That was my topic at a seminar for CLBC, a logistics group in Columbus. This photo was sent to me by one the attendees at the seminar, a breakfast meeting at 7 am (not my favorite time to speak!)
Are tariffs good or bad? The answer most economists give is bad because tariffs create less efficient use of national resources and, like other taxes, usually cause slower economic growth. Most consumers call tariffs bad because they raise prices, not only the price consumers see at retailers but also the costs of materials used by supply chains to make, transport, and distribute products.
If tariffs protect jobs of specific industries such as steel, those workers might welcome tariffs, but consumers who pay higher prices for cars, trucks, appliances, and other products made of steel might disagree. Also, if consumers spend their limited resources on products made with higher priced steel, they have less money available to buy other products, reducing employment in firms selling other products and services.
But tariffs have other effects, usually longer-term. They can be tools to encourage other nations to drop non-tariff but unfair practices such as dumping, government subsidized industries, or restrictive regulations.
Sometimes tariffs “nudge” firms to remain or return to domestic facilities, something recently announced by several major firms. GE Appliances announced it is investing $490M in a Louisville factory, moving production of washing machines from China to Louisville. The Louisville newspaper quoted a GE VP saying GE had considered the move for six or seven years, but tariffs “helped accelerate the decision.” GE Appliances, whose parent company is China-based Haier, does not plan to bring Chinese workers to Louisville, but rather plans to rely on recruiting and training workers in Louisville.
Firms and individuals have little control over tariffs, but they can control how they cope with them, and there are more ways to cope than raising prices. That was my message to supply chain managers who made up most of the session. Below is an overview of strategies I recommended managers address tariffs without resorting to price increases.
