How tariffs are shifting global supply chains

BBC:

A 90-day pause on Donald Trump’s sweeping tariffs plan is about to expire on Wednesday, which could upend US trading relationships with the rest of the world. But the uncertainty of the last few months has already forced several companies to rethink their supply lines in radical ways.

When an Illinois toymaker heard that Trump was introducing tariffs on Chinese imports, he was so incensed that he decided to sue the US government.

“I’m inclined to stand up when my company is in genuine peril,” says Rick Woldenberg, who is the CEO of educational toy firm Learning Resources.

The majority of his company’s products are made in China, so the tariffs, which US importers have to pay, not Chinese exporters, are now costing him a fortune.

He says his import taxes bill leapt from around $2.5m (£1.5m) a year to more than $100m in April when Trump temporarily increased tariffs on Chinese imports to 145%. That would have “devastated” the company, he says.

“This kind of impact on my business is just a little bit hard to wrap my mind around,” he says.

With US tariffs on Chinese imports now at 30%, that’s still unaffordable for many American companies such as Learning Resources.

So in addition to its continuing legal fight, it is changing its global supply chain, moving production from China to Vietnam and India.

These two countries, like most others around the world, have seen the US hit them with general 10% tariffs, two-thirds lower than those on China. Although these 10% tariffs are due to run out on Wednesday, 9 July, uncertainly remains over what they may be replaced by.

Meanwhile, many Canadian companies, who often trade in both their home country and in the US, are now facing a double hit to their supply chains.

These hits are the 25% tariffs put in place by Trump on many Canadian imports, and the reciprocal ones of the same level that Canada has placed on a host of American exports.

And other businesses around the world are looking at exporting less to the US, because their American import partners are having to put up prices to cover the tariffs they now have to pay, which makes their products more expensive on US shelves.