Facing a World of Uncertainties: How Manufacturers Should be Preparing for Potential Changes in Trade Policy

Manufacturers continue to wait to see how, and how profoundly, trade rules might soon change as a result of the new administration, writes Bob McCutcheon, PwC US Industrial Products Leader in a recent article for Industry Today. While uncertainty abounds manufacturing leaders aim to prepare for a variety of scenarios and focus on developing strategies to adapt to, and even capitalize on, changing global trade policies.

McCutcheon condenses the situation down to this: “major reforms to the global trading system have been on hold for some time now, and we may well be on the cusp of a new trade-policy era.” He goes on to lay out three key areas of uncertainty and offer advice on each:

  1. What’s the imported content of my products? One potential area of policy change is that of rules of origin—this may lead to considerations for alternative sourcing. McCutcheon recommends a deeper, more transparent accounting of from where manufacturers source their content and, perhaps, even a rigorous cataloguing of the origin and value of all imported content.
  2. Preparing for supply-chain disruption. Manufacturers may be faced with the need to reconfigure their supply chain as a result of changing policy. McCutcheon advises that they begin now by coming up with modeling and scenario planning for various possible changes to NAFTA, explore options for sourcing their supply chain within the US, and consider strategies for developing US-based product sourcing in the event that tax reform makes such a change beneficial.
  3. Getting ahead of trade policy: What’s your Plan B (or C)? Manufacturers must remain vigilant, following closely possible trade policies and making a plan for their implementation, if made law. McCutcheon recommends the creation of trade-policy and government affairs strategy teams focused on tracking prospective policy changes and anticipating possible outcomes. He also suggest that firms identify their biggest areas of “country exposures” (e.g., areas into or from which they export and import most significantly) and consider shifting to more local production for local markets to alleviate trade and tariff pressures.

For more information, read the article in full at Industry Today.