Tariffs’ ‘Uncertainty’ Starting to ‘Moderate’ Economic Activity in China, Says FedEx

The two rounds of Trade Act Section 301 tariffs implemented July 6 and Aug. 23 account for less than 10 percent of the shipment volume FedEx does in the “China-U.S. lane bidirectionally,” and that volume generates about 2 percent of total revenue for the “whole enterprise,” said Raj Subramaniam, FedEx chief marketing and communications officer, on a Monday earnings call. New tariffs on the $200 billion worth of imports taking effect Sept. 24 (see 1809180020) are expected to raise the impact to a quarter of the commerce FedEx does between the two countries, he said. “The uncertainty around the issue and the potential for additional tariffs is affecting the market and we're beginning to see some of the economic activity in China starting to moderate as a result of that,” said Subramaniam about an hour before President Donald Trump announced the third tranche of tariffs would take effect next Monday (see 1809170052). FedEx hasn’t yet seen “any significant shifts in the customer supply chain” as a result of the tariffs, he said. “However, if the situation continues for any amount of time, we do expect customers to diversify their supply chains and perhaps some of the trade patterns might change.” Subramaniam is confident “the scale and flexibility of FedEx will enable us to deliver strong results in enterprise despite any uncertainty on trades and tariffs,” he said.