Supply chains should start preparing for a ramp-up in US tariffs after US president Donald Trump reiterated his previous plans and also took aim at the European Union (EU).
During a press conference on Tuesday, Trump reiterated plans to implement a 10% tariff on imports of Chinese goods in response to accusations that fentanyl is being imported from China into the US via Mexico and Canada. This could come in as soon as February 1.
The EU is also under consideration for tariffs, Trump said at Tuesday’s press conference, although at this stage details are thin on the ground. These tariffs aim to address a trade imbalance.
“The EU is very, very bad to us,” Trump said. ”They treat us very, very badly. They don’t take our cars. They don’t take our cars at all. They don’t take our farm products, essentially. They are going to be in for tariffs. It’s the only way you are going to get back fairness.”
Meanwhile, on Monday he said that tariffs on Mexico and Canada could begin on February 1. Following last year’s election, Trump said he planned to introduce 25% tariffs on goods from the two countries in response to drug smuggling and illegal immigration into the US.
Trump has also instructed a wider investigation into trade, including trade deficits, unfair practices and currency manipulation.
Industry observers have warned that companies should start preparing for a ramp-up of tariffs, warning that they could cause supply chain chaos.
Peter Sand, chief analyst at air and ocean data provider Xeneta, said: “We know tariffs are on the way – we just don’t know when, where or the category of goods impacted. This uncertainty makes managing supply chain risk an almost impossible task.
“The worst case scenario is Trump announcing blanket tariffs against China and the rest of the world simultaneously. The rush to import goods into the US ahead of tariffs coming into effect could cause carnage across global supply chains and put upward pressure on already-elevated freight rates.”
He said that during the last trade war - in 2018 - volumes and rates spiked ahead of the implementation of the tariffs as companies rushed to move goods before the deadline.
“Shippers want to take decisive action against these geo-political threats. In the short term that may mean building up stock inventories if they know when tariffs are coming into effect and the goods within scope," Sand added.
“In the longer term, shippers may look to shift supply chains out of China to nations such as India or neighbouring South East Asia countries if the trade war escalates dramatically. However, they will not commit to this financial investment and massive supply chain disruption based on rhetoric and political posturing.”
ITS Logistics also warned of front loading in its most recent market report.
"Shippers should prepare for the potential of a frontloading event similar to 2018, disrupting transpacific trade lanes from Asia into North America—regardless of origin—as frontloading bottlenecks at the same entry point ports.
"Expect exports to be negatively impacted as well due to equipment imbalance and possible retaliatory tariffs."
