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Survey: trade-war fallout for supply chain still in early innings

A new survey by Resilience360 confirms the trade war’s far-reaching effects on global supply chains, and more importantly, highlights a “wait-and-see” approach among shippers.

If the trade war were a baseball game, it would still be the very early innings for supply chain overhauls — which makes perfect sense at a time when sentiment reverses at the speed of tweet and the presidential election is just 11 months away.

Resilience360 received responses from the survey conducted over September and October from 267 companies in fields ranging from health care to technology, automotive, mobility, engineering, manufacturing, retail, energy, chemicals and transportation.

In response to the most basic question — how has the trade war affected supply chains? — 68% said “yes.” Of those, 17.2% said they were “highly affected,” 18.4% “affected” and 32.4% “somewhat affected.”

The sectors with the highest positive responses (regardless of severity) were technology (84%) and engineering and manufacturing (71%). The sectors most likely to report being “heavily affected” were technology, consumer, automotive and mobility.

The survey then asked: What are you doing in response? The most popular answer, at 33.5%, was “nothing.” In second, at 14.5%, was seeking tariff exemptions from the U.S. government, while 12.5% said they had already changed their suppliers or were seeking alternative suppliers.

Further underscoring the sluggishness of the global supply chain response, the survey asked respondents how many months of contingency plans they had in place for the trade war, and 25.3% answered “zero.” Resilience360 reported that 48% of respondents in engineering and mobility had no contingency plans, nor did 40% of respondents in automotive and mobility.

“Companies are still falling short when it comes to forward-looking contingency planning to mitigate the risks posed by the trade war,” said Resilience360.

For companies looking to relocate operations from China to another country, the survey asked: Why are you moving? The answers were led by tariffs (36.1%), issues with market access and regulatory restrictions (21.1%) and rising labor costs (19.7%).

Another key question — particularly when in comes to ocean-shipping container liners — was where shippers were thinking of moving their supply chains if they were contemplating a departure from China.

The top survey answers were: not moving (27%), India (11%), Vietnam (11%), EU (8%), Mexico (7%), U.S. (7%), Malaysia (6%), Thailand (6%) and Indonesia (6%).

Yet another important question for ocean shipping is: What holds shippers back from shifting supply chains, and how resilient are those disincentives? To plan future capacity on various trade lanes, container liners need to understand why cargo interests are moving their operations from China (and if they’re not, why not).

The main reasons survey respondents cited for not leaving China were: they were unaffected by the situation (25.8%), they had long-established connections (20.8%), moving costs would be greater than tariffs (12.9%) and time of relocating would be too long (11.7%).

For those already relocating or considering relocating, the top “moving” challenges cited by survey respondents were: issues with sourcing components and assembly (20.2%), issues with building new connections (17.9%), port congestion and shipping costs (11.9%) and lack of skilled labor (11.3%).

Putting it all together, the central takeaway from the Resilience360 survey, when viewed alongside container-trade volume and pricing data, is that today’s trade-war fallout could be just a taste of what’s to come if tensions are not resolved. More FreightWaves/American Shipper articles by Greg Miller  

Greg Miller

Greg Miller covers maritime for FreightWaves and American Shipper. After graduating Cornell University, he fled upstate New York's harsh winters for the island of St. Thomas, where he rose to editor-in-chief of the Virgin Islands Business Journal. In the aftermath of Hurricane Marilyn, he moved to New York City, where he served as senior editor of Cruise Industry News. He then spent 15 years at the shipping magazine Fairplay in various senior roles, including managing editor. He currently resides in Manhattan with his wife and two Shih Tzus.