Renewable Energy SmartPod
Renewable Energy SmartPod
Tax Incentives and Trade Policy with KPMG's Jessica Libby
Sponsored by: EDF power solutions
As the Trump administration continues to announce policy changes at a rapid pace, Jessica Libby, principal with KPMG Trade and Customs, returns to the show to discuss the shifts that are having the biggest impact on the renewable energy industry. Jessica highlights rules related to content from Foreign Entities of Concern (FEOC), new tax guidance from the Treasury Department related to wind and solar and, of course, tariffs.
Jessica explains a new contractual term known as 'tariff majeure' or 'Trump majeure' and also reveals the one policy tweak that she thinks is currently under the radar, but might yet become a major challenge for the industry.
More resources from EDF power solutions:
Key highlights:
"It's a new and different world." - (4:18)
Foreign entities of concern - (6:37)
Tariffs, tariiffs and more tariffs - (8:16)
Challenges to onshoring manufacturing - (10:55)
Treasury Department guidance for wind and solar - (13:44)
How business owners are responding to all these changes - (19:15)
'Tariff majeure' or 'Trump majeure' - (21:36)
Could all these changes make supply chains more sustainable? - (22:26)
Logistically speaking, is the US capable of collecting all these tariffs? - (24:54)
A big policy change that is currently under the radar - (29:47)
Jessica's bold predictions - (32:54)
(Note: This transcript was created using AI. It has not been edited verbatim.)
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Sean McMahon
What's up everyone? And welcome to the Renewable Energy SmartPod. I'm your host, Sean McMahon, and if you work in the renewables industry, you know there's been a ton of news in recent weeks related to policy. Sure, there was the One Big, Beautiful Act passed by Congress and signed into law by President Trump, but there's also been tons of announcements coming out of various government agencies in the US that will have a profound impact on the future of renewables. To help make sense of the policy changes related to things like tax incentives and tariffs, I'll be joined in a minute by Jessica Libby. Jessica is a principal with KPMG Trade and Customs, and if her name rings a bell, that's because Jessica joined this show last year from the sidelines of re plus, obviously, a lot has happened since then, so Jessica is back to discuss some of the biggest changes the renewable sector is trying to navigate.
Before we welcome Jessica back to the show. Just a quick reminder to check out the most recent episode of this podcast featuring Mike Richter from Brightcore Energy. Mike and I had a great conversation, and we focused a lot of our time on geothermal energy. I know I learned a lot about advancements in geothermal so give that episode a listen if you want to hear the latest from Mike.
And as always, if you want a daily roundup of renewable energy news delivered directly to your inbox each day, head on over to SmartBrief.com and sign up for the Renewable Energy SmartBrief or just click on the link in today's show notes.
Now, before we get things started with Jessica, just a quick note to our listeners, if it sounds to you like different segments of this episode were recorded at different times. I promise you you don't have to get your ears checked. You see we initially recorded this conversation a couple of weeks ago, but just before we released the episode, the Treasury Department released its new guidance for wind and solar tax incentives earlier than anyone was expecting. That created a problem for us, because in our initial recording, Jessica had shared her insights about what she anticipated would be in that guidance. So after a flurry of emails and a slight delay caused by the fact that I was taking my son to the Little League World Series in Williamsport, Pennsylvania, Jessica and I decided it would be best if we re recorded that portion of our conversation. And I gotta tell you, that's a home run for you, because now you get Jessica's expert analysis of the guidance that was actually released by the Treasury Department.
So now that I've got that final piece of housekeeping and transparency out of the way, please welcome back to the show. Jessica Libby from KPMG, Jessica, how are you doing today?
Jessica Libby 3:43
Good morning. Sean, thanks again for having me on. Always great to join your podcast.
Sean McMahon 3:47
Yeah, it's great to have you back on the show. So when I went back and listened to our conversation from last year, you know, I spoke to you on the sidelines at re plus, and we discussed a whole host of different topics, you know, the USMCA and of course, tariffs, tariffs were on the agenda back then, but something tells me we're going to be talking a little bit more about tariffs today, because obviously the Trump administration has changed everything about what's in the headlines for renewables. So there's a lot of different ways we could take this conversation. But let's start with, you know, the 35,000 foot view. When you look at the policy and trade landscape out there, what do you think are the biggest things having the most significant impact on the renewables industry?
Jessica Libby 4:31
It's a new and different world, right? There are really three key areas that I think we've seen the biggest developments. The first is around prohibited foreign entity rules, including material assistance. And that came out of the one big, beautiful Bill act and goes into effect in January of 2026 obviously another hurdle for our taxpayers or developers out there trying to put these energy facilities into play, and I'm sure we're going to talk about that more later, but certain. Actually, it's a sliding scale what is allowed on most projects, with 60% allowed in 2026 down to 40% by 2030 and certainly those are less for energy storage. The next big topic I would offer is tariffs. I certainly can't wake up or read anything without talking about tariffs. Lots of developments every day. In fact, Capital Market Strategy Group recently published a table that indicated, on average, we are seeing significant tariff policy shifts every three to five days, with 100 trade policy announcements in the first seven months of the administration. Let's let that sink in. That is significant change in seven months. As you think about companies trying to navigate these tariffs and trying to develop longer term strategies, it becomes very difficult now, as it relates to the energy space generally, this creates an indirect impact to developers or taxpayers, but suppliers are definitely passing that along, the additional tariff burden, and we've seen new contract provisions around what we're hearing called tariff measure or tariff sharing agreements. And the last thing I'll just mention, and this is clearly breaking news, last week, the IRS released notice 2025, 42 which provides new and updated guidance on the beginning of construction requirements specific to wind and solar in relation to the termination of clean energy production credits and clean energy investment credit. So very impactful to those projects that are about to be financed or potentially looking at start of construction.
Sean McMahon 6:37
Okay, now let's get into some of the details of those big three things you identified, starting with foreign entity of concern, in what ways is that going to reshape the renewables landscape?
Jessica Libby 6:47
Yeah, it's a good question. You know, we're seeing a lot of discussions right now about what is a foreign entity of concern, and there are various definitions out there. Again, I think we're all hoping that we're going to get some additional guidance from Treasury as to what the rules really are. In the meantime, though, they have provided some definitions, and I think for the most part, we're looking at there's various government lists. So for those listeners that may be familiar with restricted party screening or denied party screening, which is part of export controls, a lot of these lists actually orient back to those same list. And so, you know, you can run some screening to make sure you're not working with those other definitions are a little bit more broad, right? So you can have a foreign controlled entity, which is typically a nation like China, Russia, North Korea, Iran, but it includes citizens, nationals, very broad. It also includes financing arms. So if you have you know, if you're working on a project and you get financing from a certain entity of concern, there is a potential that that would be deemed to be a problematic entity, to be involved, right and for prohibited foreign entities, they are no longer able to claim the 40 5y and 40 8e tax credits because of that designation. So, you know, when investors are looking at these projects, they're going to be very curious as to what other parties may be involved in these discussions and in these in these investments,
Sean McMahon 8:16
And then now with regard to tariffs, you know, obviously, like you mentioned, there's been hundreds of shifts. If you will, name some of the big ways that that's going to change things for this industry.
Jessica Libby 8:29
So as relates to tariffs, you know, particularly in solar, for example, that is an industry that has been ripe for tariffs for many, many years, right? But we're going to see a broader impact on tariffs, and there's going to be some countries that are going to rise to the top as it relates to preferred sourcing origins, and others that are going to fall down a little bit. Now the question I often get Sean is, Where can I safeguard my supply chain? And right now, that's a very difficult question to answer. The reality is, even if you're shifting it back to the United States and manufacturing that product here in the United States, it's likely that there are still components that are a part of the global supply chain. So it's very difficult to insulate your supply chain, even if you're manufacturing here in the US, but you should be very thoughtful about where you are getting those products. So for example, this week we had another development as it relates to China. They paused the agreement again. So we're at 30% tariffs. This goes through November 10. Some felt like this was a good good measure. Others just said it brought a lack of predictability again for the next three months to the table. But you are working with 30% if you're going to start sourcing some of your products from Switzerland, obviously you're looking at 39% so again, you got to look at, if you're going to Mexico and Canada, you can take advantage of the US, Mexico, Canada agreement. That puts you in a more preferred position, because again, those tariffs are 0% unless you're looking at. As aluminum or steel or copper. So what I think these tariff developments have done is caused developers and manufacturers to be more thoughtful about what does their supply chain look like. Do they have visibility through their supply chain? Do they know where their components are coming from? And do they have alternative sourcing, as we are talking through the domestic content requirements. Many US manufacturers have really thought about, can they bring this into the US so they can get more domestic content? And that same question about, can they bring it back to the US? Is exactly what's happening, as relates the tariff discussion as well.
Sean McMahon 10:37
Yeah, I got to think that, you know, as a as the business owner that Switzerland might have seemed like a safe place to source my materials until a couple weeks ago.
Jessica Libby 10:47
Right? I think most of us thought that chocolates were gonna be safe, chocolates and watches were gonna be safe. But unfortunately, that doesn't appear to have occurred.
Sean McMahon 10:55
Okay. And now you mentioned the complexity involved in onshoring manufacturing, that even if you bring the bulk of the manufacturing back to the US, there's still components involved. How many companies are actually doing that, and, you know, kind of doing it successfully, or are they kind of just giving themselves, like, a level of acceptability, like, Hey, we're going to onshore, and we still know that these two or three components are offshore, and we're going to have just deal with that?
Jessica Libby 11:17
Yeah, it's a good question, Sean. Building out a manufacturing base in a certain country that takes time. You have to locate a facility, or you have to build a facility, you have to locate suppliers that can support that facility. So needless to say, even those companies that are interested in onshoring, they recognize that this is more of a longer, maybe midterm, mid to long term plan, and they might be taking steps currently to secure US based suppliers or manufacturing facility. There's a lot of discussions right now about the use of Foreign Trade Zones, for example. But this is not going to happen overnight, particularly if you're in a regulated industry and you have to get approvals from the various agencies. This does take some time. The other thing to think about, and this is particularly relevant as it relates to the energy sector, oftentimes, suppliers or EPCs are entering into long term supply contracts. So they might bulk order inverters or solar panels, and they might be multi year commitments, and so their need has been met with that multi year commitment. So as you have new companies entering the market, and they might be sourcing and manufacturing that product in the US looking at what is the demand? Is the demand there, or has it already been fulfilled through these long term contracts? So there's a lot of dynamics that go into onshoring, and sometimes it's not as clear as, Hey, I'd like to do this or set this up in the next six months. It oftentimes will take a few years to get something reshored.
Sean McMahon 12:48
We'll be right back.
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Sean McMahon
And now back to my conversation with Jessica Libby from KPMG.
Okay, now let's come back to the most recent headlines, really, and that's the updated guidance from the Treasury Department. What was your take on that?
Jessica Libby 13:51
Yeah, Sean, it's it's early, right? We just received this guidance last week from the IRS, but notably, there's some significant changes to the begin construction requirements. So just a reminder, under the one big, beautiful Bill act, it terminates the PTC and ITC for wind and solar, for facilities with begin construction after July 4, 2026 and placed in service after 2027 now, if the facility begins construction prior to July 5, 2026 it is exempted from that. December, 31 2027, sunset. And of importance, this notice doesn't apply to battery energy storage solutions or other technologies. But as you can see, we have a lot of dates floating around here, and it could be easy to miss these dates, and they're critically important to claim these credits. So let's dive in a little bit more so under 2025, 42 again, specific to wind and solar, with begin construction dates after September 2, 2025 meaning that pre existing guidance under 2022, 61 applies for those facilities. With begin construction on September 1 or earlier.
Sean McMahon 15:01
However, this is an incredible amount of dates!
Jessica Libby 15:04
This is a lot of dates. I'm going to boil it down to three core areas that is addressed in the 2025 42 guidance. We're going to talk about the Safe Harbor, the 5% safe harbor, the physical work, test and continuity. Now this is probably the most shocking development, and I'd be interested in your input here too, Sean, but they effectively did away with the 5% safe harbor in the new guidance for solar and wind. Now there is an exception for facilities that are typically considered kind of low output, like residential solar or smaller commercials, so those facilities less than 1.5 megawatts, but everything else this no longer applies. So now the only method to qualify for the begin construction is the physical work test. Now they did throw us a little bit of a bone here, and that they expanded the physical work test to be both on site and off site. And when you think about that. So historically, the physical work test has been around excavation, foundation work, installation of key equipment. But now the off site activities could include things like manufacture of components, mounting equipment, support structures, transformers, things of that nature. Now it's really important to note that this doesn't apply to those products normally held in inventory, so if you're just pulling something off the shelf, that's not going to be enough to trigger that off site activity. The last thing I'll just mention here is the continuity requirements. They pulled forward the same requirements here. So it's a four year requirement ensuring that significant work must continue to be performed as you approach kind of placed in service date. So those, those definitions from the prior notice continue to apply. So again, a lot to dive in here, as you can see. And as we talked about, a lot of different dates floating around prohibitive for an entity, all of the, you know, begin the construction dates, things of that nature. So really important to have timelines laid out for your project to ensure you can hit the mark here.
Sean McMahon 17:10
Yeah, I think, I mean, my take on the 5% versus, you know, construction is, it seems like they're just trying to eliminate anything that is objective, right? Like a developer can go in and say, Look, I've spent 5% like, this is inarguable. All, all the other areas that could be kind of fuzzy. It seems like what we've witnessed so far from interior and other departments is that they're willing to kind of just take, take their own, their own interpretation of what those mean, if you will.
Jessica Libby 17:43
I do think it adds, just again, another layer of complexity, right? When you're thinking about the PTC and it credits and the hurdles that the taxpayers the developers have to jump through. This is another hurdle, right? And so is it intended to dissuade companies these facilities to be constructed. Maybe
Sean McMahon 18:04
I would think so. I mean, or you say complexity, I say uncertainty, right? If you if at all these steps of the way you need to, kind of go to the Treasury Department, you know, with your hat in your hand saying, look, we've continued work. And you can't just come at him with a 5% number. You're again, once, kind of asking for the thumbs up, thumbs down, you know, Emperor kind of thing. And I'm not sure if I was a developer, that would be an appealing, you know, situation to be in
Jessica Libby 18:28
So and again, requiring additional documentation, right? Anyone that's been involved in these projects to date understands the amount of documentation required, whether it's to demonstrate PWA compliance, domestic content. Now you have begin construction. You have other contracts that you have to have in place to demonstrate the continuity requirements and what's occurring. It just becomes very paper intensive, and potentially to your point beyond complexity, there may be some variability and unknown, and the question I have is, this is brand new guidance, but how is finance or tax equity going to be looking at these new requirements, and what level of due diligence Are there going to require to finance these projects?
Sean McMahon 19:15
Yeah, I want to get right into that. So you know, my next question is, amid all this uncertainty, how are business owners responding, you know, are they moving supply chains? Are they, you know, reducing or just changing the scope, or maybe even canceling projects like you mentioned, are they maybe just focusing on other markets outside the US, just to just kind of get away from all the chaos?
Jessica Libby 19:37
Sean, you you definitely identified one that's a hot topic, and that is, are they shifting to other markets? So what we are seeing that's, I think, unique to the last you know, seven, eight months of activity, is that the US has always been a hub for distribution, warehousing, for global companies. We're now seeing that supply chains are becoming. Bifurcated so they will have a supply chain that comes to the US, and they'll have a supply chain that feeds the rest of the world. The supply chain that feeds the rest of world is no longer in the US, that is now shifting to other countries because they don't want to pay the tariffs when they import that product and then subsequently export that to another origin. Now there are programs that they can reclaim those tariffs, like duty drawback or through the use of a Foreign Trade Zone. They may not pay them at all, but needless to say, those are complex programs. It does take some time to actually put those into effect, and so a lot of companies are looking at this and saying, Okay, this is a new world regime, and I need to shift my supply chain and how I'm thinking about it, such that I have two supply chains, one that feeds the US and the other that feeds the world, which is unfortunate, because I do think we're going to have an impact to labor in the warehousing or manufacturing space, because we're no longer going to have those jobs or those needs Here in the US, because those global supply chains are going to run through the EU or some other country, Mexico, Canada, and not the United States. So that is one thing I'm seeing on the as it relates to the supply chain side, as it relates to fioc and some of the developments we're seeing out of the one big, beautiful act, just like developers are looking at domestic content and securing information from their suppliers, they're starting to ask relevant questions that are going to get at the fioc or the material assistance calculation. So we're starting to embed some of those things as relates to supplier due diligence. We're also seeing contractual terms in various procurement contracts around the FEOC requirements, material assistance, the ability to get access to that information, but also what we're calling tariff measure clauses. So in other words, if tariffs increase by a certain percentage, they're no longer on the hook for those tariffs, because a lot of developers are getting passed through tariffs right now from their suppliers, and that's really hard to manage when you think about managing a large scale project, and now you have all these overruns because of tariffs. It's a difficult kind of proposition to find yourself in.
Sean McMahon 22:13
Wow. I never thought I'd hear a tariff majeure clause.
Jessica Libby 22:17
I've also heard of it referred to as Trump Majeure, but for the most part, I think it, they're referred they're landing on tariff majeure.
Sean McMahon 22:24
I got it. I want to ask you a question about supply chains. You know, I was having a conversation with somebody industry, and he brought up an interesting point about how all these tariffs and the impact they can have on supply chains one unintended consequence. And I think you'll know what I mean by that when I when I get there, could it make supply chains more sustainable? And what I mean by that is that a year or two ago, if you had, and I'm not gonna, I'm intentionally not gonna name countries, if you had Country A and you were importing a needed product from there and you had Country B that was more sustainable, more sustainably produced, but it was, say, 30% more expensive. And so you went with Country A, but now country a, say, has a 50% tariff on it, and Country B is only getting hit with like a 10 or 15 so suddenly the more sustainable production facility is actually cheaper, any chance that happens in all this, or is that just wishful thinking?
Jessica Libby 23:26
You know, I think I like where this is headed to Sean. I think the challenge is that, as I mentioned earlier, we have seen changes to tariff policy at a rate of a change every three to five days or 100 and about seven months, and the start stop piece is really, I would say, tying the hands of key leaders and making critical decisions about investments. And so while that seems to make sense right now, is that going to make sense next week or a month from now or two months from now, and it's all dependent on getting to a level of stability, whether it's tariffs or legislation around the inflation Reduction Act, such that it becomes predictable in nature and companies can then make these long term strategy shifts. I think one thing that I have seen as a positive is that, and you may have heard this from your neighbors, your family, whatever it may be, is that we've always been a consumption heavy country. I now hear more people talking about going to thrift shops, recycling, reusing, or otherwise just being more sustainable around their approaches as relates to their everyday life, because of concerns around potential price increases or availability on the store shelves.
Sean McMahon 24:45
Yeah, and like I said, it would definitely be an unintended consequence. I'm sure the administration would admit that if all this made supply chains more sustainable, pivoting to tariffs, logistically speaking, is the US A. Prepared and or, you know, technically capable of collecting all these tariffs that are going to be placed on, you know, inverters and panels and all these things.
Jessica Libby 25:10
The good thing is, the US is very good at collecting money, so a tariff is a tax, and the tariffs are placed on imported goods. The USS has really strong history of collecting on tariffs and taxes. In fact, I just pulled some recent numbers, and the Treasury Department indicated that they collected nearly $28 billion with a B in customs duties in July. It was the highest monthly value on record, and it represents a 4% increase over June. And if you look at the government's fiscal year to date, the US has collected $135 billion in customs duties, as compared to 62 billion in fiscal year 24 So these numbers are absolutely significant, and it's also causing the US Customs and Border Patrol and the Department of Justice and other various agencies to be very focused on those importers or companies that are maybe bad actors they're trying to evade those tariffs do things incorrectly such that they bring them in at a lower tariff rate. So we are definitely seeing an uptick in enforcement actions. This is also causing a few false claims, Acts, things of that nature. And the interesting point about what we've been seeing coming out of this administration is many of the executive orders actually very specifically call out enforcement and indicate that anyone that is found to be intentionally evading these tariffs will be held to the highest standard, so lots of significant fines and penalties on top of the tariffs that we're already collecting. In fact, you may have heard recently that there's discussions around a tariff rebate for the nation, right? Maybe a $600 rebate, because we're collecting so much in tariffs to maybe compensate for some of the higher, higher prices we're seeing as we go to shop these days.
Sean McMahon 27:03
I actually hadn't heard about the $600 tariff rebate, but sounds like it'll be popular, I'm sure. But what you said about evading taxes, you know, it's good to hear that there are kind of clauses written in where they're going to kind of throw the book at anyone who tries to do that. Because one thing I've worried about is just like the level of expertise someone at the Customs and Border Patrol has to have like you're looking at a crate full of you know, are these inverter 1.0 or 2.0 because the price point on 2.0 is 10x or whatever, and then the company can just accidentally mislabel it as 1.0 bring it in and then swap all the packaging, whatever. So that's not going to happen, right?
Jessica Libby 27:39
No, I you know, actually US Customs and Border Patrol has some pretty cool technology. They are using AI technology. They have scanning equipments at their ports. And there's a lot of just regulatory requirements around importing. Specifically as an importer in the United States, you are expected to demonstrate reasonable care. And you may ask, what does that even mean? It's a pretty vague standard. But effectively, what that means is you are undertaking the requisite due diligence to ensure that you are reporting accurate information at time of entry, whether that may be country of origin or evaluation or the tariff classification, and if you get that wrong, then you could be subject to fines and penalties. One thing you did call out Sean that I think it's really on point, is this is really hard. I've been doing this for 25 years, and there are times as I'm reading the executive order, I have to read it two or three times. Think about if you're a small or medium sized enterprise, this is the first time you've ever paid duties. Because until this year, keep in mind that there was a lot of products, toys, sporting goods, pharmaceuticals, medical devices, all duty free. So these companies, while they still have the same requirements on getting origin and classification right, they may not have been looking as closely because it was a duty free entry. Now all of those companies are paying significant duties. And this becomes much more relevant. You layer on to that the fact that customs brokers are being tasked to understand all of these developments in a real time basis, update their automation that actually transmits that information to US Customs. And you can start to see where you know this can be very difficult and complex, and people can unintentionally get this wrong, because it's just that much more difficult.
Sean McMahon 29:26
Now there's definitely so many layers of complexity that even honest actors might go sideways on it. And you mentioned you read some of these executive orders three times just to understand them. And so that is perfect for my next question, because, you know, we've talked a lot about policy changes that are getting attention right? They're in the headlines. It's tariffs, it's FEOC, all that stuff. But as someone who's definitely read all these things and you're in the weeds on it, you do it for a living, are there any policies that you think are kind of slipping under the radar in terms of, like, you know, kind of caught your eye, like, Whoa, that that might actually become pretty significant at some point.
Jessica Libby 30:02
Yeah, it's a great question. And you know, for those listeners out there, you can't see but I'm definitely smiling, because there is a provision in the executive orders that some people may have picked up on, called Trans shipment. And the executive orders are referring to this notion of transshipment. Trans shipment, for the most part, has always been legal and occurs every day. For example, you might have a feeder vessel from Vietnam that is going to Hong Kong to get onto a larger vessel for movement to the US. That product is being trans shipped through Hong Kong to the US. Completely legal. The way this administration is looking at transshipment is very different. What we are hearing from the administration is that they're very concerned that there are inputs or components coming from China or other countries and subsequently sent to maybe other Southeast Asian countries to be further manufactured historically in the customs space. We would call this a substantial transformation. So in other words, manufacturing a new and different article of commerce. Enough manufacturing has to be more than simple assembly, but effectively that product would become the product of the country where that manufacturing occurred. We now understand that the administration is looking into a content requirement. So for example, no more than 20 or 40% of that content for the product may be from China, regardless of where the manufacturing occurs, or regardless of the value add. That becomes very difficult to manage, because, again, this goes back to our earlier conversation. It requires importers to have significant visibility into supply chains, including down to the component sub component level, oftentimes getting a bill of material. And needless to say, suppliers don't want to provide that information. It has sensitive information around financial details. It might have information around manufacturing or IP that's sensitive. So if you think about if they move down the path, and they adjust the transshipment rule such that it pertains to a content origin requirement that will change decades of policy regulations and the like and how we looked at Country of Origin moving away from a substantial transformation to effectively what we use today in a trade agreement, which is a regional value content or a content requirement. And most importers, unless you're a manufacturer, do not have access to that information. That would literally flip the trade world on its head. And while I'm not sleeping a lot these days anyway, Sean, I promise you, if that trans shipment rule goes into effect, nobody in the custom space is ever sleeping again, including your customs broker, your consultants, or anybody in your trade area. So it's pretty significant. I do think it's flying under the radar.
Sean McMahon 32:50
Okay, well, trans shipment, you know, I'll keep an eye on that for sure. You know, when we spoke last year, I asked you for bold predictions about what was to come in the year ahead. And you know, shockingly, you didn't predict all these things. Jessica. I mean, come on, Jessica, but I want to ask you the same question right now. You know, a year from now, we get together, what are we talking about?
Jessica Libby 33:12
So first of all, Sean, I hope I get invited back more than once a year. I hope you find you and the listeners find this more valuable than that, but it's a good question. You know, I think my bold prediction, and listeners may not love this, and companies may not love this, but I do see in the short term, we're going to continue to have a lack of predictability in global supply chains and trade policies. This administration is very focused around ensuring that their policy intentions behind the America first trade agenda are implemented, and that means bringing back US manufacturing. It's not enough just to have manufacturing plants here. We're going to need to make inputs and components as well. And they also want to ensure that our trading partners are treating us fairly. And that's what you're seeing right now with the negotiations, whether it's Japan or South Korea or China or Switzerland or the EU, is making sure that we're getting our fair part of the equation, whether it's accepting our exports into their countries or allowing us to get access to their imports at a more fair rate. So my bold prediction is that in one way or another, we are going to continue to see this disruption in the global trade space, but it may not be in the form of tariffs, and I think that is where we're going to see maybe what we call non tariff barriers, which are things like export controls. We may have things that are more subject to licenses or enforcement actions or other trade developments we typically see. You may hear these things like digital service taxes, or things of that nature which are non tariff barriers. So I do think that that is one of the things we're going to see is, unfortunately, we're going to be dealing with this lack of predictability, the instability in the global markets for a bit. But I did want to pull out maybe two other just positives for. Listeners, I don't want to end on, you know, such a negative point. I do want to say I do think there's two things that we're seeing that are very positive that are coming out of this. We are seeing companies better insulate themselves against this disruption, and they're doing that by looking at their supply chains, getting greater visibility in their supply chains, but forming stronger relationships with their suppliers, and that creates some predictability for themselves in the company, but also in the factories and the manufacturers. And they're also looking at, Okay, do I near shore, whether that be in Mexico or Canada, in addition to onshoring. So that's going to make some of our trade agreements, you know, stronger as we move forward. I already mentioned the consumption heavy country. I do think that's causing us to really think about, how do we be more sustainable in what we're purchasing on a day to day basis? And you know, on a lighter note, my family now understands what I do. So makes for some more interesting dinner conversations. I really can't go anywhere where you can hear about tariffs, and there's not a question about a neighbor asking about, are my shirts gonna become more expensive to buy? So then we get into a long, drawn out conversation. So it's a positive thing that people now know what we do.
Sean McMahon 36:08
Yeah, I mean, good and bad right now, suddenly you're talking shop at dinner.
Jessica Libby
That's right, that's right.
Sean McMahon
I appreciate those predictions. You know, obviously a prediction that one thing that's certain is there'll be more uncertainty. Definitely will, like you said, kind of keep people awake at night. But as you also finished, with some positive notes, you know, closer relationships within the supply chain and people just kind of suddenly becoming more aware of how global commerce works. So Jessica, it's always a pleasure to talk to you. You know you and I could truly geek out on this for hours, but I think we'll leave it at that. So thank you for your time.
Jessica Libby 36:40
Thank you, Sean. I always appreciate the opportunity to join you on this podcast.
Sean McMahon 36:45
All righty, well, that's our show for today, but before we get out of here, I want to say one final thank you to the exclusive sponsor of today's episode, EDF power solutions.
This episode of the Renewable Energy SmartPod was produced by Dillon Kelly, and if you like this show, please share it with your friends and colleagues, and of course, be sure to follow us on Apple, Spotify, YouTube or wherever you get your podcasts. The Renewable Energy SmartPod is a production of SmartBrief, a Future company.