A Double Whammy of Tariffs and Strikes Looms for U.S. Trade and Global Supply Chains in Early 2025
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Loading... - CHLOE BERNARD
- 20 Nov 2024
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As 2025 approaches, U.S. shippers are bracing for significant disruptions in the global supply chain due to the anticipated implementation of new tariffs and the potential for a major ports strike. Industry experts are expressing growing concern over how these developments could impact logistics and inventory management.
The expectation of new tariffs under President-elect Donald Trump is creating uncertainty among shippers. According to reports, these tariffs could be implemented as early as late February or early March 2025. C.H. Robinson has advised clients to prepare for a strategic pull-forward of inventory from Asia, which could affect both international and domestic freight markets, particularly in Southern California.
The proposed tariffs are expected to be substantial, with increases on Chinese imports ranging from 60% to 100%, and 10% to 20% on other imports. Retail leaders, including Walmart's CFO, have indicated that these tariffs could lead to higher prices for consumers, potentially slowing spending.
Compounding the tariff situation is the looming threat of a strike by the International Longshoremen's Association (ILA), which could begin in mid-January 2025. Negotiations between the United States Maritime Alliance and the ILA are set to reach a critical deadline on January 15. Recent reports indicate that the ILA has walked away from negotiations over automation issues, raising the likelihood of a strike.
The travel time for ocean freight from China to East Coast and Gulf Coast ports is approximately 40-55 days, meaning that shippers must make critical decisions about where to send freight in anticipation of potential disruptions. Corey Rhodes, CEO of Everstream Analytics, noted that the uncertainty surrounding the negotiations could lead to significant delays and congestion at ports, similar to the backlog experienced after the three-day ILA strike in October 2024.
With the combination of potential tariffs and a strike, shippers are faced with complex inventory management decisions. Many are considering front-loading freight to mitigate risks, but this may not be feasible if suppliers cannot ramp up production in time. The upcoming Lunar New Year, starting on January 29, will also halt manufacturing operations in Asia for an extended period, further complicating logistics.
Everstream Analytics has reported that companies with four to six weeks of inventory are particularly vulnerable to disruptions if a strike lasts that long. The cost of warehousing and expedited freight is becoming a critical consideration for shippers as they navigate these uncertainties.
The anticipated changes in U.S. trade policy under Trump could lead to a restructuring of global supply chains. The U.S. trade deficit with China remains significant, standing at $287 billion for the 12-month period ending September 30, 2024. While there has been a decrease in this deficit since 2021, it still represents the largest individual deficit with any country.
As companies seek to mitigate tariff impacts, many are relocating manufacturing to countries like Mexico, South Korea, Vietnam, and Malaysia. However, these countries may also face tariff actions, and the relationship between China and Vietnam poses additional trade risks.
The combination of new tariffs and the potential for a ports strike presents a challenging landscape for U.S. shippers and the global supply chain as 2025 approaches. Companies must navigate these uncertainties while managing inventory and logistics effectively. The outcome of negotiations and the implementation of tariffs will have far-reaching implications for trade dynamics and consumer prices in the coming year.
