Today’s supply chain crisis is largely caused by the pandemic, and the resulting high prices are exacerbated by Trump-era tariffs.
Prior to the pandemic, the global supply chain could be simplified to a relatively dependable cycle; goods were transported at high rates from manufacturers in Asia to developed economies, mostly in North America and Europe. Shipping containers returned with a specific export to Asia. When the pandemic initially began, in those first months of 2020, China was the epicenter of the disease. China was - and still is - the biggest manufacturing hub in the world. So, when China began shutting down factories and ports to contain the spread of COVID, the global supply chain was subsequently affected. After China, other manufacturing hubs in surrounding Asian countries also closed, and then, soon after, economies around the world buckled down to weather the pandemic. Supply chain issues were expected and accepted. However, nearly two years into the pandemic, with most economies reopened, the economic recovery is not happening as smoothly as many hoped it would and the supply chain crisis is seemingly far from over.
Tariffs imposed by the Trump administration, some of which were never resolved, have contributed to the rising prices consumers are facing. In the first episode of CAPITAL CONNECTIONS, we covered the U.S.- China Trade War, which was mostly fought using tariffs, or taxes on imports of specific goods. To refresh everyone’s memory, former President Trump began the trade war in July of 2018, around a year and a half before the pandemic began. Currently, around $350B worth of tariffs remain on Chinese goods, which span from sneakers to TVs. In addition to tariffs on China, taxes were also instituted on steel and aluminum from Turkey, Canada, and Mexico, as well as aircraft, wine, and other goods from the EU. Some tariffs on Mexico were lifted in 2019, followed by some on Canada in September of 2020. Taxes on goods from the EU were recently eliminated by the Biden administration in October of 2021. While some tariffs have been eliminated, their contribution to the supply chain crisis and the ensuing increase in prices in consumer goods remains.
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