High-value global supply chains ‘are well established and will be very difficult to disrupt’ in event of trade war, says FedEx president
There are no signs yet of any significant tariff-related modal shift or plans to alter supply chains as a result of the new US tariffs announced last Friday on imports of Chinese goods, the first of which are due to take effect on 6 July.
In an earnings conference call with analysts yesterday, transcribed by Seeking Alpha, senior executives at US global integrator FedEx were asked whether a trade war could interrupt global growth or whether world was trade too entrenched to allow for any disruption.
President and COO Dave Bronczek replied: “We believe global supply chains, especially those of high-value items, are well established and will be very difficult to disrupt. We are hopeful, of course, that amenable solutions to trade policy issues will be found.”
In terms of any threat to his own company’s business model, Bronczek said: “Our global assets are at such a large scale now that it’s relatively easy for us to reposition our networks, really all around the world, should any (new) trade patterns evolve.”
Asked whether US customers were seeking expedited imports of items from China that will fall under the new tariffs on 6 July, EVP and chief marketing and communications officer Raj Subramaniam responded: “We have not seen any changes from the customer behaviour directly related to these new tariffs.”
He said technology sales were among the key indicators that FedEx monitors and it is “very highly correlated to Asia-US exports”. But it was difficult to discern any clear underlying trend because of the background noise of variables such as cell phone product cycles.
As reported in Lloyd’s Loading List, despite an agreement last month to suspend planned punitive tariffs against one another after achieving “meaningful progress” towards a new trade framework, the Office of the United States Trade Representative (USTR) last Friday released a list of products imported from China that it said would be subject to additional tariffs of 25% as part of the US response to China’s unfair trade practices related to the forced transfer of American technology and intellectual property”.
The list of products covers around 1,100 separate US tariff lines valued at approximately $50 billion in 2018 trade values. It generally focuses on products from industrial sectors that contribute to or benefit from the ‘Made in China 2025’ industrial policy, which include industries such as aerospace, information and communications technology, robotics, industrial machinery, new materials, and automobiles, USTR said.
USTR said list of products consists of two sets of US tariff lines: The first set contains 818 lines of the original 1,333 lines that were included on the proposed list published on April 6. These lines cover approximately $34 billion worth of imports from China.
USTR said it had determined to impose an additional duty of 25% on these 818 product lines after having sought and received views from the public and advice from the appropriate trade advisory committees. Customs and Border Protection will begin to collect the additional duties on 6 July.
The second set contains 284 proposed tariff lines identified by the interagency Section 301 Committee as benefiting from Chinese industrial policies, including the ‘Made in China 2025’ industrial policy. These 284 lines, which cover approximately $16 billion worth of imports from China, will undergo further review in a public notice and comment process, including a public hearing. After completion of this process, USTR will issue a final determination on the products from this list that would be subject to the additional duties.
And yesterday, US president Donald Trump threatened to impose tariffs on another $200bn worth of Chinese goods, adding fuel to the fears about a looming full-scale trade war between the world’s two largest economies. Trump has requested the US Trade Representative to draw up a list of Chinese imports to hit with a 10% duty.
“After the legal process is complete, these tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced,” the president said.
The move came after Beijing announced its 25% tariff on $50bn of US goods last Friday, responding in “equal scale” to Washington’s earlier hike in customer duty on Chinese products.
Will Waters | Wednesday, 20 June 2018