Tariff turnabouts send US corporate heads spinning

Guess?

06/12/2024 13:00

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Gabriel Rubin
       WASHINGTON, Dec 5 (Reuters Breakingviews) - Corporate
chieftains know a trade war is coming, but they are unable to
prepare for it. The countries, products and tariff rates that
Donald Trump intends to target change by the day, sometimes even
the hour. Dry runs during the U.S. president-elect’s first term
in office are the best playbooks available for now. This time,
however, probably will be different.
    Chief executives, who routinely gripe about uncertainty, are
now faced with an abundance of it in their supply chains. Trump
keeps abruptly revising his trade-related threats. On the
campaign trail, he vowed broad 20% rates, with 60% on Chinese
goods. The blanket approach has morphed into a 25% levy on
Mexico and Canada unless they beef up border security and combat
drug trafficking. A 100% tariff on Brazil, South Africa and
other BRICS nations would punish any move away from the U.S.
dollar.
    It’s easy to interpret such mercurial policymaking as a mere
negotiating ploy. For example, Trump already has proclaimed
victory following a chat with Mexican President Claudia
Sheinbaum. Small wonder that businesses are optimistically
grasping at such examples as reasons to stay calm. Trump tries
to “provoke strong reactions,” the president of Canada's
association of auto parts manufacturers said recently.
    Contingency plans are nevertheless being drafted, with some
confidence drawn from past experiences. Dick’s Sporting Goods
 DKS.N  Chief Financial Officer Navdeep Gupta told investors
last month that the retailer learned from 2018-2019 tariffs to
reduce its manufacturing exposure to China. Hewlett Packard
built factories around the world “to respond to changes in the
geopolitical environment.” Apparel maker Guess  GES.N  also has
moved some production out of China, but it cautioned that it
will need to seek more alternative sources if Trump doubles
down.
    Exposure to Canada and Mexico will be tougher to mitigate.
Corie Barry, who runs electronics chain Best Buy  BBY.N , warned
that customers would bear the brunt of new taxes on imported
components. Produce distributors said duties will increase fresh
fruit and vegetable prices. Carmakers are particularly
concerned, given the roughly $100 billion of parts and 4 million
vehicles brought to the United States from Canada and Mexico,
according to Wolfe Research.
    Not every company can be like Bath and Body Works  BBWI.N ,
which has moved 85% of its manufacturing to a cluster of
factories in Ohio. Even so, the $8 billion soap and candles
vendor signaled that it is only “relatively well-positioned” for
tariffs. In that case, everyone else would be wise to brace for
the worst.
    Follow @Rubinations on X
    
    CONTEXT NEWS
    U.S. President-elect Donald Trump said on Nov. 25 that he
would impose large tariffs on Canada, Mexico and China, three of
the country’s top trade partners.
    Following a call with Mexican President Claudia Sheinbaum,
Trump suggested that his proposed 25% tariff on imports could be
rescinded in exchange for cooperation on migration issues.
Canadian Prime Minister Justin Trudeau flew to Trump’s club in
Florida on Nov. 30 to discuss trade and migration.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Trump threatens North American trade growth    https://reut.rs/4ivokq6
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Jeffrey Goldfarb and Pranav Kiran)
 ((For previous columns by the author, Reuters customers can
click on  RUBIN/ 
gabriel.rubin@thomsonreuters.com))