Prices of U.S. domestic steel are up approximately 20 percent since the beginning of 2018. This is due to expectations of “protectionist measures, which could prove a significant drag on steel consumers like the machinery, motor vehicle, and construction industries,” Capital Economics analysts said. “Ironically, the tariffs actually raise the incentives for these other manufacturers to offshore production to avoid the tariffs. Construction firms will have little choice but to pass higher costs onto final consumers.”
The biggest risk here is retaliation from the United States’ biggest trading partners, such as Canada, Mexico, the European Union, and China on imports in unrelated industries.
Countries impacted by a U.S.-initiated trade war would likely retaliate by imposing tariffs on goods they import from the U.S. Companies should be looking at the top global exporters of steel and aluminum to the U.S. and then look at their respective top imports from the U.S. to get some indication of industry sectors that may be affected by retaliatory actions.
In a trade war, there will be predictable winners and losers even if the net impact to the to the U.S. isn’t observable. Proactive risk assessments are essential to landing on the right side of the fence. Companies with enterprise risk programs would have surfaced this trade war risk in January 2017. By identifying areas of potential concern in advance, companies can have contingency plans in place for mitigating risk fallout from a global trade war. Risk management will help navigate your business forward.