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Trade is centre stage in the Trump era, sourcing suffer get affected

US President Trump has thoroughly revamped the country’s trade policies. Josh Teitelbaum, Counsel for international law firm Akin Gump Strauss Hauer & Feld, explained during a panel discussion at Sourcing at Magic, the key indicator for what’s working or not in a trade deal, is the trade deficit. In this case, the losers are those on the negative end of a trade deficit, and the winners are those reaping the benefits. President Trump has been trumpeting the most when it comes to his reasoning for reworking a trade deal. He is very clear that the US will not be on the losing end of anything.

Trump has walked out of the TPP deal, threatened to pull out of NAFTA and checkmated talks on the Transatlantic Trade and Investment Partnership (TTIP), among other things. The US has also proposed eliminating the agreement’s tariff preference levels which provide duty free access for certain raw materials that Canada or Mexico source outside of the NAFTA nations for their apparel exports. “The initial US proposal was for the US to eliminate all 24 tariff preference levels,” Teitelbaum said. The move did not go down well in the talks as it would hurt Mexico’s and Canada’s competitiveness and may see US consumers spending more for goods with higher-priced inputs.

Teitelbaum explains, what’s at stake, if NAFTA goes belly up, is $682 million worth of apparel imports from Canada and $3.13 billion from Mexico as well as US manufacturing for brands like Levi’s. Anna Walker, global policy and advocacy at Levi Strauss & Co, said during a separate panel on trade, “We’ve been using NAFTA since day one and we designed our sourcing model to really capitalise on what NAFTA has to offer. We know that with NAFTA—that should the President follow through on some of his threats, we’ll continue to make those products, we just won’t do it using US inputs. Those products will move to countries that have their own supply chains.”