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12Jun

How The Trade War Might Affect Your Business

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When America sneezes the whole world catches a cold. This statement sheds light on the gravity of the repercussions that the US-China trade wars brings. Unsurprisingly, the clash of the two powerhouses will result in massive spill-over effects across countries and industries. 

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In reality, the US-China dispute transcends trade, and beneath it’s underbelly lies a power struggle between two superpowers with extremely differing views. 

But this begs the question, how can their struggle for power affect your eCommerce business? And are there any benefits to be reaped from this? 

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Downstream troubles

Just like how pollution at the headwaters of a river has adverse effects on the quality of the water downstream, the trade war between the two economic giants will inevitably disrupt businesses on a smaller scale.

As China has long reigned as a global manufacturing and exporting powerhouse, the imposition of tariffs on its exports by the US translates to higher costs of producing consumer products for your eCommerce business. This is so as the US has currently imposed tariffs on Chinese plastics, aluminium, steel, and machinery - components that aid in the manufacturing of US consumer products such as clothes and electronics. eCommerce merchants who source for items from US wholesalers are thus likely to see a surge in their prices.

Similarly, tariffs imposed on US imports by China also results in higher prices for consumer products, and increased expenditure for your eCommerce business should you source your items from Chinese businesses.

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The tariffs and restrictions imposed on Chinese technology by the US makes it imperative for Chinese wholesalers to reinforce their innovation capabilities for the development of new technologies. This inward-looking mindset has been swiftly adopted by many Chinese firms and fruits of their labour have been reaped. According to the CPA Australia Small Business Survey, 75.2% of the businesses who grew strongly in 2018 revealed that they had invested in technology and profits were reaped within the same year.

The innovations in technology and manufacturing amongst Chinese wholesalers bolsters productivity and thereby reduces the cost of production. Ultimately, this will alleviate the rising cost of consumer products and reduce your procurement expenditure.

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Shift in focus

The tariffs on Chinese imports in the US serves as motivation for wholesalers in China to relocate their production offshore. This is done in a bid to avoid financial losses that stem from the fall in demand for their products.

Given the proximity of its Southeast Asian (SEA) neighbours, many Chinese corporations have set their sights on countries such as Vietnam and Thailand. Their attractiveness is attributed to the region’s strategic geographical location for trade, business-friendly policies, and a strong supply chain. As such, the region could benefit from the influx of foreign direct investment.

The growth of the SEA region as a manufacturing and exporting hub could potentially offer a cheaper alternative source of consumer products for your eCommerce business. 

Looking ahead

Ultimately, the full impact of the US-China trade war on eCommerce remains to be seen. Additionally, given that the events that could affect your business are still in flux, it is critical for you to remain vigilant and stay up-to-date with the latest developments.

More importantly, a reliable logistics partner capable of forecasting trends in the industry provides you with an extended visibility throughout your operations. Your eCommerce business will be in a better position to navigate through the trade tensions and flourish despite the uncertainties.

 

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