A global supply chain leader shares thoughts on likely scenarios and what brands can do to prepare
5 Questions with Remington Tonar, Co-Founder of Cart.com
United States President-elect Donald Trump has signaled significant changes in tariffs and trade policy that will be put forth under his incoming administration. The wide range of scenarios being discussed could have disruptive and costly implications for the sourcing and production models of businesses that are unprepared. With so much still in flux, what are the big takeaways for now? Is there a way for businesses to take action without overreacting or over-investing? Remington Tonar, co-founder of Texas-based Cart.com, the leading unified commerce solutions provider to more than 6,000 brands, cuts through the noise and identifies practical ways businesses can take action now.
Q1: Trade policy issues and the increased strategic use of tariffs have been prominent topics for President Trump, both pre-and post-election. What guidance can you provide to help shed light on what part is talk, which aspects will actually be pursued as policies, and what elements are likely to become a reality?
A: President Trump has always positioned himself as a dealmaker, and he's certainly bringing some of that gamesmanship to play in the various scenarios that have been articulated. Some of this is intended to motivate voluntary actions and concessions from outside parties without ever having to move to the more extreme measures that have been floated. With that being said, as you look across the variety of issues being discussed there are some common threads that businesses can and should be preparing for.
First, we should recognize that whether the U.S. ultimately imposes significant tariffs or the new administration's threat of tariffs simply results in voluntary trade policy adjustments made by certain countries now caught in their crosshairs, we can reasonably expect a similar result: it is very likely there will more challenging compliance issues and higher costs for U.S. businesses that continue to source or produce goods in those targeted non-U.S. regions, regardless of whether the U.S. imposes significant tariffs.
There’s obviously a lot that will become more clearly defined in the coming days, weeks and months. However, the most sophisticated operators in competitive and price-sensitive sectors that have global value chains should not wait before getting their contingency plans mapped out.
Remember, tariffs have a long history in the United States. “Taxation without representation” became a rallying cry during the American Revolution, and the Tariff Act of 1789 became one of the first laws passed by Congress. While free trade acts and a pro-globalization mentality have characterized our country’s approach to global economics in recent times, more protectionist policies are not new and should also be taken into consideration when evaluating supply chain risk.
Q2: What do you see as the main conclusions based on where things stand as of now?
There are a few basic assumptions that most analysts and Washington insiders can align on at the moment. The first overarching takeaway is that businesses should be ready for fast change. President Trump has made it clear that his administration intends to move quickly on these issues. Even if duties are phased in over time, as some Trump advisors have suggested, operators should be prepared for those to start phasing in sooner rather than later. In the interest of risk mitigation, operators should expect the administration to leverage many of the regulatory tools in its arsenal to generate quick wins.
Second, the administration’s focus on China is a big deal and is not going away. While the trade issues and imbalances that have been highlighted relative to Canada and Mexico are real and require attention and action, these issues were largely anticipated, and businesses have a spectrum of options to help them navigate higher duties and restrictions. However, it’s a much different story for U.S. businesses whose supply chains are dependent on China. Unlike our neighbors to the north and the south and our allies in Europe, China is a geopolitical rival. As our country’s strategic focus shifts to the Pacific and as national security concerns related to China grow, the economic tensions with China will only become more intense.
Third, businesses can’t afford to wait for the dust to settle and should already have built or be building a decision matrix to guide their actions based on contingencies and likely scenarios. Yes, there may be special consideration given in cases where there is no other viable alternative to the sourcing of, for instance, a China-related product, component or part. Companies can hope for the best, but they should be planning for the worst. The lack of a Just In Case mindset broke or nearly broke many companies during the pandemic. When it comes to these types of macro-political risks, I think it’s often better to be prepared for a range of eventualities so that you can be proactive if the need arises.
Q3: It seems like potentially impacted businesses are walking a fine line between under-preparing and overreacting. What’s at stake here?
What’s shaping up is a massive game of musical chairs, where businesses with significant supply chain ties to targeted nations, and China in particular, will be scrambling to identify and contract with suppliers and vendors who can help them uphold quality standards, meet delivery requirements, and satisfy trade compliance regulations in the most cost-efficient manner. The challenge for many businesses is if they wait for the music to stop, they may lose optionality, incur greater switching costs, have longer downtime or be left without a chair altogether. And that doesn’t even get into the significant work required to transition and re-optimize their supply chains to fulfill their new production and sourcing models.
Overreacting can be costly, but being underprepared can cost even more. Companies can act without overreacting. Even understanding what your options are and what the likely scenarios are is beneficial and not overly burdensome. As they say, an ounce of preparation is a pound of cure. Managing supply chain risk is no different.
Q4: Are there any common pitfalls that brands should be sure to avoid?
A: Well, we’ve covered the fact that you can’t just do nothing and hope for some safe, affordable path to emerge. Almost every operator understands that, but another pitfall is that it is probably a big mistake to just attempt to mirror what other companies are doing. They – just like you – are operating off of limited data in an information-asymmetric environment. Further, in most cases, one company’s supply chain will have distinct nuances and requirements not shared by other companies. While there are certainly lessons to be learned from what others are doing, it is important to create a tailored set of plans and solutions specific to your business and objectives.
Q5: In closing, do you have any final advice for businesses that are facing this uncertain trade policy environment?
A: While there is a tremendous amount of uncertainty around these issues right now, and while it’s true that important details are yet to come, there is still a lot that’s knowable–and a lot that can be done! At a minimum, you’re in control of your own data streams and possess a detailed understanding of the supplier relationships and processes within your business that may be affected. Companies should be using the information they do have to do scenario planning, even if high-level, so they are prepared to take action if and when necessary. Agility and efficiency are both achievable with a modicum of foresight and preemptive thinking.
There are ample third-party expert resources available to help companies think through these issues if needed. For those who use third-party supply chain and logistics providers, include them in your planning sessions. Most 3PLs have experience across industries, geographies, and use cases that is broader than the experience base of any one business; this can provide a source of insights into how specific issues have been addressed in parallel settings. Some supply chain management partners, such as ours, possess and invest in specialized staff and resources in areas such as trade policy, compliance, and international trade law that can be efficiently accessed and mobilized in support of your analysis, plans, and actions.
Importantly, supply chain partners typically comprise extensive networks of facilities, systems, logistics infrastructure, and multimodal transportation provider relationships that can often be leveraged to aid with a smooth, timely transition to an alternate operating model on a temporary or ongoing basis.
Further to this point, as a business created to help companies “unify commerce,” Cart.com has built proprietary IT and supply chain management systems that are connected end-to-end and exceptionally easy to deploy or redeploy in support of changes in our clients' sourcing, production, and distribution models. Similarly, our supply chain facilities and hubs function largely as multiclient operations, affording us an uncommon degree of agility and capacity to flex our infrastructure to support the short and longer-term needs of our clients. This is exactly the type of collaboration we have been engaged in with many of our clients over the past few quarters.
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