Supply chain disruptions not only from the overwhelming increase in demands for goods, but equipment and staff shortages, and the “zero-Covid” protocol lockdowns in China have created not only logistics challenges but have raised PPI (Producer Price Index) across industries. From raw goods to finished products, to transport, costs are skyrocketing.
Proctor and Gamble said, “Since our last update, we’ve seen continued cost increases in nearly every type of material we use and in diesel and in natural gas. Freight costs have continued to increase. We now expect freight and transportation costs to be a $400 million after-tax headwind in fiscal ’22.”
This is only going to transfer the costs to consumers and studies are showing that rather than paying for the goods they want, consumers are currently more likely to tighten their budgets and discretionary spending.
To help combat soaring inflation, U.S. Trade Representative Katherine Tai said that she’s willing to consider lowering punitive tariffs on Chinese trade. Although, Tai was quick to state that whatever actions are taken, they need to be in conjunction with medium-term goals as those actions relate to US-China trade relations. Tai continued to say, “It is important for us to focus on a durable, effective strategy with respect to our ability to compete with China, in this global environment and through the very disruptive period that we are experiencing right now that is causing pain to the ordinary American back at home.”
These tariffs are set to expire on June 6 and August 23. If the USTR receives a continuation request, it will continue the tariffs but will begin another review of the policy including feedback from affected parties as to the effectiveness and impacts of the tariffs, while considering other solutions to the issue.
We here at Zarach have been monitoring the market trends and planning for those normal shifts and responses that many analysts do not. Including supply chain disruptions and increased inflation. If you’d like more guidance on what this means for you and your business, please contact your Zarach representative.