Two executive leaders from Sandler & Travis Trade Advisory Services are encouraging automotive companies to do an assessment of their exposures in international trade so they are prepared to respond to what are sure to be rapid changes in free trade agreements (FTA) during a Trump presidency.
“Trade is going to be volatile, so global companies need to do an assessment of what their exposure is, whether it’s operating under free trade agreements or trading with countries like China, where there have been threats to slap tariffs on them,” says Nicole Bivens Collinson, president, international trade and government relations, for Sandler & Travis Trade Advisory Services. Companies need to determine what is the worst-case scenario and what they could be facing in tariffs, she adds.
“Then they need to analyze and think, what’s my plan B, what are the alternatives, what can I do to alleviate some of the additional tariffs to make sure I stay viable?” Collinson advises.
Speaking at AIAG’s most recent Customs Town Hall, Collinson and her colleague, Paul Diedrich, senior vice president for Sandler & Travis, gave a talk titled, “Trump, Trade, and Where Do We Go from Here?” which focused on the impact of TPP and NAFTA changes on the auto industry. The session compared the two agreements and shed light on how to translate the specifics into the business planning process.
“It’s about planning and forecasting,” says Diedrich. “How can you avoid those duties through other mechanisms? It’s having the data and being able to analyze the data to understand what is the impact on your company.”
Diedrich advises automotive companies to look at the impact of the Trump administration’s FTA talks and any potential changes. “You need the data at your fingertips because sometimes you need to respond very quickly,” he says. “Do the studies on the impact. Be able to say, ‘If this changes, then this is the impact.’”
Once you quantify the potential impact, make sure the entire company and its supply chain know what to prepare for, the two recommend. “It gives you the opportunity to advocate on behalf of the damages that may occur or the opportunities that you may have,” Collinson points out. “It also gives you a chance to advocate how you need to make changes and what those changes need to be.”
Simply put, the steps need to be: (1) risk assessment, (2) development of a plan B, and (3) looking at the opportunities. For example, the changes brought on by the Trump administration may give companies the chance to get rid of some restrictive measures and restraints under NAFTA, they say.
“You may have to be more creative in how your structure your sourcing and how you structure your import process to be able to take advantage of some of the new programs,” Diedrich says.
So, are there reasons to be worried? In a video interview with AIAG’s Carla Kalogeridis, Collinson and Diedrich explain their take on that. “I don’t think we need to be afraid,” Collinson says. “We have to be aware — and there’s a big difference between the two.”
Carla Kalogeridis is AIAG’s e-news editor.