For U.S. companies trading globally, these are uncertain times. Whether you’re a large exporter, a mid-sized manufacturer, or a growing e-commerce venture that’s quickly building cross-border success, you know the tremendous benefits that international commerce brings to the table—and to your bottom line. But you have also witnessed social, political and economic shifts that can complicate even the best-laid plans. Significant policy changes, new regulations, and the continuous negotiation and re-negotiation of trade deals all create questions, complexity, and a certain degree of unpredictability in the global trade equation.
What are the biggest issues impacting global trade today, and what do you need to know about them? Let’s take a closer look:
The ongoing trade dispute with China has created challenges for many U.S. businesses. Companies that regularly trade with the Chinese have, of course, been directly impacted by the tariffs, but many others are indirectly affected as their vendors and suppliers pass on increased costs. In addition, tariffs pose a lasting, significant risk of damage to the U.S. economy as production slows and jobs are lost. Although a recent announcement suggests a tentative “truce” and some momentum in the negotiations, a deal to end the dispute remains to be brokered.
What industries are expected to feel the impact? By mid-December, unless the current negotiations are fruitful, additional tariffs on consumer goods may be implemented that will drive up prices for the holiday season. As it stands now, almost all goods traded between the U.S. and China will face higher tariffs by the end of the year, including new automobiles.
It is essential that businesses understand the new tariff increases, how they apply to their sector, and exactly when the rules come into effect. That means working closely with your delivery and logistics partner is essential. At DHL, our trade experts work with our customers to help them understand the changing tariff rules and regulations, ensure compliance and avoid delays and penalties. We help our customers identify if their goods are on the tariff list and how they can obtain potential exclusions.
In October 2018, trade representatives from the U.S., Mexico and Canada reached a renegotiated NAFTA deal – the U.S.-Mexico-Canada Agreement (USMCA). This agreement, which has been ratified by Mexico, is still awaiting approval by lawmakers in the U.S. and Canada. The U.S. House of Representatives has indicated that the review process is moving forward, and a vote may occur in November.
Upon approval, the USMCA will offer significant benefits for companies engaged in trade with our closest neighbors. The agreement will streamline trade between the three countries by adopting new customs procedures such as a universal border clearance platform, e-signatures, self-certification of origin, and other measures. It will boost e-commerce and the digital economy by ensuring that data moves freely across borders and that the localization of data is prohibited. The USMCA also contains strong protections for intellectual property rights, including enforcement tools to guard against counterfeiting and piracy.
Mexico is a vital market for U.S. consumer goods, especially beauty and cosmetic products. U.S. companies in these sectors will benefit from provisions designed to help keep trade barriers low. The USMCA agreement includes rules that prohibit discriminatory technical barriers to trade, while promoting regulatory compatibility.
To learn more about the status of the USMCA and how the agreement could impact your company, review these important documents from the Office of the United States Trade Representative.
The ongoing Brexit movement has left many traders around the globe, including in the U.S., in a state of perpetual uncertainty. Currently, negotiations between the UK and the European Union (EU) continue, but if no agreement is reached by October 31, 2019, a no-deal Brexit scenario or hard Brexit, will unfold. That means the UK will leave the EU’s single market and customs union, and UK-EU trade will then be governed by the World Trade Organization (WTO) rules regarding tariffs, customs declarations, and border controls.
A hard Brexit will have an immediate and wide-ranging impact on traders while creating additional uncertainties. Despite the application of known WTO rules, customs declarations will rise as controls and vague processes for goods entering and leaving the UK adjust to the new legal environment. In this scenario, businesses that trade with the UK will have to pivot quickly by aligning with their supply chain partners. There will likely be delays with UK cross-border shipments; traders will need to reconsider their schedules, commitments, and ultimately, their lead times.
At DHL, we are preparing for any potential Brexit outcome and will stand by our customers to minimize delays and avoid confusion. For instance, one predicted effect of a hard Brexit will be heavy congestion at entry points for road freight. DHL is assessing the use of sea transportation in order to assist our customers and expedite their shipments.
What is your business doing to trade with confidence in uncertain times? Let us know on Twitter @DHLUS.