…prepare and adapt.
Tariffs have been a part of US history since 1789, so like all presidents before him, once elected, Donald Trump began imposing a variety of tariffs on a variety of goods. Some things seemed harmless, like solar panels and washing machines, which probably only caused panic in anyone looking to upgrade their laundry. But for those of us in the freight industry, tariffs have a much bigger meaning than a larger price tag on home goods.
What is a tariff?
At their core, tariffs, which are taxes on imports and exports, are meant to encourage domestic production and manufacturing. Seems like a good thing. It’s meant to lead to increased production of goods in the US, which means more trucks and rails hauling those goods all across the country, right? Well, not exactly.
The China tariffs we keep hearing about
In 2018, a 10% tariff was placed on over 818 categories of goods coming in from China (about half of all imports from China). That equates to roughly $23.7 billion collected by US Customs and Border Protection. In theory, it would be Chinese companies and manufacturers paying those tariffs to import those goods into the United States, but unfortunately, it’s not that simple. The increase in costs to import goods into the states increases production costs, which then increases final product costs, which the American consumer then pays for.
What this means for carriers
As sales decrease because of rising product costs, there will be less product to carry. And if the tariffs increase from 10% to 25%, as there have been mentions of, those effects would only intensify. However, if you’ve been watching the news, you’ve probably gotten whiplash as there’s been a lot of back and forth on that increase. However, a lot of manufacturers are trying to get their products shipped into the west coast and delivered to warehouses before that possible increase.
We also have options across the big pond. Though the EU and other countries have their own set of tariffs to deal with, and they can’t compete with the volume of goods from China, they are a trade option. These goods land at ports on the east coast and get transported out from there.
Though a lot of these trade war issues affect the major coastal and port cities the most, we have seen some strong ripple effects in the middle parts of the country. China wasn’t too happy about the imposed tariffs, so they decided to set some of their own, hitting the US agriculture industry where it hurts; the farm belt. As they put tariffs on soy products, US farmers started losing out and so did the freight carriers that transport their crops.
The good news
Sounds like a whole lot of bad, right? But the good news is, we’re fixers. Companies will have to get crafty and efficient with their packaging and shipping methods; but we’ll be there to help with the logistics, adapting to the rapidly changing market, and addressing all of your shipping needs.