2024 Trade Outlook
Start
Previous
Next
Breakdown
2023 recap
01.
EU eyes tariffs in response to Washington’s EV policy
02.
Canada pursues trade liberalization with the ASEAN
03.
Mexico-U.S. row over Mexico’s industrial policies set to heat up
04.
De-listing China from de minimis privilege
05.
Possibility of a 10% minimum universal tariff
06.
Steel: What’s old is new again
07.
Canada-Japan to collaborate on EV supply chain
08.
U.S. President Joe Biden’s Inflation Reduction Act allows Americans to benefit from tax credits on electric cars manufactured in the U.S. But the program has ruffled feathers with key trading partners, including the European Union, wherein Brussels has threatened to bring back Trump-era tariffs on U.S. consumer goods, such as whiskey and motorcycles. This will leave European retailers with the arduous task of determining how to adapt, including raising prices, sourcing from different markets and/or shifting to domestic products.
David Merritt
EU importers of American consumer goods should be prepared for disruption to their supply chain and/or landed costs. Those landed costs aren’t just being affected by the payment of duties, but also greater vigilance in how goods are classified as the EU’s customs agencies will be increasing their scrutiny of U.S. imports. Improper classification can lead to significant fines and penalties, not to mention reputation damage.
“
”
Director, Global Trade Consulting Europe and Asia
Much like the Biden administration, Canadian Prime Minister Justin Trudeau has set his sights on Southeast Asia as a means of diversifying trade away from China. The Prime Minister toured the region in late 2021 and met with leaders from the Association of Southeast Asian Nations (ASEAN) to secure informal support for liberalized trade between Canada and the bloc. It’s difficult to say whether the agreement will come to fruition in 2024. A third and fourth round of negotiations over the terms of the deal took place in 2023 with a fifth scheduled in 2024 even as certain chapters are already scheduled to be written. Points of contention are likely to be around labor laws, gender policies and environmental-protection policies. For Canadian businesses, a trade deal with the ASEAN would ultimately serve as an extension of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), of which several ASEAN countries are already members.
Firms with CPTPP experience will already be aware of the administrative demands of using free trade agreements, but the ASEAN deal could open up trade opportunities for firms that have not yet explored free trade. For them, there will be critical considerations around the Rules of Origin, regional value content, classification, documentation and record keeping and much more. To be sure, the benefits greatly outweigh the administration burden, but that burden shouldn’t be taken lightly. Non-compliance can have a massive impact on a company’s finances and reputation.
Michael Zobin
Director, Global Trade Consulting Quebec and Atlantic Canada
U.S. industry leaders are hopeful that the country’s Trade Representative, Katherine Tai, will request a formal USMCA dispute resolution over ongoing concerns about Mexico’s industrial policies in the energy and telco sectors, as well as the country’s surge in steel exports to the U.S. A ruling in favor of the U.S. could force Mexico City’s hand in reforming those policies, opening the door to U.S. competition. However, failure on the part of Mexico to make the necessary reforms could, once again, call into question the long-term viability of the USMCA. U.S. firms stand to benefit significantly should Mexico choose to liberalize its energy and telco sectors; however, if the latter digs in its heels, U.S. importers could find themselves on the receiving end of reciprocal tariffs.
As more U.S. companies shift away from a dependency on China, many are looking towards Mexico as a viable alternative in the nearshoring phenomenon. But the degree of foreign direct investment – particularly greenfield investment – will depend heavily on Mexico’s ability to demonstrate its willingness to liberalize trade so that U.S. firms can invest with a greater degree of confidence. Many firms are already exploring opportunities in Mexico, but that shift will require a different lens and practices with respect to trade compliance, including effective trade-program management (e.g., IMMEX), classification, record-keeping, valuation and regional value content requirements. Those that have made the shift already may have overlooked some if not all these considerations, putting their businesses in peril.
Rody Camacho
Director, Global Trade Consulting Mexico and Latin America
While still in its conceptual stage, a policy proposal to exclude low-value shipments from China from de minimis status (i.e., putting tariffs on e-commerce goods coming from China) is making the rounds on Capitol Hill. Proponents of the plan argue the low-value threshold has allowed importers to avoid the tariffs placed on imports from China while also unwittingly facilitating the smuggling of illicit goods such as Fentanyl. Business groups are already lobbying against Washington taking action on de minimis, claiming there is little evidence of de minimis being used as a tool to circumvent tariffs or illicit goods. Should the proposal come to light, it would have profound implications for U.S. retailers, particularly those who have come to rely on direct-from-manufacturer fulfillment processes. Importers would need to review their e-commerce and distribution models to consider everything from potential increases in warehousing requirements and costs to the burden of customs compliance and the risks of potentially having to switch suppliers.
This proposal has a long way to go before it becomes a reality, but it’s an example of how the adage that the only ‘certainty is uncertainty’ remains very relevant today. There are political and economic forces that are disrupting supply chains regularly. That’s why, in recent years, our work with clients has been less about solving immediate needs and more about ensuring agility in supply chains so that firms can adapt to the next unforeseeable event. That means supplier diversification, process simplification and automation, vigilance in record management and storage, and much more.
Jill Hurley
Director, Global Trade Consulting Western Region, U.S.
With 2024 being an election year, the looming possibility of a return to office by former President Donald Trump raises the specter of new forms of trade protectionism. The Trump campaign has already floated the concept of a 10% minimum universal tariff to discourage foreign imports and boost domestic manufacturing. Should it come to pass, it will have a significant impact on landed costs for importers and the international competitiveness of exporters in the event other countries retaliate with tariffs in kind. Importers would likely have to pass the costs down to consumers, and the impact on countries with which the U.S. has free trade agreements remains a question mark.
This would likely force many importers to re-evaluate the intermediary goods they import, reviewing which are essential, which could be produced domestically, and which may have to be produced entirely overseas to service overseas markets. In short, it will force global supply chain reconfigurations. These will be costly and time-consuming, but in many cases, they may be unavoidable if global businesses are to stay competitive.
Jamie Adams
Director, Global Trade Consulting Eastern U.S.
The EU is bracing itself for more trade wars similar to 2018 when Trump’s steel and aluminum import tariffs hit Europe hard, and the EU retaliated with tariffs on U.S. exports. This time it’s the Biden administration that’s going head-to-head with Brussels over the latter’s Carbon Adjustment Mechanism, which requires EU importers to calculate and pay for the carbon footprint of their imports, and which Washington believes puts U.S. exporters at a disadvantage. But if the trade war is rekindled, U.S. exporters will be hurt anyway, as Brussels could impose tariffs on any number of American goods, particularly consumer products. The good news is that the parties are working feverishly toward a resolution. That resolution could see them team up to restrict the import of steel made in non-market economies (i.e., China), but only time will tell how this will play out.
U.S. exporters still remember the challenges and costs associated with the trade war between the U.S. and Europe. It impacted market share in Europe and overall profitability and had little benefit to most non-steel producers. Another round of tariffs is likely going to prompt some to investigate new markets – even if only as a means of shoring up international revenue when trade wars heat up. Finding alternatives to the EU’s 500 million-plus market won’t be easy. Growing middle classes in India and Southeast Asia serve as viable alternatives but come with their own set of complications.
As Canada moves to solidify its prominence in global electric vehicle supply chains, it’s looking to court key automotive companies to buy into its green-sector investments. To that end, Ottawa has courted Tokyo to establish a series of small-scale trade deals that would incentivize production of Japanese EV vehicle components with an emphasis on EVE batteries. Canada and Japan are both looking to compete with China’s growing hegemony in the EV sector and reduce their dependency on China. Details of the deals remain scarce but ultimately boil down to an exchange of Japanese scientific intel and financial investment for Canadian subsidies, similar to those the Canadian government has already provided other automakers.
The ultimate benefit for Canadian businesses is the spin-off industries these details will create. These EVs won’t just need batteries; they need numerous other technological and mechanical components, not to mention materials and accessories for vehicle interiors. This benefits everyone from rubber producers to upholstery makers, glass manufacturers and many other producers, many of which will be competing for contracts and many of which will be sourcing raw and intermediate materials from abroad. Given the highly regulated nature of the automotive sector and the scrutiny with which the Canadian government has been receiving imports, importers will have to be hyper-vigilant in where they source their materials, how they classify those imports and how they conduct their record-keeping.
Learn more
Replay
Overwhelmed by the complexity of global trade? We’re here to make it simple.
Learn More
