Trade wars never completely go away. Once a market can no longer afford your products, they shop elsewhere. Once they have established a new supplier or developed a less expensive alternative, you are basically done in that market!
The problem with populism is that it is, at its core, nationalism. It’s based on the false idea that we can go it alone, that we don’t need the cooperation of our allies to settle trade disputes, and that we can simply use tariffs to coerce the other guys into behaving. Tariffs are not the way!
Trump China Tariffs have hurt American businesses in two ways:
- They have to eat the tariff. This means less profits, less sales, and ultimately less jobs. The stock market knows this and has responded accordingly. The tariffs will kill off many American businesses.
- They can no longer depend on income from exports. Countermeasures taken by the other side in a trade war make American goods less attractive. But the other side’s market still has a demand for these products. So they just buy from our competition!
Losing shelf space
We can tell you from our own painful experience how hard it is to get shelf space in America, let alone in a foreign country. If you lose it, the shelf space doesn’t just sit there vacant, waiting for a resolution and your return. Far from it! It is instantly seized upon by your competitors!
Take the case of American wine, for instance, since that was our industry. It’s taken decades to get buyers in China for American wine. We had to overcome other international competitors in that market. Just when we finally get somewhat established, we hand the market over to the Australians, Italians, French, and South Africans! Then, due to a manufactured “border crisis” and new rules on temporary workers, the cost of labor has skyrocketed. The recent devastating fires due to the climate crisis resulted in all available labor being sucked into the rebuilding effort in California, inflating the cost of labor even more! This year, we have a bumper crop. What do you think that will do to prices and the health of this important US export?
Take the case of the soybean farmers. China was their fastest-growing market for soybeans. The farmers geared up for it. Then China retaliates for the tariffs on their goods and stops buying our goods. Then our government uses our tax money to prop them up. Farmers would prefer have a real customer. Without sales, they have too many soybeans. They store them, and the price plummets with oversupply. Then the climate crisis causes massive flooding in the soybean states and the silos are flooded. Now China is looking to South America and elsewhere for soybeans. Do you think they will ever come back to American soybeans? Will they ever trust us again? Why would they become dependent on products from a country that can use that dependency against them?
The China tariffs are having a rippling effect throughout the US market.
Ultimately, it will be the consumer who is hurt by the tariffs and the whole economy. We don’t have the nationalist/populist choice to go it alone anymore. The world is too interdependent. Our standard of living is based on our ability as consumers to get the best prices in the world. All that is about to change!
While we oppose trade inequities, dumping, and theft of intellectual property, we don’t believe putting ourselves in an even worse trade position is a good solution. Tariffs hurt business, the consumer, and the economy … permanently. We hope the businesses that supported an administration that uses tariffs as a trade war weapon finally learn the lesson that economists have known for decades. Tariffs don’t work!
Who We Are
Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.
Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.
They offer their Guiding Principles for Success (GPS) to help entrepreneurs become successful. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.
Currently they travel the world leading workshops, trainings, & keynoting at business schools, corporations, conferences. They are regular media guests and contributors to international publications and professional journals. They are C-Suite Network Advisors & Contributing Editors. Visit their popular brand building site at www.consumerbrandbuilders.com.
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