The unpredictability of U.S. trade policy has kept companies on their toes, but that doesn’t mean all businesses are scrambling in their attempts to ease the impact of additional tariffs.
According to a new report by investment banking firm JPMorgan, 47% of surveyed firms expressed worries over trade barriers affecting their businesses. However, more than half (52%) of respondents aren’t taking action this year to respond to tariffs. But among those making plans to address such levies, 32% intend to raise the prices of their goods and services, while 16% expect to shift their supply chains to non-U.S. countries and 12% will move those facilities to America.
“While there are challenges in today’s international business environment, companies continue to remain heavily invested overseas,” added Morgan McGrath, head of international banking at JPMorgan Commercial Banking. “This is becoming increasingly true for smaller companies and technology companies, which are going global earlier in their life cycle as the ease of technology and travel allows them to develop international business much more quickly.”
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After more than a year and a half of slapping tit-for-tat tariffs on one another, the U.S. and China confirmed in mid-December they had reached a partial trade deal, with President Donald Trump nixing the 15% levy on hundreds of billions of dollars’ worth of Chinese imports that was scheduled to take effect on Dec. 15. That tariff would have impacted a wide array of consumer goods including footwear, apparel and accessories.
For industry leaders, it marked progress on the trade front, but other geopolitical concerns remained: According to JPMorgan, Brexit ranked as another worry for companies, with 16% of respondents anticipating a negative impact from the U.K.’s impending withdrawal from the European Union. About two-fifths of those firms said that reevaluating their supply chains was a top priority this year.
The U.S. has been embroiled in a tariff dispute with the EU since Trump, over a year ago, slapped 25% tariffs on imports of steel and 10% on those of aluminum — a move he asserted would provide protection for American industrial workers. Washington also imposed duties on $7.5 billion worth of European goods in October, including 25% on British-made apparel and accessories as well as a variety of food and beverages hailing from other European countries.
Further, Trump threatened last month to tax $2.4 billion worth of French products in retaliation for France’s new digital services tax, which charges a 3% tax on revenues earned by companies that provide digital services in the country, affecting tech behemoths such as Amazon, Google and Facebook.
But despite some global economic pressures, JPMorgan reported that nearly half of the surveyed firms continue to do business around the world and most remain bullish about expanding their international footprint.
“Businesses are starting to report some decline in optimism as the pace of economic expansion naturally settles down and they become used to a new normal,” said Jim Glassman, head economist at JPMorgan Commercial Banking. “But it’s important to note that slowing economic growth isn’t a sign of weakness, and many of the concerns business leaders have point toward an economy that’s running at its full potential.”
JPMorgan’s 2020 Business Leaders Outlook survey took responses from 885 senior executives from U.S. middle market companies with annual revenues from $20 million to $500 million, spanning from technology and commerce to manufacturing. It was conducted from Oct. 29 to Nov. 19, 2019.
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