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How Trump’s Presidency Is Affecting Logistics
President Trump has been keen on changing up the logistics industry, even during the 2016 primaries when he was campaigning against other GOP politicians for the general election.
Trump perceived that by accepting the Trans-Pacific Partnership, or TPP, America would be unfairly disadvantaged, with jobs going overseas to Asia as a result. He argued that Japan, for instance, would be able to continue manipulating their currency, which would put them at an advantage over the U.S.
The Trump presidency is affecting logistics, for better or worse (it may take a while to see the result). The President has criticized America’s foreign trade for decades. Now, however, as President he is in a position to influence such policy. And he has.
Understanding Trump’s America-First Trade System
The Trump presidency, with regards to trade relations (which affect the logistics industry by extension) seems focused on a mixture of isolationism and soft protectionism. Trump’s policy is to protect American investments and industries, while increasing the value of such investments and industries by isolating America from one-sided foreign trade relations.
“America First!” is not just a rallying cry for his base, it is his position when it comes to trade.
Trump’s Major Moves
- The TTP is dead.
- Trump has withdrawn from the Paris Climate Accord.
- NAFTA may be next on the chopping block.
- When it comes to the globalization of trade and logistics, there are two general goals that politicians set their sights on: short-term gain, and long-term gain. While neither is guaranteed, President Trump is focused on short-term economic gain.
It is understandable why President Trump would focus on short-term gain, as it may seem more obtainable, and correctable if it goes awry, than long-term gain.
When it comes to presidencies, especially those that only last 4-8 years, nothing is certain.
Deals can fail, treaties can lose their effectiveness, laws can change, and the will of the people can shift. For politicians, it is better to score an early win than a late defeat. To learn why the Trump presidency is cautious about global trade, we need to understand how foreign trade agreements affect logistics.
When policies like protectionism and isolationism are enacted, a nation’s industries are economically bolstered. Products and services may cost more, but the demand for those products is higher, since fewer foreign competition exists. Since the cost of entering the American market becomes higher, only the wealthiest foreign nations and companies can compete.
This drives the price of goods and services up, especially for foreign goods. The higher the cost of foreign goods, the more reliance American citizens will place on goods manufactured in America due to the price difference.
American logistics companies benefit in this scenario because they are provided with more domestic clients. An American automobile logistics company will quickly fill the gap left from their now-extinct foreign competition. Instead of worrying about Toyota’s market share, for instance, Ford or GM will sell more cars and ship more of them to Americans.
Even if the cost of a Ford F-150, for instance, stays stagnant, Ford will sell more cars because, while Toyota may be able to compete with the Tundra, they will need to increase the price of their vehicles to cover the increased expenses of shipping cars manufactured overseas for the American market.
However, the continuation of this short-term gain by American automobile and logistics companies depends on whether these companies can, and want to, meet the needs of the American market. If not, Americans will choose to pay extra for foreign cars, thereby negating the benefits that protectionism and economic isolationism created. This example can be applied to practically any other industry.
Every presidency affects logistics. Trump’s is no different. While previous presidents were open to increasing globalization and foreign trade ties, Trump is not. Whether this shift in policy is positive or negative is anybody’s guess. The true effects may not be seen for decades.