How Election Results Will Impact Supply Chain Stakeholders
The coronavirus, and the associated lockdowns, has brought a great deal of logistics activity – and many business decisions – to a grinding halt. Especially when it comes to international trade, it’s hard for business decisions-makers to decide at the moment if they want to invest heavily in a certain market, or to make commitments to shipping partners and overseas customers or suppliers.
Will the election results clarify some of these issues and put business leaders in a position to start choosing strategic directions?
Obviously, there are a lot of variables, but let’s consider some possible scenarios:
If Joe Biden is elected, that could have a quick impact on those doing business with China and Europe. Biden is mostly likely to distance himself from Trump policies. The Trump Administration has exhibited a clear hostility toward China and the European Union. That’s been exacerbated by China’s role in the spread of the virus, but also by Trump’s natural distrust of multinational organizations like the EU, whom he believes has enjoyed the favorable subsidies handed to them over the years by the United States and free military protection.
Biden would quickly move to mend relations with China. The United States is getting almost no investment from China at the moment, and China is receiving little from the United States in the form of knowledge, technology, and resources.
I believe China wants its relationship with the United States to return to what it was during the Obama era, and Biden would likely move away from the contentious trade negotiations and heated rhetoric that complicate this scenario.
In Europe, Biden would similarly take a more conciliatory approach, which would result in a stronger economic development relationship between the United States and the EU.
What is less clear is whether the United States or the EU would benefit more from such a development. There hasn’t been much joint participation on that score in recent years, as neither Trump nor the EU have much trust in each other, which has been exacerbated by the World Trade Organization siding with the EU on many tariff issues.
If the election and its aftermath play out like this, shippers and logistics managers will likely go ahead with commitments to these markets, but there will certainly be some apprehension in certain sectors.
A bilateral trade deal between the United States and the United Kingdom is probably a foregone conclusion, although I think the impact will be more in financial services and less in manufacturing or trade.
Biden has also said he would rejoin the Trans Pacific Partnership, although it was never ratified by the U.S. Senate after it was signed in 2016. If Biden could somehow get the TPP ratified at this point, it would open up new avenues of trade with Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.
A Second Scenario
But what if President Trump is re-elected? In that case, there are still a lot of variables to consider. If the Democrats take the Senate while keeping control of the House, a second-term President Trump would have little ability to move new legislation. He could, however, pursue further trade deals and bring them back to a Democratic Congress for ratification. Regardless of who is in the White House, the House and Senate will hold the strings and dictate the direction of many things for the next four years.
It’s possible not much would change in a second Trump Administration, although it’s also possible he could finalize a better trade deal with China. If that happens, and the coronavirus subsides (or we get an effective vaccine), that has the potential to open up both markets and get activity rolling again.
At this point, the best step for those operating logistics and supply chains is to work on the cost issues they can control. What points of leverage can you influence within your supply chains? What priorities do you know you’ll need to emphasize in the next six to 12 months? Knowing and understanding the dynamics of your company, as well as internal politics within your buyers and category managers, may be your best guiding light.
All participants in the supply chain are eager to establish some known elements of the plan going forward. Everyone is trying to protect their turf.
Not everything that happens depends on the outcome of elections, or even on the resolution of the coronavirus. You have the opportunity to weed out unnecessary costs and wasted motion now while everyone is focused on a contracting global economy. You can re-evaluate your partners and your resources now.
It’s also a good time to look at the role artificial intelligence (AI) can play in your decision-making cycle. For the most part, the logistics/supply chain field is just beginning to tap into the potential of AI, and only very large companies are able to make the significant investments necessary to get the most out of it.
But AI integration will continue to grow in its importance, especially as the pandemic has impacted the way people work and shown us the value of technology to play many of these roles.
Neither Donald Trump nor Joe Biden can be described as a free-trader, so politics will continue to complicate international trade. But international markets are so important to the economy of every nation on Earth, it’s inconceivable international trade activity will be constrained permanently. The question is whether it makes sense to gear up for more aggressive activity, or to continue to wait and keep your powder dry.
What we do know is this: It’s never the wrong time to strengthen your processes, better align your supply chain, and control your costs. During these uncertain times, the supply chain can be a useful tool to advocate your company’s mission and competitive advantage.