The imposition of tariffs by the United States on various nations has emerged as a focal point of discussion, significantly impacting global trade dynamics.

In this episode of The Buzz, host Kevin L. Jackson delves into the ramifications of these tariffs, particularly on supply chain operations and international economic relations along with Warwick Powell, a distinguished expert in supply chain digitalization, who provides insightful analysis on the evolving landscape of trade and the necessity for agility amidst these challenges.

Listen in as they discuss:

• The critical intersection of technological advancement and geopolitical considerations
• The strategies that businesses can adopt to thrive in an ever-changing global market, emphasizing the importance of informed decision-making and adaptability
• And much more

Join us for a critical analysis and understanding of the current economic climate and its implications for supply chain leaders worldwide.

Additional Links & Resources:

• Connect with Warwick: https://www.linkedin.com/in/warwickpowell/
• With That Said: https://bit.ly/3XUlxOg
• U.S. tariffs create urgent need for supply chain agility: https://bit.ly/4icqmLd
• Australia rules out reciprocal move on US after Trump proceeds with steel tariffs: https://bit.ly/3FBB0wu
• Learn more about Supply Chain Now: https://supplychainnow.com
• Watch and listen to more Supply Chain Now episodes here: https://supplychainnow.com/program/supply-chain-now
• Subscribe to Supply Chain Now on your favorite platform: https://supplychainnow.com/join
• Work with us! Download Supply Chain Now’s NEW Media Kit: https://bit.ly/3XH6OVk
• WEBINAR- Bridging the Gap: Investigating the Disconnect Between Supply Chains and the People Who Run Them: https://bit.ly/3F1iZr2
• WEBINAR- Unpacking the Latest Tariff Updates, Best Practices & What to Expect Next: https://bit.ly/4ikvdcS
• WEBINAR- Lessons Learned from the Trenches: How AI Will Impact the Future of Work: https://bit.ly/3DUnROx
• WEBINAR: Adapting to Volatility: Navigating Trade Wars, Supply Chain Disruptions & AI: https://bit.ly/4kqSv2D

This episode is hosted by Kevin L. Jackson and produced by Amanda Luton, Trisha Cordes, and Joshua Miranda. For additional information, please visit our dedicated show page at: https://supplychainnow.com/buzz-understanding-impact-global-trade-tariffs-1406

Welcome to Supply Chain, now the number one voice of Supply chain.

Join us as we share critical news, key insights and real supply chain leadership from across the globe, one conversation at a time.

Well, hello, hello, good morning, good afternoon and good evening, no matter where you are in the world.

Welcome to THE buzz.

This is Kevin L.

Jackson here sitting in for Scott Lewton.

He's out somewhere.

I think he's in Boston enjoying a trip out of his studio.

So he let me borrow it for a while to do today's Buzz.

So thank you very much for joining us today.

It's a very timely show.

Over the past couple of weeks, we've seen the United States put tariffs on just about every country in the world.

And we're going to talk a bit about that from an expert that lives on the other side of the world.

And we'll get to that later.

But before then, I want to remind you of a event that's coming up this week that's going to focus on the people in Supply Chain.

It's a title, bridging the Gap, investigating the disconnect between supply chains and the people that run them.

It's going to be this Friday, March 28th at 12 noon.

We have Melanie Salter, the director of supply chain research at Boom Global Networks, and Lashena Naido, the managing director of esdp.

You know how in business HR is often seen as more administrative than strategic and supply chain, and HR metrics and strategies are often not aligned.

In this upcoming webinar, we're going to explore the reasons behind the disconnect and how to bridge that gap between supply chains and the people that run them.

So don't miss it.

Register online today.

With that, we're going to talk a bit about the United States against the world with trade tariffs.

Unless you've been under Iraq, you know that our president has been basically telling every country in the world that you have to pay up to trade with the United States.

Our friends, like Canada, put a 25% tariff on all Canadian imports and a reduced 10% tariff on energy products like oil and electricity.

Mexico, look, all Mexican imports are subject to a 25% tariff.

China, we didn't forget about them.

A 10% tariff has been imposed on Chinese goods and the European Union, 25% tariff on steel and aluminum imports that affects just about all EU countries.

Some of them have really retaliated against the United States for these actions.

So because of this, I thought it would be great to bring in an expert to talk more about how these tariffs are affecting the global economy.

Especially supply chain.

And, and with that I'd like to bring onto the show our special guest, Mr.

Warwick Powell, chairman of Smart Trade Networks.

Well hello, welcome on board Warwick.

Thanks for joining us today.

Great to be here Kevin, you know.

Tell me a bit about yourself and where you from and what you do.

Well, as your viewers could probably tell in Australia and I've been in Australia almost 50 years.

I'm originally from Hong Kong.

Oh, okay.

These days I wear three hats or perhaps two hats and one hat has two halves.

One hat is heavily focused on research and development and the other hat is as the chairman of a company, a little group of companies called Smart Trade Networks.

So Smart Trade Networks is focused very much on the intersection I guess of digital technologies and cross border trade.

And the company is involved in a whole range of research and development initiatives around digital technologies, whether it's in blockchains or in artificial intelligence IoT devices with a view to creating tools that enable small and medium enterprises in particular to gain market access and to improve the ways and opportunities for them to benefit from international trade.

So the work is very focused on enabling small and medium players within economic systems to I guess their game and benefit from technology.

So that's the commercial side of things if you will.

The research work is very much focused on the later areas but I guess a little bit more abstractly or higher level.

And it looks at the intersection of technology, supply chains, payment systems and dynamics in international geopolitical economy.

That's in short, the things that I get up to when I'm out of bed.

Sounds like fun.

But before we get into the geopolitics of everything that's going on, you know, I've been to Australia a few times.

I've been to Sydney, I've been to Canberra, I've been to Perth and even Darwin but you know, I survived.

And sometimes you may wonder because they always say that when you're in Australia everything is trying to kill you.

Is that really the truth?

Well, Australia does have a lot of animals, critters that in one way or another can be hazardous to human well being, whether it's the crocodiles or whatever.

But I guess what most people think about in terms of Australia is the, is the number of venomous snakes and spiders and other insects.

A lot of people don't like snakes.

And spiders and, and they can be a little bit of a shock.

But I mean the reality is is that most of these critters are more scared of humans more then humans should be scared of them.

And if you make enough noise, they tend to scatter and run away.

So usually, usually not really a big.

Yeah, you had a pretty interesting story when we were in the green room about maybe you didn't make enough noise.

Yeah, look, I fly fish for trout mainly when I get time.

And for those who know something about fly fishing, you'll know that part of the challenge is being able to get up to the edge of a stream without causing too much ruction because the, the trout themselves are very sensitive to vibrations that they can feel.

So I was on all fours crawling towards the stream and the grass was quite long.

I was clearly doing a very good job at not making much noise because as I got close to the stream and I brushed aside the grass, I came face to face with a snake.

And, and the snake looked at me and I looked at the snake.

It clearly didn't hear me coming.

And we both froze.

The snake didn't go anywhere.

And in the end I quietly backed off and moved to another part of the stream.

So that was probably my closest unplanned encounter with some of them.

And I must say it was a bit of a shock.

You know, you certainly don't, you know, come literally, you know, within a foot.

The snake's head was a foot away as I crawled through the grass.

That's amazing.

And as you said, these snakes are venomous, so it could have just snapped at you and you wouldn't be here on my show.

It could have.

I was obviously as shocked as I was.

Well, you're also an adjunct professor at Queensland University there in Brisbane.

Right.

Could you tell us a bit about Brisbane if people don't know?

Sure.

It's a subtropical city on the east coast of Australia.

It has a population of about a million people in the official territory of the city itself.

And within the broader region in which it's nestled, which we call Southeast Queensland, there's about 3 1/2 million people.

Many of your viewers would probably be more familiar with the Gold Coast.

Oh yeah.

In Australia, the Brisbane and the Gold coast is about 50 miles away from Brisbane itself where we've got great sandy beaches and tremendous surfing and fishing opportunities as well.

So that's Brisbane.

Queensland University of Technology is a long standing institution in Australia.

It's one of the top 20 institutions and I'm fortunate to have an opportunity to work with a bunch of clever people, but also participate and often lead research projects involving academic and industry crossover, particularly in the area of supply chain digitalization.

And so I lead projects that mobilize people who have very diverse Skills and backgrounds from supply chains, logistics, information technology, data analytics, cryptography, legal research, software development and design.

And it's a lot of fun, you know, when you get a bunch of clever, creative people together in a room and you get to brainstorm around a particular set of problems, you really are able to, I think, reach a level of being a human being that I think is probably one of the peaks of what being human is all about, and that is to be creative.

So it's a lot of fun.

Wow.

Yeah.

And you actually kind of work at an interesting intersection in these ways.

You're working at the intersection of China.

You were born in Hong Kong.

That's another one of my favorite cities.

I used to go to the big jumbos before it burnt down.

Digital technologies, supply chains and the finances, international finances.

And let's get back into this.

Geopolitics, the economy and governance.

That must be really fun.

And in today's environment, does that keep you busy there talking to your colleagues there at Queensland University?

Look, it absolutely does, because in all of those fields now, we're experiencing and witnessing very significant transformations in not only the fields themselves.

So technology is advancing incredibly quickly.

So there's a lot of change in development, just natively, so to speak, within this particular field.

They're being disrupted because nations and governments and regulatory authorities are now approaching these particular fields with a totally different set of lenses, and that is shifting to a posture where risk is emerging as a more central focal point around almost all of these areas, and particularly the.

This broader idea of risk to national security.

So we're starting to, I think, see a period where there is a lot more sensitivity around these domains, whether it's in the movement of goods and services, the movement of people, and importantly, the development, operations and movement of data.

So the development of technological infrastructure, whether it's in mobile networks, whether it's in satellite technologies, all the way through to softW applications, and where data centers are being located and built is really becoming an area of considerable concern in ways that perhaps 10 years ago simply wasn't.

And I think the transformation is one where what was in effect, an environment where American big technology was the de facto global technology.

That situation has been unwinding very quickly, and countries around the world have become more sensitive to the big question of data sovereignty.

And that's driving all sorts of things, both in terms of policy, but also in terms of how enterprises are responding by developing alternative technologies that can address these concerns.

So it's an incredibly fluid environment.

And I guess when you're in the business of research and advising, fluidity creates its own opportunities.

Well, this is really amazing because, I mean, data is at the heart of supply chain management.

Being able to forecast what you need, being able to understand what you have to manufacture, reading demand signal, for instance.

And that seems to sort of come up against issues with data sovereignty because of the international nature of, of supply chain and trade.

I imagine that's at the heart of some of the issues.

Is that true?

Yeah, absolutely.

And that's where my colleagues in cryptography really come to their fore.

Because cryptography is really the mathematics of secrets, right, and how it is that two parties can ensure that they can communicate with each other, but no one else knows what they're talking about.

And the big challenge now is how do we enable an environment where information interoperability can still play the critical role that it needs to, to enable actors in supply chains to coordinate what they're doing and to make decisions about what they need to do, whilst at the same time not compromise the national sovereignty or digital sovereignty concerns that governments increasingly have.

And the challenge in all of that is a whole technology stack challenge, right, to start with, going from the ground level of the undersea cables, the routers, the terrestrial transmission networks, all the way through the satellite networks.

So that's your hardware.

And it goes all the way through to how technology stacks in the software space enable data to be relevant and useful for enterprises and their stakeholders, whilst at the same time not being broadcast around the world willy nilly.

Now, I think these are still early days in this particular space.

About 70% of global Internet traffic continues to transit through data centers in Virginia and that proportion is dropping and dropping quickly.

But as that process takes place, a whole bunch of new technologies need to be developed.

Obviously a bunch of new hardware needs to be developed and operationalized, which is why we're seeing massive data center projects in obviously China over the last 10 plus years, but also through Southeast Asia where Malaysia is picking up its act to become a significant data center hub for the region.

And in Middle east we also see big moves by Saudi Arabia and to some extent the UAE to be positioned as critical data octopus data center operating hubs as well.

So this entire space, if you will, of core infrastructure is.

So we used to think of infrastructure as roads and ports and railroads and airports.

Well, this other layer of infrastructure which we all really just took for granted, it just sat in the back of our minds.

No one really paid much attention to it, except the engineers, is now becoming something that everyone has to pay attention to.

Yeah, this is why all of this is making front page news.

In fact, I want to bring up an article that I saw in a supply chain management review, and it talked about the fact that these US Tariffs are creating a real urgent need for supply chain agility.

We'll bring the link up in the chat.

But these challenges are significant, but they are also opening up doors for innovation and growth for businesses.

The retailers and manufacturers need to adapt quickly because of these higher import costs.

But they also have to wait and see and figure out how to deal with retaliatory tariffs that could hurt brands, especially here in the United States, by making their exports less competitive in key markets.

And these moves, I think, really highlight the need for, you know, digital transformation.

Scott's going to get on me because that's my show, Digital Transformers.

But in reality, everyone that's in supply chain or logistics has to digitally transform their business.

Do you agree?

Look, digitalization is a massive part of what's going on generally in economic systems.

So in supply chains themselves, obviously, if you just think of each of the nodes in the supply chain, whether you're in the business of harvesting raw materials or in the business of transforming them, transporting them, or ultimately storing and distributing products, digital technologies is playing a role in creating new productivity opportunities in each of those activity areas, whether it's to be able to make things with less inputs, operate a plant more efficiently, manage logistics and distributions and fulfillment in a quicker, less costly way.

So digital technologies is playing a pivotal role in what I would call productive efficiencies.

The other area, of course, digital technologies is playing a critical role is what I call process productivity, and that is the ways in which the different nodes in these supply chain networks can interact with each other and coordinate effectively.

And this is where information actually comes into its own.

Because if you think about supply chains as really a series of circuit flows where products flow in one direction and money flows in the other direction, what holds all of that together is actually information.

Because without information, you can't have either of those things happening.

And again, we've taken that information layer very much for granted.

But because of geopolitical concerns, because of the advent of computational power and all sorts of other isis that enable you to collect data, we're now starting to pay more attention to critical layer that until now really sat in the background.

So we took for granted what I call the conditions of existence of information.

So information itself is a supply chain problem.

We collect information, we make information, we validate information, we store information, we distribute information, we access information.

And we use information.

And that all happens within an infrastructure that requires energy, particularly from a computational point of view.

So information as a supply chain is intersecting with the other dynamics of supply chains as well.

And that digitalization process is at the heart of an enterprise's and an industries or a supply chain's ability to adapt to the changes that are taking place in the world.

Tariffs, which is, I guess the heart of the question here, fundamentally aims to transform relative pricing.

And by changing relative pricing, it seeks to give signals to enterprises to change something about what they're doing.

In the case of tariffs, the aim is to either cause buying enterprises to seek alternatives, so instead of buying from an imported supply chain, they will be looking for either a non tariff impacted import supply, or looking for some kind of import substitute, some domestic supply.

The aim of that then is to catalyze investment in domestic supply to fly.

So this is the theory that sits in behind this tariff regime.

And the question then is, is how do enterprises adapt in that environment?

Sellers have of course, over the course of the last eight years.

We've already had Trump 1.0, so the world has.

And enterprises and governments have in a sense, had a practice run.

They have already had an exposure to a significant disruption to relative price signals in global supply chains.

And many have already been adapting, which explains many of the changes that have taken place in the contours of trade flows.

But adapt they will all need to do.

And they will do that either by, as I mentioned, looking for domestic supply opportunities, or from an exporter's point of view, they'll be looking to either have ways to comply with the tariff provisions, which are incredibly complex.

And compliance is all about information, by the way.

That's all compliance is.

Compliance is just an information problem and a big and complicated information problem, alternatively.

I mean, we'll touch on this later on, I think, but we're going to say steel, aluminium, the tariffs actually apply not just to the wholesale raw materials, but it's actually to downstream goods that contain steel and aluminum, which basically covers almost anything and everything.

And once that starts to happen, even if you're in the business of manufacturing pots and pans, you'll need to be contemplating the issues of compliance.

So compliance is one way that enterprises need to adapt.

That's just to be able to maintain their ability to participate in a market anyway.

And the other one, of course is whether or not enterprises can relocate activities to avoid tariffs.

So we do get some structural and geographical changes in the locations of where things happen.

And in many regards, one of the main features of the post Trump 1.0 tariff world is an interesting set of cases of how enterprises have diversified some of their locations.

And much of that has perhaps a large proportion, not much of that has been catalyzed by the art of work around country specific tariff regimes.

So we see an expansion of activity in Vietnam, Malaysia, Mexico, all of which is aimed at, in the first instance, maintaining access to the US Market without being impacted by tariffs.

Though all of that's going to change.

And of course, it also means that these firms are close to new markets.

So that's the other change that's happening.

Well, you know, you were talking about, I guess, anger in some ways.

And in fact, when the United States imposed tariffs on Canada, you saw the Prime Minister of Canada, Prime Minister Trudeau, in front of microphones basically saying, american people, we're your friends.

Trump, this is not right.

He used some other choice words.

But I just saw a recent Reuters article talking about the tariffs that are being placed on Australia.

And your Prime Minister, Anthony Albanese, said that Australia is not going to put any reciprocal tariffs on the United States.

And we'll put that link in the chat because he says that imposing reciprocal tariffs on the United States would only push up prices for Australian consumers and spur inflation.

Is your prime Minister on the right side of this argument?

I think generally, yes.

You know, Australia is a trading nation and it depends a lot on its ability to export and import.

And it's important to bear in mind that the bilateral trading relationship between Australia and the United States sees the United States having a substantial trade surplus with Australia.

And in that regard, that particular trade relationship is in the minority, I guess, because the United States experiences a trade deficit overall with the world.

But in relation to Australia, the United States actually has a trade surplus.

The imposition of tariffs obviously affects prices and the way it works through supply chains can be quite complex.

The conventional story, I guess, is that as tariffs add to the cost of the goods when they land, that cost will get passed on to end consumers, leading to rising prices, prices and increasing the rate of inflation.

And in some sectors, that tends to happen more than other sectors.

The other ways in which tariffs affect supply chains and particular nodes within a supply chain is that rather than being passed on, the importers themselves often absorb the tariff increase to the extent that they can so as not to have to pass on those costs and put at risk their market share.

And some recent research that I saw indicates that a good proportion of the Trump 1.0 tariff reactions in the United States did involve importers absorbing quite a lot of the tariffs.

What that meant, and this is a bit that's unseen as far as the economic impact is concerned, is that rather than pushing prices up in many of the categories Australian effect, these enterprises essentially experienced a contraction of their profit margins and that affected their balance sheets.

And for some of these enterprises, it clearly would have affected their ability to employ people, but they made the decision to absorb the tariff increases to a greater extent.

Others have passed on those tariffs, of course, to varying degrees, which then affects the downstream industries and ultimately also consumers.

The third way in which tariffs can affect supply chains is that the exporting entity would absorb to some extent the tariff by reducing their export cost.

Export price.

That tends not to happen that often, particularly when globally competitive markets have already caused exporters to operate at incredibly high level of efficiency and relatively low margins anyway.

So the original exporter has relatively low margins to play with.

It's the import side and the distribution side where there are margins that can be used to absorb tariff increases or ultimately pass them on eventually at some point, the more the tariff gets raised, the less the ability there is for those on the downstream side to absorb them and ultimately it will feed through to the empire in one way or another.

So look, I think the Australian response at this stage is typically Australian.

It's relatively measured, it's quite mild, and ultimately it's looking to not aggravate the situation, but keeping an eye on what the end impact is on Australian enterprises and consumers.

Obviously, the steel and aluminum tariffs will affect Australian exports to some extent, but adding a tariff onto imported goods from America isn't going to help anybody.

So your mission statement, Eric smarttree Network says that your foundations are to enable data integrity in supply chain to drive responsible businesses and value growth.

And we've talked about the importance of data, the importance of IT infrastructure, and also the importance of being flexible and having agility in this current climate.

So how does Smart Trade Network advise its clients to deal with this turmoil in global trade?

Look, in some ways the first thing we say to people is sit tight.

The temptation often is to react quickly, in haste in the face of significant changes.

Now, sometimes the need to respond immediately is unavoidable because the price point shifted.

And if your operating margins are fairly thin, then obviously you need to do something about it.

But the first piece of advice that we give is for people to actually take a deep breath and scan the world and get a group of the broader dynamics at work and be less impetuous and then plan effectively.

Think about not just where you need to be in a week's time, but when you're dealing with foundational infrastructure questions, when you're dealing with the commitment of fixed capital, particularly if you're looking at expanding production in new locations, then you need to be judicious in the kinds of judgments that you make.

So the first thing we advise people is actually do nothing for the first move, understand your environment.

The second thing that we've seen, of course, and this is, you know, partly the experience that we've had now over the last 10 years since Trump 1.0, is that considered.

Responses to this change in the relative pricing structure of the global marketplace can be done in ways that ultimately empower enterprises to expand their productive capacity and to grow their businesses.

So just as the market in the US Becomes a tougher market, it also creates opportunities to open up markets elsewhere.

And we are seeing this happen in large part because the non US Parts of the world are playing an increasingly larger role in global trade.

If you think about the way that the US Economy dominated the world in the years immediately after the Second World War, occupying a little bit over 50% of global GDP, the vast majority of trade in those years was of course, anchored by the United States.

These days, the US market contributes about 15% and declining to global trade.

So in relative terms, the US Market is not as big a market in global terms as it once was.

What that means, of course, is that other markets are becoming more important.

And as enterprises in other parts of the world are looking at how they can respond to the challenges of US Tariffs, one of the first things is actually to look at the growth in other markets.

And we see that at macro level as well, where supply chains are reconfiguring in tighter spatial clusters.

So in Asia, for example, supply chain reconfiguration is seeing an intensification of supply chain networks that revolve around intra regional trade, so far less about the longer supply chains that connect up to other markets, such as the North American market.

So in Asia, trade is increasingly intra Asian.

And those sorts of changes, I think, are likely to be the kinds of systemic responses to the US Tariffs.

What that really means is that the US Is progressively cutting itself off from the rest of the world, and the rest of the world, in a sense, just needs to deal with that.

And of course, its economy will also adapt in its own way.

And I guess that's the intent of the policy.

The adaption However, I don't think will be particularly kind in terms of what the ambition is.

So the ambition is to rejuvenate American manufacturing.

The ambition will be very difficult to achieve simply by tariffs, in large part because the reasons why American manufacturing has hollowed out over the last 50 years are difficult to resolve quickly.

The main reason is that the US Economy has structurally changed.

Where financialization has seen.

The growth in financial services, real estate, insurance and the stock market is playing a much bigger role in the economic system.

And that comes at a price to the manufacturing sector, which has diminished in proportional importance.

Until the dominance of the finance sector is tackled.

The space in the American economic system for manufacturing rejuvenation is really constrained.

The second reason why the rejuvenation of manufacturing is difficult is that modern manufacturing requires high technology and high skills.

And the American population at large has experienced began over the last 40 plus years a relative reduction in overall literacy and numeracy levels.

There's a lot of data which shows that the literacy and numeracy standard of Americans has been dropping.

And modern manufacturing actually needs a population that is highly literate and highly numerate.

The third reason why rejuvenation will be challenging, particularly in the short term, is that the United States economic system does not manufacture sufficient amounts of fixed capital and sufficient intermediate input goods, which means to create new factories, which is ultimately the sort of imaginary of manufacturing, would require a dramatic increase in the import of fixed capital, machines, equipment and those sorts of things, as well as a significant increase in the short term, at least of intermediate goods.

Now, as tariffs gets pushed up around the world on contained steel and aluminum, that will actually push up the cost of capital goods.

There are no import substitutes.

So the United States is going to have to import more stuff.

If it doesn't import it from China, where the world's lowest cost capital goods come from, by and large, the United States will turn to Europe, particularly Germany and Japan and Korea, all of which are a higher cost supplier of these kinds of things.

So the end outcome in all likelihood is that the United States can make a transition, but over the next decade it will actually transition to a higher cost plateau economic structure, the aim of which is to actually, and perhaps this is not the explicit aim, but the consequence of which is that it becomes less connected to the global economy.

And that continues a current trend anyway, which is a relative diminution of the role of the American market in global trade.

The rest of the world, however, will continue moving on.

So, you know, the newscasters call this a trade war is.

But is it a trade war or just a natural evolution of global economics?

Well, it doesn't have to be this way.

So in a sense, there's nothing natural about it.

But at the same time, the concerns that have been expressed by the Trump administration, I think, are an understandable set of concerns.

When you survey the landscape of the American political economy, there are plenty of reasons why it's understandable, at least for political leaders to be concerned about the decline in certain economic sectors, which has also contributed to the decline of particular regions, because a lot of these sorts of activities are concentrated, right.

Becomes a visible set of social problems.

And tackling them is, I think, a totally understandable and legitimate set of concerns.

The challenge is, is whether or not the world can be turned back, and the world can't be turned back because of technology development, the ability of other countries to literally move on to markets elsewhere.

60 to 70% of world trade was transatlantic trade then.

So this is why when both sides basically began tariffing each other out of trade, it had such a big impact.

But you come to today, and when the US market's only 15% of the global marketplace, the US tariffing itself just doesn't have the same kind of impacts on the system at large.

The Europeans have been diversifying.

China's certainly been diversifying its trading exposures, though, ironically, since Trump 1.0, China's trade surplus with the United States actually been increasing.

So in that sense, tariffs haven't actually done what they said that they were meant to do in any regard.

So is it a natural response?

Well, it's an understandable response.

Is it the only way in which I think the United States can respond?

Well, certainly not.

You know, there's many ways in which governments and industries can respond to these sorts of concerns.

And some of those we've touched on, which is to become more agile, to adopt technologies, to become more cost competitive.

Because if you want to be a global economic system, you've got to be and your trade exposed, then you've got to achieve efficiency levels and productivity levels that are comparable to what's going on in the rest of the world.

If you cut yourself off, you can do whatever you want.

But if you want to be in the trade exposed part of the world, then you can and must need to reach those productivity and efficiency levels.

There's no reason, there's no reason why American enterprises cannot do that.

It will take effort, it will take a commitment to invest in technologies and systems that perhaps for a number of decades, capital managers have been reluctant to do.

You know, they've been more interested in pushing more and more money capital in the American system into stocks, into derivatives and those sorts of areas where they can monetize returns quicker and easier than in the tougher, slower world of manufacturing.

But they're the changes that can be done.

Taking seriously the concerns that the administration, I would nonetheless suggest that this particular policy approach is be that as you know, the administration's very committed to it and therefore it will have its own ripple effects.

I'm not convinced that they will be particularly good for the United States and they're not great for other people in the world in the short term either.

They will need to adapt, but adapt the old will.

And it has shown that it can do that already.

Yeah, so earlier in the show we talked about how many hats you had on.

It sounds like, as is shown in the graphic, it was really bad globally.

But you had mentioned that, I guess I don't know if this was Pre World War II, but it was when the United States was growing in its percentage of trade.

But now, as you're saying, we're only 15% of global trade.

Can we learn anything from that history that will help the industry get through what's happening today?

Professor yeah, look, it's important to understand what's different because if we use analogies carelessly, we potentially draw the wrong lessons.

So at the time of the trade war in the late 20s, early 30s, the United States and Europe contributed about 60 to 70% of global trade.

The transatlantic trade itself contributed about 40%.

In and of itself, backwards and boards across the Atlantic, 40% of global trade none of that holds anymore.

None of that holds anymore.

The transatlantic trade is about 6% of global trade now.

So the tariffs are imposed and there's a tit for tat between Europe or the EU as it is now and the United States.

It's actually affecting a much smaller proportion of global trade.

And so at that time, you know, when 70% of trade was between the U.S.

and Europe and the rest of the world and 40% was between Europe and the U.S.

a transatlantic trade war had a massive impact.

Today, however, given the relative roles of transatlantic trade as well as in particular the relative role of the United States as a global trading market, tariffing goods coming in and out or coming into the United States, and if it's retaliatory, coming out of the United States will have a much smaller impact compared to then.

Obviously, if you end up in a world where 100% tariffs are being imposed across the board and there are similar retaliatory measures from others, that will kill, you know, trade because buyers in different markets simply won't be able to absorb that or afford it.

But I think what it's going to do is continue driving the kinds of changes in the global patterns and contours of supply chain organization that we've seen already in the last 15 years or so.

And those changes, the macro level firstly is an expansion of trade by everybody else in the world.

So trade, for instance, between China and the rest of the world has been growing at a rate faster than trade between China and the United States.

China is the world's largest trading partner for about 150 nations now, which is a contrast to the situation 40 years ago when the United States was the largest trading partner of the majority of countries in the world.

So trade between China and everyone else has been growing faster.

And in fact, for the first time this year, trade between China and the Global south exceeded trade between China, the us, Europe and Japan together.

So that's the first sort of interesting thing to visualize is the changing structure and composition of the flows trade amongst countries.

And if you take Southeast Asia as a case in point, is also growing at a rate far greater than trade between Southeast Asia and the United States.

So we're starting to see a world of trading networks emerge, which in part are much more tightly connected, which I've touched on before.

That geographical concentration and connection on intra regional trade is starting to emerge as a strong feature.

But also the fact that other trading nations, particularly large ones like China, are beginning to respond anyway.

China's trade with the rest of the World, as I mentioned, is now greater than its trade.

With a combination of the old transatlantic markets, Europe itself has been diversifying its trade.

So from a period when trade with the United States was the dominant part of European trade, that has been changing too.

So the world today, in terms of the structure and contours of trade relationships, is vastly different to the world of the 20s and 30s.

So at this stage, I would suggest that the leverage impact, and I don't mean this in terms of, you know, a political leverage, but the capacity and the scale of reach of impact of American tariffs today is far less significant than it was 90 years ago.

And that's how the world has changed.

Wow, this has been insightful and I'm not scared to get out of bed in the morning.

Thank you.

Thank you very much for all the insight and knowledge that you've shared with us and the audience.

Your view is very refreshing.

So I'm sure others would want to connect with you and learn more and as we go through this transition.

So how could people best connect with you, especially us on the other side of the world?

Well, there are two ways.

I post on LinkedIn, so look me up on LinkedIn and they're basically short posts, you know, just with new snippets and things, as you'd expect.

And I also write longer form essays and publish frequently on Substack.

So that's Warwick Karl and.

And people can find things there.

I touch on many topics there and particularly on geopolitics and more, the Chinese economy.

But there are a couple of pieces there on questions of supply chains and trade.

In fact, I think your viewers might find interesting a couple of stories that I've posted there that look at the potential implications of President Trump's threats to impose 100 and 150% tariffs on BRICS nations and how they are likely to adapt and how of course, the United States economic system would also adapt as well.

So they're the two main ways.

I've also got a book if people are interested in it.

It's a little bit academic.

It's called China Trust and Digital Supply Chains Dynamics in a Zero Trust World.

And that focuses on the adoption and embrace of blockchain technologies by China, particularly in relation to how it affects data integrity and supply chains and intersects with the evolution of global payment systems and currency multipolarity.

I'm going to have to bring you on to digital transformers because that's one of the areas that we really focus on digital assets and blockchain.

So I look forward to bringing you back there, Warwick.

Look, absolutely.

It would be a pleasure to do that.

Thank you.

Thank you very much.

And audience, thank you.

I'm sure you got a lot out of this last hour.

I know I did.

So don't forget.

Stay tuned for so much information from Supply Chain now, especially with that said, which a new edition will be out this week and with Digital Transformers.

Our next show is going to be an interview with Oracle's Mark Rakmilovich.

He is the group vice president for product management and development that provides blockchain technologies for fintech and transaction management.

That will be an awesome show.

So as Scott always said, we really welcome you, the audience.

That's the most important part of our show.

So take what you've heard today and take some action, leverage it, use it, do good, give forward and be the change that's needed.

So thank you.

Thank you for joining us here for this special edition of the Buzz.

Enjoy and have a transformative day.

This is Kevin Jackson.

See you next time on the Buzz and Digital Transformers.

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