Lisa Anderson participated in a panel discussion with John Tulac, international business attorney, and Jay Prag, economist, on the Lou Desmond radio show. With expertise in the economy, international affairs, and the global supply chain, the panel talked about the record-breaking month for Southern California logistics, economic indicators, impacts related to tariffs, and likely interest rate cuts in the fall as well as the importance of critical minerals.

The L.A. and Long Beach ports had a record-breaking month in July. The group discussed its meaning. The bottom line is that companies are starting to ship again after taking a pause when the tariffs first went into effect, and they are starting to build in anticipation for the peak holiday season. The team agreed that companies are planning ahead, and they expect much of the impact of the tariffs to be absorbed by the manufacturing countries and the selling company, and so what’s passed on to consumers is minimal. Jay said the inflation is quite low and doesn’t expect significant increases. Of course, depending on the specific company and its supply chain (including whether the products are dependent on steel and aluminum), the price increases can be dramatic whereas overall, it will be mildly inflationary. 

The panel discussed the state of the economy and how it relates to supply chain. Lisa Anderson talked about what she sees as the three key items to drive manufacturing growth out of the recession it’s been in for over a year. The first two have been resolved – the tax law was passed, continuing the competitive (lower) corporate tax rates and providing the benefits of expensing of equipment to drive investment; and the tariffs are largely resolved and/or known, creating stability. With that said, the third (high interest rates) has not yet been resolved, and so Lisa estimated that interest rates will start coming down in the fall with manufacturing kicking off with a big pivot in the next six months. Logistics has been pretty steady.

Jay Prag talked about the money supply which expanded hugely during COVID, creating the need for higher interest rates. The key is to get the trend line back under control with the bubble, which it hit this month. Thus, Jay said that regular normal fund rates are closer to 150 basis points lower which he expects to start rolling out in the fall. He also mentioned that tariffs do not cause inflation; they cause a one-time price adjustment. 

John Tulac talked about the crazy price of sugar. There is no explanation for it, but the price of sugar in the U.S. is not competitive. As with everything, you cannot base your end-to-end supply chain on the law of averages. For example, if you are dependent on China, you are in trouble. If you are dependent on the price of sugar in the U.S., you will have product that is too expensive. Dig deep into your end-to-end supply chain and who you are dependent on. 

In addition, the group highlighted the critical importance of rare earths and strategic minerals. As John said, rare earths are not rare. It is a policy issue as we need them for vital industries, high tech, military etc. Jay said that he believes the current administration will pursue this as it is a clear issue. The problem is that minerals are not always located in ideal states such as California as they are not supportive of mining. He believes the gap will be closed regardless. In addition to the U.S., there are critical minerals in Africa, South America etc. John emphasized the need for resiliency in your supply chain. It is not a choice; it is a requirement!

If you are interested in reading more on this topic:
Supply Chain Visibility Fueling Faster, Smarter & Proactive Decision Making