3 reflections on the impact of war to a distribution business

Today, I would like to write my reflections on the impact of war to a distribution business. My article comes from my current thoughts on what would a potential conflict over Taiwan bring to the current employer in Germany.

The issue is pertinent to me since it will impact my employability in the current employer. If the distribution company can't generate revenue due to the war, I may lose my job.?

For me, I need to figure out what I should do when such a situation arises. Some people may dismiss the possibility of seeing a Sino-US war over Taiwan, but it is a possible future for me.?

Without further ado, let's get started.?

1. Supply chain disruption?

The current employer imports goods from Asian countries and distributes them in the European market. It has working connections with major offline retail channels all over Europe, which is its major strength.?

Right now, its products come from South Korean companies, and it buys these products in the US dollar. Some transactions use Euro, but most of its trade transactions are in dollars.?

If a war breaks out over Taiwan, it may disrupt the maritime trade route between South Korea and Europe. Currently, there are no alternative land trade routes available due to the division of the Korean peninsula.?

The commercial vessels may get bombardments while they are passing near the war zone, as it happened during the war in Ukraine. These vessels may have to take a detour to avoid entering into the war zone, which may cause long delays.?

It might be possible that South Korea may become a combatant state due to its obligation to the ROK-US Mutual Defense Treaty. Once the US becomes a combatant state siding with Taiwan, the US may call Korea to join the war to fight against China.

If Korea and China become adversaries despite all odds, it would be quite difficult for vessels to use Chinese ports for transit as it is now. Such a situation may need a rewiring of the supply chain, which may take a lot of time to construct.?

So, a war over Taiwan may sever the maritime trade for a short-term and may disrupt the trade routes for a medium and long term. Reconstruction may take a long time, and the new route may take longer time and more money to ship goods from Asia to Europe.?

2. Price Increase?

When a war occurs over Taiwan, it may reduce the flow of goods coming from China and Taiwan. These two countries shoulder a significant amount of consumer goods that Europeans use in their daily life.

China has been operating its business model to produce consumer goods on an OEM basis. They don't put much emphasis on their existing brands to promote them overseas.

Chinese companies produce living products such as containers, bottles or other essential items. These goods are cheap in comparison to other Korean or European brands, reducing the price burdens for consumers.?

If the flow of goods stops from China, the price level of these goods may become higher as the market has less amount of goods. Since it may take some time to get these products from other sources, it would contribute to price increase further.

The war in Taiwan will fuel the rate of inflation in Europe due to the decrease in supply. It would reduce the quality of life for ordinary Europeans since they have to buy these goods with more money.?

It would also pose some quality issues since the alternative suppliers may not match the quality level of Chinese suppliers. If so, the European consumers would face a situation where they would pay a higher cost for a less quality product.?

If you are a distributor importing from China, you need to figure out your alternative supply source. You need to look for your alternatives now so that you won't have any surprises when the war comes.?

3. Restricted movement of people?

The war may cause a restricted movement of people from overseas, especially from China and its allies (if any). If China becomes a combatant against the US, the latter may call for its allies to join the fight as well.?

Since many of the EU countries are members of NATO, it may be probable for these countries to consider China as war combatants. Since NATO identified China as a major strategic and military competitor last year, such a situation might be possible.

If NATO joins the war, its members may restrict the coming of Chinese students and workers entering into their space. The EU may walk in step with NATO by banning the entry of Chinese nationals.?

It may also be possible that Chinese nationals might not get visa renewals to stay in Europe further. If so, they would have to leave the EU countries despite their status as employees or students.?

It may become inappropriate to hire Chinese or people with Asian descent, so that the EU may restrict their right of abode. If so, there might be an exodus of these populations out of the EU, thereby reducing the number of available workers.

In such a situation, you may lose your workers as well if you hire Chinese nationals in your distribution business. Even if you want to fill the vacancy, it may take a long time since the labour pool itself decreased due to the restriction that happened due to the war.?

The war over Taiwan might cause a serious shortage of workers in the EU economies since it will decrease the EU's labour pool. Your distribution business will also get impacted since you may not be able to hire some people anymore due to restrictions.?

4. Wrap-up?

Today, I shared my personal thoughts on the impact of potential war over Taiwan to a distribution business. Please note that I haven't done any professional research on the issue.

What I have written comes from my general knowledge and a bit of imagination. My scenario may not necessarily manifest itself at all, and the war over Taiwan may also turn out to be a fantasy. Who knows??

If it is not the case, you need to prepare for a potential war over Taiwan. You need to check your vulnerabilities that the war will expose to your business and start to prepare for those.?

I hope you enjoyed reading today's article, and if so please put your thumb up and share it with others who may also enjoy it. Thank you, and I will see you in my next article.