The Trouble With Tariffs - Katalyst Technologies

1. The Trouble With Tariffs https://katalysttech.com/

2. In our series of supply chain predictions for 2020, we explored how an unpredictable global economy will present challenges to manufacturers. In the weeks since that piece was published, the United States and China teamed up to sign a ―PhaseOne‖ deal set to take effect on February 14. The tariff on Chinese products remains intact for now, with China pledging to buy $200 billion of U.S. goods and services in the next two years, although the terms may be renegotiated in a future deal. Leaders of both countries seem pleased with the pact, although economic analysts are less impressed. One diplomatically considers it ―astart,‖ while another called the deal ―not encouraging as a completely sustainable trade framework going forward.‖ ―We’re sort of chaotic at the moment,‖ says Rosemary Coates, Executive Director of Reshoring Institute. ―My guess is [the deal] is not going to mean much, and we’ll barely have a dent in the trade war. The trade war is going to continue for a while.‖ If your company’ssupply chain has any international presence, reach out to Katalyst to determine if—and how—you should modify your practices. Read on for more on how tariffs have impacted business governmental relations in the past, and what tech companies should do to minimize concerns and costs. practices and

3. History of American Tariffs It’s a common misconception that taxes are despised. Taxes are actually quite popular…when other people are paying them. Indeed, tariffs were a well-received mainstay of the early American economy, promoting domestic manufacturing and agriculture and, according to some sources, funding as much as 95% of the federal government. The country took it a step too far, however, when it passed the 1930 Smoot-Hawley Tariff Act. The law increased an already high average dutiable tariff rate by approximately 20%, and American imports and exports fell significantly. Economists had warned President Herbert Hoover not to pass the tax, which they rightly predicted would amplify and extend the Great Depression. After World War II, the United States actively reduced its reliance on tariffs, pushing for free trade agreements, and helping to establish the World Trade Organization. More recently, though, tariffs have emerged once again—though the China situation is the most widely reported, there have also been significant taxes on European and Canadian imports, with more likely soon. Tariffs and Tech Companies Because China is so heralded for its high-quality yet inexpensive electronics, software and technology companies are on high alert. The increased rates on laptops, phones, TVs, and other products have resulted in billions of costs to businesses and consumers. Several tech companies have formally petitioned the U.S. government to limit the tariffs or provide exemptions, including Apple, Microsoft, and Nintendo. Even cloud-based/SaaS providers are taking a hit—while they have fewer hardware expenses to consider, components still originate from China, and data storage on that level is not cheap. When it comes to punitive tariffs, businesses and consumers simultaneously feel the most pressure and hold the most power: costs are ultimately passed down to them, but if they find themselves satisfied with substitutions, it eventually loosens any intended strangleholds towards another government.

4. In the wake of the trade war with China, many of these tech companies began exploring alternatives in their supply chains, bringing manufacturing to territories such as Vietnam and Thailand. While this avoids the overwhelming tariff, it comes with the caveat of a smaller, less skilled workforce. Plus, China remains a growing and profitable market. ―If you don’t keep your eye on China as a developing market, you’re going to miss a lot of revenue,‖ Coates warns. ―It’s a huge growing market.‖ So What’s Next? The short answer: nobody really knows. While the ―PhaseOne‖ deal does not appear to have relieved concerns from economists and supply chain managers, it is at least regarded as a step in the right direction. Perhaps the most important lesson and development is the incentive to look outside of China for supply chain essentials. ―I think we’re going to continue to see shifts in companies moving production to other areas, which is not a bad strategy,‖ says Coates. ―It certainly mitigates risk, instead of having all your eggs in one manufacturing basket.‖ In turn, this will inspire other countries to revamp and improve practices. There may be no real end to the trade war in sight, but companies who can find opportunities within this challenge will give themselves more options and paths to succeed in the future. Source Link - https://katalysttech.com/blog/the-trouble-with-tariffs/

5. Demo Form https://katalysttech.com/free-demo/

6. Katalyst Technologies is a leading IT services and solutions company servicing clients in the manufacturing, wholesale distribution, life sciences, e-commerce, logistics, and retail sectors. We provide industry – specific IT products, strategies and solutions for companies implementing large-scale and transformational projects. Our business and technology experts are highly-skilled and work seamlessly across multiple geographies, with a global footprint in the U.S, U.K, India, and Germany. We specialize in the areas of Digital & e – Commerce, Enterprise Resource Planning, Supply Chain Management, Engineering and Manufacturing, Professional Services and e – Publishing. USA Evanston +1 847 425 4321 Atlanta +1 678 684 5300 UK INDIA Hadapsar, Pune +91 20 6709 3939 Valasaravakkam, Chennai +91 44 4294 3400 Basavanagudi, Bengaluru +91 80 2677 0101 Teddington +44 208 943 5589 sales@katalysttech.com