00:00Hi, everybody. I'm Brittany Lewis, a breaking news reporter here at Forbes.
00:07Joining me now is Rodney Manzo, head of supply chain intelligence at Sage.
00:10Rodney, thanks so much for joining me once again.
00:13Rodney, thank you.
00:15Trump tariff tensions have flared up once again. The 90-day pause on the reciprocal tariffs was
00:21supposed to be lifted this week, but President Trump extended it to August 1st. You and I talked
00:26back in May during the first half of the 90-day pause. And at that time, Anvil found companies
00:32didn't feel confident in handling tariff supply chain chaos. Two months later, another pause later,
00:40how are companies feeling now about the tariff uncertainty?
00:44Much of the same, actually. And it's really hard to predict when no one knows a true strategy.
00:50And you look at some economic rationale around this, whether it's protecting national defense,
00:56generating revenue, or even just reciprocal tariffs. You never know what's going to happen
01:01or who you're going to tariff. So a lot of the supply chain, what we've seen through our
01:06state of supply chain report, unease, tension. And then what we see now is it's the same thing.
01:12When you don't know if it's going to be Malaysia next or Japan, it's really hard to predict. And
01:16it's really hard to put a stable supply chain in place that needs to be stable to perform.
01:21And something that we've seen a lot of is President Trump kicking the can down the road
01:26when it comes to these reciprocal tariffs. When it comes to his tariff policy, there has been a lot
01:31of whiplash. And I can imagine that for a business, for a supplier, that could be really
01:35impossible to try to plan around. So is this extension, is that welcome from businesses? Is
01:41that welcome from suppliers? Or are they just thinking, you know, this is more of a headache?
01:46It's way more of a headache, for sure. And let me give you an example. One of the companies we work
01:52with, they do baby formula. And they produce out of Europe. Obviously, months ago, Europe was on the
01:58radar. So what they did is this lull, they just shipped a lot of their goods. And they have a lot
02:02of inventory on hand in the US. The problem with that, it's a working capital issue. So their costs are
02:08now increasing from holding inventory. So it's a problem because they don't know what to do or how to
02:12react. Because a month from now, you could see another tariff in Europe. And I can imagine that's
02:17hard because there's so many different percentages that President Trump and the Trump administration
02:21is throwing at different countries. So I'm sure companies and suppliers are doing a lot of math
02:27trying to say, OK, this country has X percent of tariffs. This country has Y percent of tariffs.
02:32President Trump said this time, no more extensions. But it's almost like a boy who cried wolf
02:37situation here where he he said, this is it. This is final. And then there's been more extensions.
02:43And according to a Forbes report, Forbes has been tracking this and he has flip flopped since
02:47Liberation Day over two dozen times when it comes to his tariff policy. This time around,
02:53do suppliers think it's going to stick? How really are they preparing for this moment?
02:58The pulse we get is there's unknown and no one's really reassured that any words are actually
03:04going to be reality. And you're looking at it like, you know, a lot of our partners, Canada,
03:0935 percent tariffs. You're looking at like 50 percent for Brazilian goods and for copper and other
03:16things. You're like, well, how do these numbers come about? And even lower, you know, countries that
03:22have a negative import were tariffing them, meaning that they're bringing in more goods than they're
03:28actually pushing out. So it's no one knows what's going to happen. And the strategy is really,
03:33really not a strategy because it's just numbers that blankly get thrown on the wall.
03:38And what does all of that mean to that point of numbers getting blankly thrown at the wall?
03:43Countries have different percentages now of tariffs. So are companies looking at this and saying, hey,
03:48I want to work more closely, perhaps I want to move the supply chain a little bit to a different
03:53country that perhaps has a lower rate. What does that really look like right now?
03:57Yeah. So what we see is how business are reacting. And there's a few things. Number one,
04:04they're reassessing their entire supply chains and they continue to do that throughout the year,
04:08trying to understand if they have a good source or a bad source, a good location or a bad location.
04:12While they're reassessing, they're doing the second thing. They're diversifying their supply chain,
04:18securing costs, securing contracts, making sure that they have stability in this very unstable time.
04:23And lastly, if they continue to explore reshoring, should you bring back things here in the US?
04:30Not all companies, not all industries or verticals can, but they're doing those things.
04:36And lastly, what they're doing, I think more than ever, they're looking at visibility across that
04:40first mile because that's really where you're getting hit from sourcing to inventory management
04:46or production to incoming goods. They're trying to invest in technology. They're trying to automate
04:51communication, collaboration, making sure they're more seamless and they have real-time feeds going
04:55on so they can quickly react and adapt to this uncertain time with tariffs.
05:01And when it comes to tariffs, economists have said a tariff is a tax on the consumer.
05:06I'm thinking about the consumers right now, especially when businesses, as you're saying,
05:11they're facing unease, they feel unease, they feel this uncertainty. There's a lot of unknowns right now.
05:16When will the consumer really feel the brunt of that?
05:19Yeah. So I look at this in two questions that I continue to ask myself.
05:24Do tariffs ultimately help? And what about this for me? So if I'm looking at, do they ultimately help?
05:31Are they going to protect domestic industries short-term? Maybe, maybe they do. Do they help
05:38with inflation? Maybe. Do they help with bottlenecks? Definitely not. And what's the retaliatory measures
05:44here that are going to be taking place? So when I look at those things, I don't see them actually
05:49helping. I see them counter to each of those points that we want. Increasing inflation, creating supply
05:54chain bottlenecks, hurting domestic industries, and really short-term, long-term, it's not helpful.
06:00So for me, for you, when we're going in the store, I think we'll face higher prices. We're already
06:06seeing that. We're just looking at Amazon Prime. We're talking about that right before this. Prime
06:10Day is not what it has been in years past. Well, why? Consumers have less money. Things cost more,
06:17so they're not buying as much. But you see across in different verticals and industries, you see this
06:22more. Electronics. If you need a new MacBook, it's going to be more expensive. Vehicles, way more money
06:27than you would in the past. And even copper could be hit. So for the consumer at the end of the day,
06:32these tariffs are not helpful. They're not helping you or me. They're increasing what we're spending
06:37on products. And to that point, it's Amazon Prime Day right now. I'm thinking about November. I'm
06:44thinking about Black Friday. I'm thinking about the holiday season come November and December. We're
06:49even closer to the holiday season right now than we were back in May when we were talking. And two months
06:54ago, you said businesses really face two choices right now. One was, do I order too much right now
07:00and have an overstock? Or do I not order enough right now? And perhaps I don't meet my margins
07:05come the end of the year. Where are they right now when it comes to holiday season shopping and buying?
07:12So there's different camps of brands and companies and different strategies. The companies that delayed
07:18and they're producing in Japan or Malaysia and these countries, they're being hit now because their hand
07:23is forced. You need to ship goods to get them into your warehouse or distribution center for the
07:27holidays. It takes 30 to 45 days via ocean to get them to wherever they need to go. If you don't
07:32have them on hand, you're not going to be able to sell them. The other companies that put the strategy
07:38in place, let's move ahead. Let's avoid these. They have a benefit. And I don't know the cost difference
07:43between a 20 or 50% tariff with the holding cost per se, but chances are the ones that reacted quick
07:49and avoided those tariffs are actually making more money and they prevented themselves from
07:53getting that tariff tax. And so if I'm a company right now, and I know that President Trump said
08:00August 1st, that's the drop dead date. That's when these reciprocal tariffs will go into effect.
08:05If I'm a top executive here, do I believe that? And how do I strategize right now in almost mid-July
08:13about that August 1st date? You have to believe it. And the reason for that is you can't plan not to
08:19believe it. The repercussions of that is just counter to what you would need to be as an
08:23executive in a company or operator at a brand. And if you don't have one, two, three, four different
08:30contingency plans in place, you're going to fail and your business is going to under. I think we're
08:35seeing that for the SMBs, the smaller companies, they can't react quick enough. They don't have the
08:39money, the capital, the resources to actually do something. It's hurting them. Bigger companies,
08:44they'll just take a hit. They'll lose margin, maybe increase costs for us and the consumers,
08:50but there's all different strategies and you have to deploy multiple now. And if you look at 10 years
08:56ago when I was at Harry's or even close to 15, 20 years ago when I was at Apple, we never had to
09:03worry about any of this. It was stable. We never made any changes. We never had to adapt. The
09:08contingency models, the risk models were not in place. Now today, every business is doing that.
09:13And so as the supply chain expert here, as someone who's been there when you didn't have to make
09:19these contingency plans, when it was smooth sailing, now it's exactly the opposite. I mean,
09:24what is the best way for businesses to go forward? Yeah. So the same thing in the past,
09:31and you'd be, I think anyone listening to this would be just amazed that most of the global supply
09:36chain is run on an Excel spreadsheet, pen and paper, email, phone call, or someone just going around
09:43the world and shaking hands. That process and that way to manage the supply chain is just not what
09:50happens nowadays. Agentive AI, intelligent software, software that connects and orchestrates an
09:57ecosystem, that's what they're putting in place and that's what they're looking at now. They have to
10:01produce that, the feeling, the gut of a human and replace it with actually technology that can see
10:06around the corner. So we're seeing a lot of that. The second thing that we're seeing is true
10:11diversification. You know, if you always just worked for 20, 30, 40 years, that one supplier in
10:17the one location, you are not doing that anymore. You're diversifying that supplier, whether it's
10:22forcing that supplier to have multiple locations, so you still work with the same supplier, or you're
10:28diversifying outside of that supplier and having multiple suppliers in your ecosystem. So those two
10:32things are working in parallel nowadays. Aside from looking at President Trump's social media accounts
10:38and seeing what his latest tariff announcement is, what specifically are you looking out for between
10:44now and August 1st? Because the White House said, we're still working on deals. Deals could be made
10:49right now. They're sending letters, they said, to other countries saying, this is the deal. This is what
10:54the tariff rate is going to be. What are some signposts you're specifically looking out for?
10:59I'm looking at the legal landscape. Number one is what's happening here. Are these going to hold
11:03true? Are the courts that are scrutinizing these policies and the practices, are they going to allow
11:08them to continue? Because for me, that's a major way to get around this. The second thing that I'm
11:13looking at, what are our allies? What are these countries that are actually getting these tariffs
11:18doing? Are they, is it reciprocal? What actions are happening? And then lastly, I'm picking up the
11:23phone, I'm calling my suppliers, and I'm trying to get closer to them and trying to understand what
11:27strategies and policies they have in place. Are they going to eat some of those costs for me? Are they
11:32looking at moving their supply chains to different locations? So those are the three, I think, things
11:37I'm looking at in doing to try to help combat tariffs now, and also the unknown with tariffs.
11:43And to that point, would suppliers eat some of this cost? What is the benefit for them there? And
11:49how much of a loss is that? And how much are they going to eat before they pass it on to you or me?
11:54It depends, right? It very much depends. So where I look at this, high margin industries have a lot of
12:02room to go, and they can cut into their margins to keep their customers and keep them happy.
12:06Because the alternative for these suppliers is to lose your customer, which then you'll have zero.
12:12So they're looking at that. So if you look at electronics or even auto and other industries,
12:16they will, they'll come down. But others where they just can't, like health, beauty, and wellness,
12:21food and bed, where maybe the margins are a little bit lower, they can't actually do anything for you,
12:26which is very unfortunate. Because you could be the world's best supplier, again, for someone that's
12:30been with them for 20 plus years. And you may not be able to do anything to retain the business,
12:35which is pretty unfortunate on both sides. And to end the conversation, I want to circle back to
12:41the beginning, because the sentiment here is, while two months have passed since you and I have talked,
12:46it's been three months since Liberation Day. A lot has changed, but a lot has stayed the same.
12:53Are businesses right now, from when you and I talked, are they feeling better, worse,
12:57or exactly the same? You know, that's a great question. And I would look at it on a couple
13:05lenses. The first lens are the companies that were able to adapt. And for whatever reason,
13:13they were able to not hit the lottery of tariffs. And they prevented their supply chain from moving to
13:18whether Canada or Japan or Malaysia or any country that was hit, they're feeling great.
13:23They feel like they made the right moves, even though it was pure luck. It was a lottery move.
13:28They made the right moves. The others that are now being hit that did do these moves,
13:33try to move away from China, try to move from other countries, do the right thing that are now
13:37getting hit, they're questioning things and they feel way worse. And every individual or every company
13:42has a different strategy, different approach for good reasons. But it's really hard to put strategies
13:48in place when you don't know what's next. I think that's a big question, the what's next. And as
13:54you and I sit here right now, what's next seems to be that August 1st date. But I hope you and I talk
14:01around August 1st, either perhaps August 1st or right after and see where we are then. Rodney Manzo,
14:07thank you so much for the conversation. Brittany, thank you so much.
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