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Trade Tariffs involving many countries are leading companies back to domestic production
During the past year, we have seen tariffs issued by many countries. Tariffs and trade deals are helping create a weak international trade environment.
A tariff can be described as a tax imposed by country A against country B. It can apply to all exports to country A by country B or just particular enumerated things. Some of the most prominent tariffs have been placed by the U.S. against China and in return China against the U.S.
The U.S. vs. China trade war that led to these tariffs started because of several economic-related reasons. Some of these economic-related reasons included:
- Corporate Espionage
- Noncompetitive practices of state-owned enterprises (SOEs)
- The large Chinese use of industrial subsidies
Tariffs and Trade Deals
Because of these tariffs and the coronavirus lockdowns many companies are looking for domestic providers. Tariffs can very much benefit domestic suppliers. Tariffs make domestic production more competitive compared to imports that are coming from the country that has tariffs on them.
Tariffs are paid by importers to their own government. They can be used to protect domestic industry from foreign competitors. These foreign competitors can be dumping products on the market at cutthroat rates or receiving subsidies from their national governments.
There are two forms of tariffs. They are the ad-valorem tax and a specific tariff. The ad-valorem tax is levied as a percentage of the entire value while the specific tariff is a fixed feed.
Recently there has been a large number of trade disputes involving tariffs being placed on one country’s product by another. These countries include most of the major industrialized countries including the U.S., China and Europe. These products vary based upon the countries involved but do include lithium ion batteries and aircraft.
There are some coming trade deals and tariffs which can also affect domestic providers. Trade deals which are in the works include a comprehensive U.S. and U.K. trade deal as well as a U.S. and Kenya trade deal. The new tariffs include goods coming out of Hong Kong. These are actually not new tariffs but a revocation of exemptions that were given to Hong Kong.
The coronavirus lockdowns are also having an impact upon customers looking for domestic suppliers of goods. These goods in particular are those that come from medical supply companies. There are many benefits for local producers and the people in general from having locally sourced medical supplies.
Executives from 3M and Honeywell both said that both N95 respirators, masks, gloves, and other equipment were prohibited from being exported by the country of origin. Domestic suppliers can benefit here by teaming up with those companies. The ability of a country to prevent another country from receiving these necessary medical supplies has led to a national recognition in many countries that they must have their own internal source for these medical supplies regardless of the cost.
The coronavirus has also led to the increased rhetoric between several countries. Part of this rhetoric has included the threat to add additional tariffs on goods. Other countries have stated they might refuse to supply medical goods to countries if certain trade demands are not met. There has also been talk by both China and the U.S. about walking away from some deals because of COVID 19.
The increased rhetoric between nations threatens world trade and provides a reason for companies to look at domestic production. Domestic production, while more expensive, can be seen as more reliable.
Non-Payment of Debts
The economic risks of doing business internationally are always more dangerous. Factoring in the tariffs and the economic trade deals being endangered, the non-payment of debts by foreign companies has become a problem. A company or person that is owed money by a foreign company does have options.
There is an enhanced danger when doing business internationally. This is because of different laws, regulations, and time zones between the two different countries.
The tariff’s endangered trade deals have caused financial uncertainty for many companies. This uncertainty can lead companies to stop making payments to international accounts.
An international debt collection agency is one of your better options to collect these debts. An international debt collection agency is more likely to know the foreign country’s financial laws then most in house counsels would.
Using an international debt collection agency to deal with non-payment of debts from foreign companies is also necessary for technical reasons. If you sell grain internationally, you’re most likely not a technology-driven company with enough tech-savvy to track someone down but a debt collection agency is.