FDI in Turbulent Times - SFP Insider

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Site & Facility Planning Insider Friday, August 21st, 2020   Pandemic Adds Challenges to Trade Wars

The COVID-19 pandemic and its subsequent supply chain disruptions have caused companies to rethink their location decisions. The trade war with China was already impacting company supply chains prior to the global pandemic. U.S. tariffs on supplies from China and China’s retaliatory measures are adding to manufacturers’ costs. By using foreign-trade zones, some companies were able to increase the time to pay those tariffs. However, many U.S. companies that initially moved operations to China for its low-cost wages, which are also rising, are now considering other Asian locations (although wages are going up there too) or reshoring to North America. The uncertainty of tariffs was also affecting FDI from Europe over the past year, especially when it comes to the automotive industry, and those woes have been compounded by the pandemic. Travel and visa restrictions have been put in place to control the spread of the virus, making it difficult for European and other foreign companies to initiate or complete their U.S. site selection efforts. All of these challenges are slowing down the location decision process. Consultants are advising clients to do their modeling around the basic site selection factors, i.e., logistics, workforce, available sites, etc., and then plug in the variables around uncertainties and address those as they change. And foreign companies considering a U.S. destination will need to navigate the incentives process, which may be quite different from what they have at home.

A Heightened Focus on Reshoring Brian Gallagher, Vice President, Corporate Development, Graycor Southern As costs and risks of lengthy supply chains become even more apparent in the wake of the COVID-19 pandemic, more U.S. companies may consider reshoring their operations to the Americas. Foreign Trade Zones: A Key Tool to Navigating Tariffs Curtis Spencer, President, IMS Worldwide, Inc. Area Development interviewed Curtis Spencer, President, IMS Worldwide, Inc., at our Houston Consultants Forum. Our discussion covered how companies can leverage foreign trade zones to mitigate the impact of tariffs on their bottom line.