With world trade disrupted by tariffs (or the threat of tariffs), there is the risk of a full-scale global trade war breaking out. Further tariffs from the United States on European goods would definitely trigger counter-tariffs, which would according to most economists hurt companies on both sides of the pond.
When it comes to China, a trade war with the US would hurt American consumers – but it would also likely impact European interests. On the other hand, European industrial exports like vehicles and machinery could gain share in China as US competition declines following tariffs.
If US-China trade deteriorates significantly, European importers of Chinese goods could also see lower prices, but Europe might eventually look to anti-dumping measures if Chinese imports begin to harm domestic sectors like electric vehicles or steel.
Procurement measures to mitigate tariffs
In dealing with and smartly navigating tariffs, Procurement teams have an important to play. Responsible for sourcing and supplier management, they can help shape sourcing and supply chain flows, and protect margins.
In the whitepaper, H&Z Management Consulting presents several recommendations for Chief Procurement Officers on how they can address the potential impacts of tariffs, including short-, medium-, and long-term action.
In the short-term, businesses can negotiate with their suppliers, distributors, and logistics partners to pinpoint short-term ways to share and trim tariff costs. They can also evaluate alternative sourcing and potential contracts (like considering plants in other regions) with current partners.
Companies should look to AI-based tools to help model and create assessments of products, suppliers, and customers to capture US exposure with respect to EU and US production sites. There is also the consideration of potentially transferring costs for the main affected products onto consumers, at least in part.
In the medium-term, companies should consider forming joint ventures and partnerships with businesses in countries that hold more favorable trade agreements with the US. This strategic move aims to directly bypass tariffs by re-routing supply chains.
They can also look to optimize existing routes and renegotiate freight and transportation agreements to reduce costs. They should also keep an eye on opportunities that may arise for better terms and additional sourcing options from Chinese suppliers as they get pushed out of the US market.
Looking to the long-term, companies should consider establishing subsidiaries, joint ventures, or manufacturing plants within the US to expand local production. This includes building US supply chains for these new facilities to avoid tariffs entirely. Companies should leverage existing and new EU trade agreements with other nations to secure favorable alternative sources and suppliers, particularly with China and other Asian countries.
Overall, European companies should reduce reliance on US-centric supply chains by diversifying sourcing across multiple global suppliers, thereby building dual or multiple sources. Bringing resources and materials closer to European plants will minimize exposure to tariffs and broader trade disruptions, enhancing overall supply chain resilience
“Global trade is entering a volatile new phase. With tariffs reintroduced by the Trump administration and further escalation on the horizon, procurement functions are under renewed pressure to safeguard margins, secure supply, and respond strategically,” said Lukas Zeidler, partner at H&Z Management Consulting.
Source: consultancy.eu