Insights & News

How Should Your Supply Chain React to a Trade Conflict With China?

Chinese lantern

Posted On September 6, 2019

Visit any news source right now, and the headlines are likely to focus on the ongoing trade conflict between the United States and China. Because we now live in a 24/7 news cycle and our daily dialogue is more politicized than any time in recent memory, every tweet, comment, and statement from federal officials regarding the conflict is likely to receive a disproportionate amount of attention.

The conflict and tariffs have impacted companies and industries, and in the immediate future we will likely continue to see a more turbulent trade environment. Every business will have to make its own decision regarding relationships with foreign suppliers. However, while the impact of tariffs is real and should not be minimized, a wholesale revolution in trade policy isn’t likely—even if the relationship between the United States and China is different than it was a few years ago.

Before you become too fixated on the headlines, here are a few things you should know about trade and our relationship with China.

1. You do need to pay attention to our changing relationship with China, but don’t become over-invested in every headline.

Over the last several years, changes to trade and rethinking globalization have become a big part of the political dialogue in the United States and throughout the world. However, that doesn’t mean drastic change is going to happen tomorrow, or that you should immediately go into crisis mode and look to replace your Chinese supplier partnerships.

According to the World Trade Organization (WTO), the value of global trade is measured in the trillions. That’s “Trillions” with a capital “T.” It’s a lot of money, and a lot of money means a lot of people have a vested interest in making cautious, wise, conservative decisions.

If you manage an international supply chain, you cannot and should not ignore the important discussion focused on our trade relationship with China. That said, you also cannot and should not react to every news alert sent to your smartphone.

2. Nations and political leaders are still working to maximize the gains and minimize the losses that occur from globalization.

Modern global supply chains are a recent innovation, and policymakers are learning how to make them beneficial for everyone involved—including nations, countries, companies, and workers. China itself was only admitted to the WTO less than twenty years ago. It’s a process—and one that takes time.

The structure of global trade was far from perfect before it became a central focus of American political life. In their influential paper The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade, labor economists David Autor, David Dorn, and Gordon H. Hanson demonstrate that while our modern trade relationship with China has been a net positive for consumers, many American industries concentrated in specific geographic areas were disproportionately impacted—and have not completely recovered.

It’s important to remember that no one is seeking to blow up the globalized economy for the fun of it.

Autor, Dorn, and Hanson’s work shows that some Americans have shouldered a disproportionate amount of the globalization burden. Attempts to ease that burden are inevitable—but policymakers know you can’t put the globalization rabbit back in the hat.

3. Adapt, change, innovate, and focus on the fundamentals.

Making your supply chain as efficient as possible will only help, regardless of changes to trade policy. By belonging to advocacy groups like your local (and national) Chamber of Commerce or professional trade associations, you can make your voice heard on political matters that impact your business—including trade relationships.

In the meantime, making your shipping department and your supply chain stronger is critical. Weathering the impact of tariffs requires a supply chain that can adapt and innovate quickly—and isn’t leaving money on the table through inefficiencies.

You can build a supply chain based on a foundation of excellence by choosing a partner that puts visibility, efficiency, and customer service at the forefront of everything it does. That’s what we do at the Flat World Holdings family of companies. Each of our brands—Flat World Supply Chain, Flat World Hospitality, Ram International, Ram Custom Crating, and Prologue Technology—is there to tackle your toughest supply chain, logistics, and transportation management problems.

You need to remain informed and aware of trade conflicts and changes to international trade policy.

In the meantime, we’ll make sure you have a high-performing supply chain that can adapt to any changes and challenges that lie ahead.