We’re certain that you’re aware of the news regarding the United States’ recent protectionist turn. While this post won’t focus on current events and politics, it’s fair to say that no business advice can be detached from the state of our current markets and the wider context that impacts them.
As such, it’s important to correctly assess the challenges we face, and if possible, try to pre-empt them. Doing so is tough at a time where announcements can be made on a whim and geopolitical situations change quickly, but the truth is that some principles have lasted for quite some time, and will no doubt last into the future as well.
So, how should businesses think about global trade in a protectionist world? Well, there are certain measures you can use to keep your business competitive and your options open. Please consider:
Reassessing Your Logistical Network
The companies finding success right now are the ones taking a good hard look at how their products move from point A to point B.
Global shipping routes that made perfect sense five years ago could now be vulnerable to tariffs or unexpected regulations and may need to be worked around where appropriate, such as by re-checking fast international freight quotes. It’s worth mapping out alternative pathways for the goods and materials you use on a daily basis. Some are even bringing certain operations closer to home to avoid crossing multiple borders, and that might make the investment of opening in a distinct area worth it to you.
That’s because many businesses are discovering that slightly higher production costs nearby might actually save money when compared to distant manufacturing plagued by new fees and less reliable delivery times. This takes a full top-down look at your supply and production routes with a fresher mindset, without necessarily relying on the convenience you had before. Many British businesses learned this after Brexit, for instance.
Starting In New Markets
There is an opportunity in some cases, especially if protectionism from one country has led other markets to open up. For instance, countries with strong trade agreements among themselves generally become natural areas worth exploring, as your business might find welcoming conditions in regions working against protectionist outcomes. As the USA has clearly signaled its intention, we can expect certain markets to respond accordingly.
Revising Your Suppliers
Dependency on single sources has become increasingly risky despite the promise of global sourcing and manufacturing abroad. It’s hard to predict how things will change, but we’d still suggest that the company heads sleeping better at night are the ones who’ve developed relationships with multiple suppliers across different regions.
Just keep in mind that the cheapest option isn’t always the safest anymore. This doesn’t necessarily mean abandoning long-term partnerships, but you may find value in working with existing suppliers to understand their own risk factors and developing contingency plans as part of that together.
Withholding Investment For More Stable Times
Putting it frankly, keeping some money in your pocket might be the smartest move right now. A good portion of businesses are pumping the brakes on big spending until they can see where all this is heading.
It doesn’t mean stopping everything, of course, because no business can be stagnant and survive except for those that are too big to fail. You might just focus on the kinds of investments that keep your options open, such as expansion that works in different scenarios or equipment that could be used for multiple purposes. The goal is staying nimble when nobody really knows what next year looks like, as we saw with Covid.
You may hold off on that second premises right now, but that doesn’t mean there’s no work to do as you continue operating, as building relationships and getting plans ready so when things settle down can help you move quickly.
Balancing The Value Of Subsidies
Government money can look pretty tempting, especially when times are uncertain, but just keep in mind that there are usually strings attached, and it’s important to have the immediate cash boost as just one of the pros in mind, not the foundation of your decision.
Also, remember that those subsidies tied to specific places or ways of doing things might feel great now but could box you in later. A country focusing on protectionism might try to influence home manufacturing or development by offering these subsidies, but you also need to understand what this may limit you from as well as the assistance it could offer should you wish to make an informed decision.
With this advice, we hope you can more easily think about the complex topic of global trade when trade tariffs and protectionism becomes the norm. Don’t worry, it’s a subject almost every global company is thinking of at the moment.