DC Velocity - March 2020

NEWSWORTHY

SUDDENLY, A CLOUD OF UNCERTAINTY OVER TRADE IS
beginning to lift.

So said analysts at a freight transportation industry conference in January, pointing to the president’s signing of the United States-Mexico-Canada Agreement (USMCA), which moves closer to implementation now that both the U.S. and Mexico have approved the deal. Canada has kicked off its ratification debate, but a final vote by Canadian lawmakers has not been scheduled. Still, industry watchers say the forward movement on USMCA lessens the uncertainty of the trade environment and promises a boost in business across the logistics and supply chain landscape.

“USMCA should boost business confidence now and yield more exports to Mexico and Canada over time,” said Avery Vise, vice president of transportation research firm FTR, speaking at the SMC3 JumpStart conference in Atlanta. He added that the Trump administration’s “phase one” trade deal with China is also helping to boost confidence. “Suddenly, trade is not one of the big negatives in the economy,” he told conference attendees, adding that remaining tariffs on $370 billion in Chinese imports are still a concern despite the phase one deal.

Other industry watchers agree with the optimistic outlook. Pauline Hale, senior manager in advisory for commercial real estate software firm Altus Group, said separately that passage of USMCA will serve as a boost to the already solid industrial real estate sector. “Not tightening down on NAFTA [the North American Free Trade Agreement, which has governed trade among the three countries since 1994] is only a plus,” she said, pointing to rising demand for warehouse space to accommodate increased automotive manufacturing under the deal as well as growing e-commerce activity and last-mile delivery needs, and a related uptick in demand for space among third-party logistics service providers (3PLs).

Hale said e-commerce retailers need up to three times more space than traditional retailers require due to their broader product mix, and that last-mile demands are driving the need for a variety of warehousing solutions that put products closer to consumers. An increase in trade across the continent will only heighten that demand, she said. n

—Victoria Kickham

Manufacturing and production executives say a global recession is likely in 2020 due to an extended trade war and ongoing concerns over trade restrictions and geopolitical instability, according to a survey by supply chain artificial intelligence solutions provider LevaData.

The news comes despite business optimism generated by January’s signing of “phase one” of a trade deal between the U.S. and China, which was expected to lower tariffs on some Chinese goods beginning in February, and approval of the United States-Mexico-Canada Agreement (USCMA) in the Senate.

The LevaData survey polled more than 100 manufacturing and production executives about their concerns for the coming year and found that trade issues remain top of mind for the majority. More than 60% of executives surveyed said that a global recession is likely in 2020, and 70% said an extended trade war is likely to cause a recession. Trade restrictions were cited as the biggest concern by far (42%), followed by geopolitical instability (15%), natural disasters (12%), and impeach-ment-related uncertainty (11%).

Despite the short-term concerns, the survey revealed a more positive long-term trade outlook in the manufacturing sector: Just 22% of executives surveyed said they don’t support recently imposed tariffs, while nearly a third (32%) said they support them and 46% claimed to be “neutral.” What’s more, 65% said they think tariffs will ultimately lead to improved global trade practices; 40% said they will lead to better U.S.-China trade relations in two to three years; and 37% said their supply chain operations will run more smoothly in the long term. n