Business & Finance

Tariffs force companies to rework their supply chains

As U.S. President Donald Trump pushes to upend the status quo of global trade, companies that initially took a wait-and-see stance are starting to take action to shield their businesses from shifting trade policy.

From global manufacturers like Harley-Davidson Inc to small tech startups, companies are scrambling to rework supply chains built for an era of stable and open trade policy that is under threat right now.

The decision of the Milwaukee, Wisconsin-based company, Harley Davidson, which Trump vowed to make great again when he took office, came less than a week after Mercedes-Benz maker Daimler AG cut its 2018 profit forecast, citing growing trade tensions. Its German rival BMW said it was considering “possible strategic options” in view of the rising trade tensions between China and the United States.

Harley is the latest example of how companies are finding themselves in the crosshairs following “tit-for-tat” retaliation over Trump’s bid to rewrite global trade rules as part of his “America First” agenda.

Office furniture maker Steelcase Inc last week reported a 230 basis-point fall in the gross margins of its American business in the first quarter due to higher raw materials costs following Trump’s metal import tariffs.

Although it increased prices earlier this month, the second increase in four months, Steelcase said it expected profit margins to remain under pressure for another quarter or two.

“A manufacturer can no longer assume that the direction of trade policy is towards freer and freer trade over time,” Dustin Burke, a partner at the Boston Consulting Group, told Reuters last month.

Analysts at Morgan Stanley estimate that the U.S. tariffs along with the retaliatory duties imposed or under consideration by trade partners will affect 1 per cent of global trade. But for some companies, that 1 per cent covers a much larger share of their supply chain.

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