Experts Talk About the Hidden Costs of Tariffs as Liberation Day Looms
Tariffs cause ripple effects throughout the international trade and business communities beyond just the levies on goods at the time of entry, experts said during a Zencargo "Tariff Talk" webinar on March 31.
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David Murphy, a partner at international trade and customs law firm Grunfeld Desiderio, said of President Donald Trump's planned tariffs that "if this truly goes into effect on April 2, there's going to be a lot of hiccups. You know, not only is the matter of laying out the additional duty at the time of entry, it's also going to impact your Customs bond, it's going to impact a lot of other things: your pricing, to your customer, all of that." He recommended that businesses and brokers stay flexible: "The best thing is just to be prepared to pivot whatever way you have to go."
Michael Starr, vice president of growth and expansion at Zencargo, concurred, saying that he knows "a lot of folks who are kind of waiting out the April 2" announcement to see what policies are actually announced. The potential for sweeping change that could upend traditional business models is making businesses uneasy, he said, and if "the classic safe havens of Vietnam, etc, they all of a sudden have 20% tariffs levied, does that change the math on changing production" locations?
Businesses with China exposure are already feeling the pinch of 20% tariffs in addition to "the old Trump 301 duties," which Murphy said is "forcing companies to rethink their sourcing strategies. Do we stay in China? Do we move to Vietnam, Mexico, India?"
He said that businesses have become "so highly reliant on China or other locations that it's tough to move production. And then it's also the future uncertainty. Where do we move it to? Am I going to get hit down the road? Is it going to be worse? Is it going to be better? And, unfortunately, a lot of you know, we're not all able to answer a lot of questions. Come tomorrow, we might be able to, but right now, it becomes very difficult to plan as a business."
The tariffs on steel and aluminum already in place are causing frustration too, he said. "There's been a lot of hiccups with getting those in place. It's hitting people across the board that never knew they were going to be part of it," Murphy said. "But there it's causing a rise in costs for just about everybody across the board."
He said that the potential for even further duty increases on April 2 means that "companies that are doing construction projects, long-term commitments," if they already have systems in place, have to think "about repricing and renegotiating, and that's always tough to do after the fact."
Companies faced with "the volatility of all of this" are finding it difficult to transition; Murphy said that because they do not know where duty rates are going, "today, Vietnam is 3%, tomorrow it's 33%," that "you don't want to be all of a sudden reliant on a single source" for production. "But that also creates problems," he said. "I mean, you want quality, consistency. How do you get that across various locations?" In his experience, multi-source production is messy: "You know, when you start getting involved to all of those [multi-source production points] that God only knows where that could lead, to havoc."