A report by PwC says that the tariffs imposed by the US government may raise costs. Not only that, but it could also create greater compliance challenges and introduce more uncertainty for Australian businesses.
PwC said that supply chain costs for Australian businesses, particularly in the manufacturing and retail sectors with operations in the US may rise. “Many of these businesses depend on supply chains linked to nearby markets like Canada and Mexico. Or integrate with value chains that rely on Chinese goods for intermediate or finished products. This could lead to significant procurement costs,” PwC said.
Furthermore, PwC warns that Australian businesses will likely face a greater compliance burden as they must prove the ‘true origin’ of their goods. This is to reassure US regulators that the goods were not initially shipped from other countries, like China, to avoid higher tariffs.
PwC also forecasted that the tariffs would significantly impact local businesses, as many Australian companies are part of global supply chains involving the US and China. “The new and proposed tariffs could disrupt these supply chains, leading to increased costs and/or supply delays,” PwC said.
There are a several actions that Australian businesses can take in order to reduce the impact of tariffs. These may include analyzing how tariff increase can affect offshore purchases, and determining necessary changes to their business model, such as adjusting manufacturing or diversifying sourcing. Also, consider the tax implications.
Australian businesses could also explore customs duty strategies to manage rising costs. Review their supply chain’s duty profile and find ways to reduce or defer liabilities, such as using lower tariff classifications, free trade agreements, duty drawbacks, and strategies like first sale for export.