COVID-19 and Global Trade: Expert Roundup

COVID-19 and Global Trade

Note: This is not an update on social distancing regulations, medical expectations, or relief aid within your community. For those resources, check your local chamber of commerce, economic development organizations, state department of commerce, or other local, state, and federal government agencies for best/latest resources.

The goal of this roundup is to provide clarity and advice to companies involved in global trade on how to navigate this challenge and emerge with a clear path to a strong recovery.

The effects of COVID-19 on companies and communities in the US are still being written. Stimulus and aid packages are being formed; social distancing, quarantining, and “stay-at-home” orders are being put in place; and communities are trying to band together to mitigate the impacts. Much focus is rightly being placed at controlling the virus and surviving as a community: mentally, physically, and economically.

SMEs with a tradeable good or service (meaning it can be sold outside of their borders) will play an outsized role in writing the story of recovery. Their success or failure will lead to sluggish or strong recovery for their communities. The road ahead is long, winding, and uphill. Some experts have warned of potentially 5 months of social distancing and all agree that an economic slowdown or recession is very likely to occur.

As has been the case in the past, international trade will be a primary component of recovery. Companies and communities that succeed in continuing and/or jumpstarting international trade early in the recovery process will move forward much more quickly than those who don’t. However, navigating the opportunities and volatility of international trade during this time will require careful forethought and strategy.

To help you, we’ve brought together a panel of experts to share their insights.

They’ve shared:

  • Expectations for the future
  • Characteristics of successful companies
  • Practical Steps you can take now

Get In Touch!

Companies Have Felt Varying Effects So Far

Companies we spoke to had varying experiences on the effects, so far, on their global outlook. The direct pains are quite acute, while the general pains are still waiting in the wings. Some companies have seen sales plummet in the last 7 days, and others haven’t seen a big shift. Some have received or anticipate big supply chain shocks, while others foresee little disruption. Depending on your industry and global ties, you may feel direct impact or you might simply feel the effects of a general global slowdown and uncertainty.

“Initially we were on hold for several products from China about 3 -4 weeks.  This problem has now been resolved and we are back on track. We think there could be a 10-15% decreases in anticipated sales over the next 4 months but then back to regularity.” – Pete Ochs, Seat King; Hutchinson, Kansas

“To date, we have not been too impacted. Because this occurred during Chinese New Year, we, like many companies, have to plan stock around that and already had two containers on the water our way when this started becoming an issue in China and factories were not opening back up. I’ve had one container moved out about a month and most of our other international suppliers have kept or come close to keeping with their delivery dates. I think mostly the potential delays in business opportunities, the reality that travel will likely be minimal this year and so we have to find new and creative ways to interact with opportunities and to conduct sales, tradeshows, and customer trainings that we would likely do face to face now through tools like Teams, Zoom, etc. and still make the experience effective, efficient, and relevant.” – Scott Rutledge, Pitsco; Pittsburg, Kansas

“With regard to our supply chain, we have seen little to no change.  With this answer it is important to understand the culture of Maxivolt.  We are an electronics manufacturer and see inventory as our lifeline to success. The threat of COVID 19 in January was considered volatile, so we increased our inventory out of China.  The factories we deal with in China are up and running.  With regard to long-term effects, we don’t anticipate any; simply a change in industry based touches based on the economy.  We do not recognize any international trade troubles out of the ordinary.”  – Mark Wingate, MaxiVolt; Amarillo, Texas

“Our supply chain appears to not have been impacted very much at this point. We have a large amount of parts in stock to be ready for larger, unexpected orders, so for now we are good and have not yet seen any impact on our global supply chain. We have not implemented JIT yet as many of our customers wait until the last minute to place an order and need it now. That is of course a challenge to forecast, but our decision to keep a larger amount of parts in stock for this is proving to be successful in this unusual economic challenge. We will definitely have a large downturn in sales. We were already expecting a strong US Dollar this year and have made strategic decisions and forecasts for this, but the new coronavirus challenges will certainly cause a great reduction in international sales. How much will depend on how fast the entire world can work to reduce the spread of the virus.” – Steve Smith, Vacuworx; Tulsa, Oklahoma

Expect Severe and Ongoing Volatility

Looking at a macroeconomic level, economists have identified industries and cities likely to be hit hardest. Overall, though, the expected effects on the broader business environment are not pretty. The long-term effects are still up in the air, but they will be severe and far-reaching. 

“We should be prepared for a major disruption of global supply chains, the affects of which are only just becoming apparent. With quarantines and restrictions in place in many countries, these disruptions will especially hit companies with supply chains heavily or solely dependent on factories in China for parts and/or materials. Having said that, this is a global rather than a regional issue.” – Dr. Masud Chand, Wichita State University

“Companies can expect massive volatility in global freight and logistics. The trade lanes are highly interdependent and respond differently to different types of disruptions. For example, the transpacific ocean freight trades lanes are starting to return to normal. But, just as quickly, air freight lanes to and from parts of Europe are completely haywire right now due to the travel bans changing the amount of capacity that is available. The nature and direction of your freight will influence the challenges you have ahead.” – Jay Devers, Bestway International

The effects of the global slowdown caused by COVID-19 are too early to be determined.  You can bet to see a big hit to small businesses. While the US Government is working on a legislation to ease the economic stress of COVID-19, we don’t yet know how this will all “shake out”. The global supply chain has been greatly impacted since January, and that will continue in the US. Both exporters and importers will see increased freight costs, freight delays as it will take some time for this industry to get back to equilibrium. The other issue to resolve for exporters is the strength of the US Dollar.  In recent weeks, traders have jumped to the Dollar as a “safe-haven”, dragging most other currencies down. This hurdle will be difficult for US exporters to overcome, until an equilibrium hits the FX markets.” – Matt Burke, First National Bank of Omaha

How Should You Respond?

Given the massive volatility in most aspects of international trade, the depressed state of sales, potential cash flow difficulties, and the troubles with workforce management caused by the virus, some companies will be tempted to lay low and not pursue new international opportunities until they are satisfied that the trade waves are steady once again. We asked our “panel” how companies can respond successfully, and what will differentiate successful recoveries from sluggish ones.

They identified 3 primary characteristics that are key to a company’s successful recovery.

1. Successful companies will actively embrace international opportunities, instead of pulling away

“International trade is the circulatory system of that global economy. A company that pulls back from that system, interrupts and weakens the natural flow of that system, and endangers its own economic health and that of other stakeholders. It is easier for a company to retreat from international trade than to reestablish a trade partnership and win back a hard-won place in the supply chain.” – Darshana Patel, Latitude Worldwide

“All businesses will need to think more creatively in order to position themselves for success after the recovery.  What worked prior to the COVID-19 challenge may not work again.  In addition, some markets will have new needs.  Every market will want to stock up with those items required to make sure they are fully prepared for the next emergency.  A large amount of business volume will be generated as a result. No stone should be left unturned.  As just one example, businesses can use in market experts (IBG Global) to find out what needs exist in each market for their product lines and then address those.” – Sherwin Pomerantz, IBG Global; Israel

“COVID-19 has exposed many organizations who had become complacent in the bustling international trade environment of the last 10 years. Compared to this global pandemic, the issues of late have been mostly trivial and relatively simple to mitigate. Take steps not to be in that category of exposed company.” – Jay Devers, Bestway International

2. Successful companies will proactively communicate and build relationships with existing/new global partners

“Openness during this time of stress is key to preserving global relationships. Company communications should:

  • Establish a regular cycle of contact—a periodic checkup— with partners that is independent of major developments. A concerted effort designed to stay in touch helps to demonstrate that the partnership is important and always top of mind.
  • Keep partners in the loop. As part of that contact, company should keep partners up to date to ensure that its domestic communications do not take a global partner by surprise, and thereby convey the impression that the partner has been relegated to second-class status.
  • Cultivate goodwill through open, two-way communications. Solicit feedback from global partners and respond quickly and thoughtfully to that feedback.” – Darshana Patel, Latitude Worldwide

“US companies can best remain engaged with global partners by By keeping open communications and by constantly delivering news – good or bad – so that their partners know what to expect and how to react. Information is key to maintain a good relationship flowing.” – Fabio Yukio Yamada, Tradebrz (IBG Global); Brazil

“In the current situation, communication is everything.  People need as much information as they can gather to meet the current challenge.  Regular communiques with clients and prospects is key to maintaining connections during this crisis.” – Sherwin Pomerantz, IBG Global; Israel

“Regularly scheduled Skype video calls can work well to encourage transparent and vibrant business relationships with global partners.  Providing supportive data, qualified leads and new information relevant to the global partner’s business are also good ways to stay engaged during this period of time when it is more difficult for us to travel for in-person meetings.” – Kim Benson, Zenaida Global

“Place extra emphasis on communicating with your customer.  You are important to them and odds are that they are have similar thoughts, concerns, meetings, and emails.” – Jay Devers, Bestway International

“Continue to foster excellent relationships with your current international customers.  While new channels of communication may be necessary , i.e. a virtual meeting or conference call, these customers are also looking for reassurance that they will have a supplier in the future.” – Matt Burke, First National Bank of Omaha

3. Successful companies will intentionally improve themselves internally and prepare now for future global opportunities.

“Spend any quiet time thinking about new business strategies for the changes ahead.  Pare down staff to necessary levels as during the recovery period cash flow could be a problem.  Assume no new debt and eliminate as much existing debt as possible.  Reach for new horizons and don’t be afraid of thinking big…the “new” world in recovery will be eager to pursue big ideas.” – Sherwin Pomerantz, IBG Global; Israel

“Companies can take steps now to prepare for future opportunities by fostering thought leadership within their organizations; they can take this time to strengthen their brand and position themselves as recognized leaders within their industries.  Examples of actions could include publishing white papers, delivering keynote speeches (when we can once again gather for conferences!), conducting and disseminating industry research online, establishing mentoring programs for young professionals and arranging for youth to engage in our respective industry events.” – Kim Benson, Zenaida Global

“Most agree there will be a bounce back, probably this year, as soon as next month in certain categories. Where do you stand compared to your competition when that happens? What has the volatility done to your competitors and your service providers? What have you learned to make yourself and your company more valuable through all these trials?” – Jay Devers, Bestway International

“[Companies] should be using this time for deeper market and customer research, for sales training, and to prepare equipment and facilities to resume production more efficiently than currently.” – John Hixson, St. Louis Economic Development Partnership

“Work today to set up new sales when the world returns to some sort of normal. We are working with companies on their growth strategy. While we adjust to a different pace, looking inward to strategy and how we position ourselves for when the world returns to some sort of normal is imperative.” – Karyn Page, Kansas Global

“For us, we’ve been focusing on building our Global Dealer Network, building relationships, and learning more about the target countries and cultures that are in our primary target market.  This will not change, and in fact, we are getting more time and more information to help us be more effective as we move forward in these specific, targeted countries.” – Steve Smith, Vacuworx

Companies who use this time to develop their messaging and branding, improve their production efficiencies, scope out global opportunities, create action plans, and develop effective remote working patterns will have incredible competitive advantage moving forward.

3 Actions You Should Take NOW For A Stronger Future

  1. Be Kind, Act Wisely, and Stay Safe – First and foremost, you should act wisely for the good of your community, families, employees, and stakeholders. Follow the advice of medical professionals and stay well. This isn’t particular to international trade, but it is worth repeating. Everybody will be making difficult decisions. Others will be hurting and affected, too. Stay in touch with your community and be kind. Companies and individuals will be remembered for how they handled this hardship. Those who were gracious and put their community first will emerge stronger because of it.
  2. Gather/Consult Your Trade Team – Every race car driver needs a pit crew. The strategic vision of the field, the technical experts, and the available and consistent support to help them be confident in their performance. They cannot be see the whole racing field, drive the car, perform repairs, refueling and tire changes all by themselves. So too, global trade is becoming increasingly complex. Old strategies that were “good enough” will lose to specialized expertise. Use this time to “gather your crew” and create personalized strategies and processes for maximum efficiency and effectiveness. 
  3. Target Specific Supply Chain and Sales Opportunities – Research and identify current and new international opportunities. Generic market research may have been “good enough” in the past, but to move forward, it will not be enough. You will need to get personalized research parameters and local insights will be invaluable. Identify opportunities that are actionable and achievable. Avoid conjectures or far-flung ideas. Prioritize the opportunities in front of you in order to get the best results for your work. Make specific action plans to be implemented when the time is right. Allocate the necessary resources and staff to carry out the plan effectively. Don’t waste this time. Use it to strategically prepare for a stronger global future

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