Navigating the Effects of the 2018 Trade War: From the Managerial perspective of American Manufacturing Companies

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School of Business | Master's thesis
Degree programme
Management and International Business (MIB)
The latter half of the 20th century is marked with globalization and an increase in global trade. During this time, developed and developing countries reduced trade barriers, especially tariffs, in an effort to promote trade. Now, protectionism is becoming an increasingly strong sentiment in many countries, especially the United States. The sentiment first began when Donald Trump ran for presidential candidacy in 2016, under the campaign slogan of “America First.” His goals were to bring manufacturing jobs back to the U.S., strengthen national security, force China to halt damaging economic practices like subsidies, and retract from “unfair” trade deals that caused the American trade deficit to widen. In 2018, the Trump Administration implemented many protectionist tariffs on products from around the world but many specifically targeted Chinese products. China then retaliated with additional tariffs against U.S. imports of an equal monetary value. The industry most heavily targeted in the U.S. was the manufacturing sector, and, as a result, it disrupted global supply chains. This thesis studies the measures taken by top-level management at three American manufacturing companies to mitigate the effects felt by the tariffs during a time where they are unable to control the external forces disrupting their supply chain. Due to the current state of the trade war between China and the U.S., the operations of these companies have been increasingly complicated, and the top-level management continues to make changes in attempts to mitigate the impact of the tariffs. The developed framework includes understanding how these businesses interact with five links in their ecosystem that can have an impact on risk mitigation risk transfer, risk elimination, risk sharing or risk acceptance. The five links are suppliers, customers, government, economic policies, and internal operations. The findings conclude there have been many unforeseen effects that American manufacturing companies have had to endure, in addition to many of the effects predicted by experts and economists. The major findings include the difficulties facing management as a result of uncertainty from day to day policy changes—as uncertainty is harder to manage than risk. One common theme seems to be great efforts taken to diversify suppliers away from being single sourced to one supplier from China, however, decoupling efforts are near impossible with the magnitude and low cost of supplies from China. In addition, American manufacturing companies are facing higher input costs due to the increase in tariffs and a dilemma between cost absorption or passing the costs down to customers and risk a reduction in sales. Lastly, despite pleas with government officials from each company’s state senate, there has been no success in altering or reducing the tariffs. The only way that the tariffs may be avoided is through tedious documents submitted through tariff exclusion, however, whether the exclusions are granted is unpredictable and also adds an additional level of uncertainty.
Thesis advisor
Kähäri, Perttu
tariff, manufacturing, protectionism, risk management, supply chain, offshoring, trade war, China, USA
Other note
The year of approval showing in the abstract of the thesis is 2019.
Tutkielman tiivistelmätiedoissa näkyvä hyväksymisvuosi on 2019.