Global Supply Chain Review: August 2017

Turbulence has shaped global supply chain this month, as nations worldwide have confronted political, ecological, and diplomatic instability and uncertainty. In the face of this, it becomes increasingly clear how interconnected global supply chains truly are.


U.S.: In a recent speech in Phoenix, President Trump noted the possibility that he will be abolishing NAFTA. It’s unclear if or when this would occur, but such a major policy change would shake industries across Canada, Mexico, and the U.S. that benefit from tariff-free exchange, and it could cause price spikes for U.S. consumers. Meanwhile, typhoon Hato and Hurricane Harvey are placing stress on supply chain links in the southern U.S. Lines of transportation and production facilities are already preparing for flooding, damage, and delays.


Mexico: With recent liberalization in oil and gas markets, Mexico has increased its GDP and opened new collaborations with U.S. corporations including Exxon Mobile. As U.S. companies help rebuild Mexican energy supplies, they stand to gain significant revenues. It is unclear how long this will continue, however, if NAFTA policies end or change. Mexico’s auto production and export also continued to boom this month, despite declining sales in the U.S. where the market is facing saturation and declining sales.


Venezuela: Political upheaval continues to shape Venezuela, and debates are still in process regarding whether the U.S. will impose sanctions following President Maduro’s increased power and the resulting protests and riots. If the U.S. bans Venezuelan crude, analysts suggest that the U.S. and the global market will experience a significant hike in gas prices – which will ripple out to affect supply chain costs in production and transportation.


China: Despite diplomatic collaboration with China to stem the nuclear threat of North Korea, the White House has initiated a review of Chinese practices affecting the intellectual property rights of U.S. corporations. At the heart of the issue are China’s practices of requiring companied performing R&D or joint ventures to share proprietary information regarding tech, or to conduct research on Chinese IP addresses. Such practices leave companies vulnerable to intellectual property theft and counterfeiting.


North Korea: Continuing to threaten nuclear action against the U.S., North Korea faces new sanctions from Japan as well as the freezing of some assets. Emboldened as China, its main trade partner, faces U.S. investigations on its intellectual property practices and tech supply chains, North Korea has now made threats against a major American ally: the U.K.


Taiwan: A centerpiece in the global supply chain, Taiwan is facing a supply chain crisis of its own. Despite limited indigenous power sources, the state backed Taipower has yet to create a sustainable system of acquiring and distributing energy. Recent blackouts affecting residents, businesses, and supply chain hubs raise questions about much needed updates to infrastructure as well as energy sources.


Japan: With consumer prices consistently rising throughout the year so far, Japan’s economy is progressing steadily towards its national target. Notably, the energy industry is central to this; as consumer spending was depressed by weak wage growth. Internationally, Japan is also dealing with its volatile neighbor North Korea, imposing fresh sanctions in the face of nuclear threat.


U.K: In addition to confronting recent threats from North Korea, the U.K. continues to muddled through Brexit. An 80% increase in citizenship applications is largely sparked by EU citizens residing in the U.K., who are unsure of how Brexit will affect their residencies and rights. EU companies with offices based in the U.K. face similar uncertainty.


France: A local reason for France’s investment in the Paris Climate Accord: consistently poor weather patterns have led 2017 to become France’s worst grape harvest since 1945. Following unusually frosty spring weather, a hot summer damaged grape crops. Wine production is predicted to be down 17-18%. France is exploring new technologies to assist harvests in future. For now, connoisseurs can expect higher prices on the export.


Germany: As elections approach, Germany is reporting a record budget surplus. The second largest since reunification, the surplus gives Chancellor Angela Merkel a boost in polls. Analysts suggest that the country’s investment in immigrant and refugee housing and integration is partially responsible, feeding the workforce and growing the economy.


Spain: In the wake of the tragic terrorist attacks on Barcelona, the leaders of Spain and Catalonia initially joined together in solidarity to mourn victims of the violence. But tensions have begun to reemerge as investigations unfold; and analysts are suggesting that the functional rifts between Spain and Catalonia may create gaps in intelligence acquisition and sharing, as well as security monitoring in the region. Questions persist regarding how the region can best be policed and protected.




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