Insights from David Peña, Director of International Trade at Chambers Wales South East, South West and Mid

“A week after the so called ‘Liberation Day’, there is no need for us to expand on how damaging the increase in tariffs by Trump’s administration could become not only for the US economy but for the global economy.

“The level of uncertainty and volatility in global markets is linked to a concept we have not seen discussed in much depth: is this new US policy or just Trump’s policy? One might think of the latter as per the exclusive (ab)use of Executive Orders instead of securing consensus from US Congress. A US Congress validation of this policy would confirm the change of course of the country after 80 years of liberal trade policies.

“The aim of ‘Liberation Day’ is to bring manufacturing back to the US but for those businesses looking at capital allocation in the US to increase manufacturing capacities in the country, the answer to the above question, US policy vs Trump’s policy, is a key aspect. What would happen in two years (after mid-term elections) or in four years (after this election cycle)? Capital investments take longer than four years to bring any tangible return, and knowing whether this is long-term policy or presidential policy would be key to investors.

“Further to this, we may need to ask ourselves a question, is ‘Liberation Day’ strategy or just a tactic? The transactional style of the current US Government would indicate the latter. A tactic aimed to achieve a short-term goal: a position of power in trade negotiations with third countries without distinction of being historic allies or not. We can certainly see that the concept of allies is no longer in use.

“Our Welsh exporters trading with the US and all our exporters in general will be affected directly or indirectly by the impact to global trade. No matter where or with who you trade, there will be a knock-on effect.

“Sadly, we cannot control what happens in global stages, but, as mindfulness techniques teach us, we can certainly control our thinking, behaviour, attitude, and the energy we bring to our interactions. There are multiple factors to be considered in challenging scenarios and as we have learnt in the past, trade, like rivers, will always find a way to flow downstream.

“Let’s summarise the situation and consider our options.

“The impact of tariffs can be:

• Passed on to importers/final consumers, which affects the competitiveness of goods and impacts national inflation.
• Absorbed by exporters, eroding their commercial margins, or
• a combination of both.

“Back to our mindfulness mantra for a second: we cannot control tariffs but what we can control is:

• Upskilling our sales teams – knowing how Incoterms work or how rules of origin apply could unlock better deals.
• Efficient use of customs procedures – are you utilising Inward & Outward procedures, customs warehousing, and other special procedures to its maximum?
• Improve your Foreign Exchange strategy – a better exchange rate GBP vs USD could make your business recover part (or all) of the lost commercial margin.
• Consider trading with Intellectual Properties (designs, patents, trademarks) as an alternative way to export/import to/from certain markets
• Better knowledge and use of current Free Trade Agreements – expanding your target markets and maximising opportunities offered in such markets.
• Maximising the use of existing export support by Welsh Government (ITD, ITO, trade missions, Agile Cymru)
• Ensuring predictability on your export operations via export finance and trade insurance services.

“Chambers Wales South East, South West and Mid stands for trade, innovation, and growth. Our International Team is ready to offer honest, impartial, and pragmatic trade support.”