Perhaps trade wars aren't so easy to win.
U.S. shipping giants FedEx (FDX) - Get Report and United Parcel Service (UPS) - Get Report are advocating for lower trade barriers and free trade policies as U.S. President Donald Trump prepares to impose additional tariffs on Chinese imports.
Trump announced late Monday a new round of tariffs on about $200 billion of Chinese goods, as China's current trade practices "plainly constitute a grave threat to the long-term health and prosperity of the United States economy." The 10% tax, which is set to be levied on Sept. 24, is set to increase to 25% at year-end. The president also threatened tariffs on approximately $267 billion of additional imports should China respond with retaliatory tariffs. Ahead of the announcement, China said it would "take necessary countermeasures" should Trump impose any new tariffs.
However, the contentious trade rhetoric is not the ideal operating environments for global package delivery companies FedEx and UPS. In the past week, both U.S.-based companies have said they are closely watching the developments with trade, and want fair and free trade policies.
"The uncertainty surrounding [trade] is not helping and, thus, has a broader impact on the market," FedEx Chief Marketing and Communications Officer Rajesh Subramaniam said Monday during the quarterly earnings conference call. "We continue to support lower trade barriers for all our customers."
That said, FedEx noted that its China-U.S. business represents just 2% of total revenues "and the tariffs impact only a small portion of that." Should global trade slow, the Memphis, Tenn.-based company said it has several operational levers it can use.
"These include adjusting our network capacity to flat reductions, temporarily parking aircraft, decrease reliance on purchase transportation and other network adjustments," said FedEx Chief Financial Officer Alan Graf. "We can flex our overall network up or down, play offense or defense, and our continued integration allows us even further flexibility and efficiencies from a network perspective."
Meanwhile, UPS Chief Executive Officer David Abney said last week that while he worries about tariffs and counter-tariffs, the company advocates with governments throughout the world about trade policies. UPS generates about 3% of its total revenue from China, according to FactSet.
"We certainly agree that trade needs to be balanced and needs to be fair, but we also think that the globalization in trade really improves society as a whole," Abney said.
"The government is going to set trade policy; we can advocate and certainly try to influence [it]," Abney continued. "But when you can't shape the [trade] rules, [we] use our technology and flexibility to operate within those rules."
Shares of UPS rose 0.2% to $119.35 at 9:30 a.m. New York time, while FedEx stock slipped 3.5% to $246.85 after reporting an earnings miss on Monday.
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