November Roundtable Discussion Highlights: Preparing for US Trade Policy Shifts 

October 17th, 2024, Executive Roundtables for purchasing leaders

The roundtable theme was how purchasing leaders are preparing for potential impacts of U.S. administration policy shifts and steps that purchasing leaders are planning to mitigate the associated risks. Highlights of the roundtable discussion are summarized below. 

• Executive VP of Supply Chain for a glass and glazing manufacturer shared that they were at a tie 1 automotive supplier in 2018 when protectionist trade initiatives affected supply chains, and the strategy that worked best at that time was to encourage Chinese suppliers to establish Mexican manufacturing operations.  They also shared that at this time, they are investigating potential suppliers in low-cost countries outside of China including India, Turkey, and Mexico (as well as the Middle East for glass).  Their Chinese suppliers are investigating establishing manufacturing in Thailand and Vietnam. 
  
  They also shared that because they have a lot of business in Canada, they need to have a strategy for being competitive in that market (not subject to US tariffs).  They are keeping a close eye on the imports & exports of competitors to understand where they cannot pass on trade-policy-related costs to customers due to competitors not having similar exposures. 
  
  
• General Manager of a 3^rd-partry purchasing organization specializing in indirect materials and services shared that they have a robust process for suppliers to get price increases, and in 2018 they handled tariffs as a price increase.  Suppliers are required to provide mitigation – either an alternative product or cost savings offsets – to be granted a price increase. 

• VP Purchasing for an automotive sunroof manufacturer shared that in 2018, they were at a different automotive supplier, and had some success with localizing the supply base, applying for exemptions, getting some cost recovery from customers, and moving manufacturing from China to Malaysia.   
  They are benchmarking suppliers in Mexico for possible mitigation of the increased tariffs.  However, they are finding that they can be subject to Mexican tariffs on European steel. 
  
  
• Exec. Director of Purchasing for a steering and driveline supplier shared that they had success with getting tariff exemptions for specialty steel in 2018.  They have a concern that Chinese-owned companies operating in other countries might be subject to new trade policies.  They are currently doing an impact analysis of their supply chain to understand the trade policy risks associated with lower tiers.  They also shared that they had Thai suppliers that were in the process of establishing manufacturing operations in Mexico, but have put things on hold until the USMCA is renegotiated. 

• Director of Global Purchasing for a manufacturer of front end components shared that, as a Canadian company, they did not have much exposure to the 2018 tariffs and just pay the duties.  They have not reduced their Chinese supply base, but have established duel sources in Taiwan, Korea, and Turkey to be able to provide 100% non-Chinese content for customers who require it (and are willing to pay a 15% cost increase).  They have Chinese suppliers who have indicated they are willing to open manufacturing operations in Thailand if needed. 
  
  They also shared, in response to a question from the group if they consider being a Canadian company is a competitive advantage, that Canadian corporate taxes are higher than the U.S. and labor costs are more expensive, but finding talent is not an issue due to favorable immigration regulations. 
  
  
• Sr. Director of Supply Chain for an agriculture and construction equipment manufacturer shared that with 60-70% of sales in North America, their supply chain is very regional.  Their biggest worry is inflation and labor shortages that could affect their customer demand. 
  
  They also shared that in 2018, they benefited from prior decisions to shift their supply mix to be more domestic.  In 2018, they were able to achieve 80% – 100% domestic supply.  They were successful getting tariff exemptions for specialty steel. 
  
  
• Chief Procurement Officer of an automotive sensor supplier shared that they are working on scenario planning to anticipate impacts of trade policy shifts.  They are reviewing every product they buy manufactured in Mexico to identify Chinese content (they expect the Chinese content will be subject to tariffs) and are considering the effects if Mexican-produced products are subject to tariffs after USMCA renegotiations.   

• VP of Strategic Sourcing for a manufacturer of automotive control valves shared that in 2018, there were able to get a lot of tariff exclusions, but lost them all by the 3^rd round.  They moved 2/3 of their spend out of China, primarily to Thailand and Malaysia.  They were able to get some Chinese customers to participate in increased costs due to tariffs, and some customers helped as well. 
  
  They shared that they are planning to do a lot more resourcing to get out of China and are establishing their first manufacturing operation in Mexico.  They are finding that the labor in Mexio is not efficient compared to China, and Chinese companies are struggling with opening manufacturing operations in Mexico.