Wait-and-See Phase Ending for Companies Mired in Trade Uncertainty, Trade Advisers Say
Now that the White House appears to have given more direction on its trade and tariff actions, more companies may transition from a wait-and-see approach to more specific courses of action, trade experts with KPMG said during a July 31 webinar on tariffs and trade complexities.
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“It’s changing from that wait-and-see to a bias for action. That's certainly a theme,” said Brian Higgins, an advisory partner specializing in industrial manufacturing for KPMG’s U.S. operations.
Amie Ahanchian, a KPMG tax principal for trade and customs, said clients are looking at "developing a very well-integrated and coordinated strategy for managing the impact of the tariffs." Developing that coordinated strategy may entail using data visualizations and predictive analytics, Ahanchian said.
“Just looking simply at entry data or customs case data, one may see a country of export as being China, but it doesn't always mean that the product itself had a country of origin of China or any other country,” Ahanchian said. “So it's always important to look at the data as a starting place and then develop your analysis from there and really think about the impact of the tariffs, and then how to strategically solve and manage that impact."
More companies may consider increasing prices. According to a KPMG survey, over 80% of companies anticipate raising prices in the coming months, Higgins said.
While price increases may be less severe than the projected worst-case scenario, the link between “rising input costs and tariffs [is] clear as well. And the message [that] price increases are coming is, I think, equally clear,” he said.
Joe Lackner, an advisory partner specializing in industrial manufacturing, said price hikes only work "if we understand the demand environment well enough to understand what the large-scale margin implications of those price changes might be."
However, “the time for analytics only is really shrinking, and it's time to act. We have a client, for example, who has 100% of their productive capacity sitting in China," he said. "There's a little bit of uncertainty about what the total load will look like for China, but they've already started analyzing other low-cost locations, and it's time to start thinking about, how do we move production out of China? What's the balance of our portfolio of product production assets, and where should they sit?”
Other KPMG clients are factoring in regulatory and legislative changes along with the costs associated with moving manufacturing production from one location to another, Lackner said. “The analytical frameworks are certainly changing, and companies really need to learn new ways of looking at the cost base and predicting the changes” that will come from potential price changes by competitors, he said.
AI also has a role to play in developing tariff mitigation and cost-cutting strategies, Higgins said.
He added that companies, while they're tackling the new tariff landscape, may also look to address some "deferred maintenance" on how they structure their supply chains, he said.
“There's some amount of deferred maintenance that we're dealing with. This new tariff landscape hasn't caused any fundamental breakdown of existing supply chains, but it's essentially surfaced some fault lines that have been in place for some time,” Higgins said.