The World Economic Forum in Davos was one of the biggest global events impacting supply chains this week, and the sparks were certainly flying…

Meanwhile, I just returned from a visit to Canada, and got a taste of the confusion and uncertainty that is going on north of the border….. I must have had at least half a dozen people ask me “What is going on down there?” I gave them a blank look, and responded “I’m not sure exactly what is going on… it changes daily.”

One thing I can be sure of – supply chains are in a state of significant transformation and change. Manufacturers have done just about all they can do in terms of “tariff engineering”, and are looking for new ways of redesigning their supply chains. I can see signs of it everywhere, as executives begin exploring how to exploit free trade zones, shift production to different regions, and having in-depth long-term strategic planning meetings with critical supplier partners.

Canada’s Prime Minister, Mark Carney, gave a speech yesterday at Davos which summed it all up: “If you are not at the table, you are on the menu”. He correctly characterized what is happening today as Countries are realizing that they must create new strategic autonomy in their supply chains.
We are in the midst of a rupture, not a transition”.

This speech was greeted by a standing ovation. The fact is that collaboration between critical parties in the supply chain has never been more important. We need to explore a new way of operating our supply chains, not just making tweaks that have little if any effect. This could take a decade or more – but mark my words, the current economic turmoil is likely to continue. As my Canadian cab driver observed this morning – “what I am afraid of is what other countries believe they can do now… I grew up in a dictatorship, and Trump has emboldened others around the world to do what he is doing now.”

Trump’s speech at Davos was a meandring 1 1/2 hour unscripted commentary full of veiled threats which did not really add up to much – but it was evident that Carney’s speed evoked his wrath. This will likely not bode well for the upcoming USMCA negotiations that are due to occur this week. It is very likely that the US will seek unilateral agreements with Mexico and Canada, which could ultimate result in a collapse of talks. This could lead to a return to the Reagan-era NAFTA agreement – which has a number of holes in it, but is still an agreement of sorts..

Meanwhile, ROW governments are taking tentative steps to adjust, including launching new initiatives like the Future of Investment and Trade Partnership (FIT-P) and repurposing existing arrangements, especially building on the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). Canada has stated it will join the TPP, and an an indicator, Carney made a deal with China this week to import more than 50,000 Chinese EV’s, much to the disappointment of GM and Ford in Canada, who are already seeing jobs disappear after the tariffs…Progress remains painfully slow even as the stakes grow swiftly higher.

Meanwhile, French President Emmanuel Macron mentionied the “trade bazooka” as a potential threat to the US for blocking trade. As primarily a trading bloc, the EU’s toolkit is mostly financial instruments, from steep tariffs on U.S. goods to the so-called trade bazooka So far, most of the 27 EU nations remain skeptical about using it. The term is shorthand for the bloc’s Anti-Coercion Instrument, which includes a raft of measures for blocking or restricting trade and investment from countries found to be putting undue pressure on EU member nations or corporations. The measures could include curtailing the export and import of goods and services, barring countries or companies from EU public tenders, or limiting foreign direct investment. In its most severe form, the bazooka would essentially close off access to the EU’s 450-million customer market.

The fallout from the Greenland threats are likely not as great as envisioned after Trump’s speech at Davos. This is not the first time the US has sought control over Greenland. The United States has discussed obtaining Greenland from Denmark since the 19th century. There were talks within the US federal government about purchasing Greenland in 1867, advocated by secretary of state William H. Seward, and again in 1910. In 1946, following World War II, during which the US took over the defense of Greenland, President Harry Truman offered Denmark $100 million in gold for the island, though Denmark rejected the bid. However, the US was permitted to build and operate military bases there. The US had several bases, but has since closed all but one – the Pituffik Space Base, previously called Thule Air Base.
President Trump said he wouldn’t impose tariffs on several European nations after he reached the “framework of a future deal” on Greenland and the Arctic region with NATO Secretary-General Mark Rutte. In his Davos address, Trump said the U.S. needs to take control of Greenland purely for security and not for access to minerals, but he said he wouldn’t deploy the military to take control of the Danish-controlled island. 

The global landscape continues to shift …. stay tuned!