Dive Brief:

• The European Union is considering retaliatory measures against Donald Trump's announcement to impose tariffs of 25% on steel and 10% on aluminum, Sourcing Journal reported. 
• Tariffs from the EU could be as much as 25% on $3.5 billion worth of U.S. imports, including Levi's jeans, Harley-Davidson motorcycles and Bourbon whiskey. 
• A spokesperson for Levi Strauss told the BBC, "Unilateral tariff impositions risk retaliation and destabilizing the global economy, in which case American brands, workers and consumers will ultimately suffer."

Dive Insight:

All it takes is the threat of a trade war to realize how interconnected the global economy is. The unpopular decision to put tariffs on foreign steel and aluminum imports was met with resistance from inside and outside of the United States. Stock markets, a bellwether of the global economy, tanked on the threat of an escalating trade war.

It was interesting to see the rapid counter attack from countries that import U.S. goods, seeking to implement tariffs on things like jeans, whiskey and motorcycles. What was originally a benefit for American steel and aluminum manufacturers quickly became a liability for many other American industries.

A trade war was forecasted to raise prices, impact employment levels and create other economic woes like inflation. It also showed how other countries prudently protect their economies.

Situations like this prove that economics drive the supply chain. But for many supply chain managers, it should be a wake up call to add the ramifications of global trade policies into their supplier risk profiles.

Complex global supply chains see products moving between borders, and it is important to understand the complexity of taxes, tariffs, duties and other international financial transactions. The focus of too many is on simplistic bottom line based landed costs, when attention should be on all of the cost elements and what drives them.

Finally, it is imperative to understand and pay attention to the geopolitical landscape. In the past week, there were political changes in China where President Xi Jinping has now been made president for life. This is creating some uncertainly in the Chinese economy, challenging some human rights gains and also expanding China’s military. It remains unclear how this will impact commercial relationships, but it bears watching. I’m sure that some part of your supply chain has links in China.

The complexity of today’s supply manager is truly global in nature. While the economic flare-up over tariffs may quickly cool down, global economic challenges and pressures will increase. We need to keep up with them.