Dual threats of Trump tariffs and new port strikes have shippers nervous | Wilnesh News

Uncertainty for U.S. shippers is expected to escalate into 2025, with new tariffs imposed by Trump and new port strikes likely to begin in mid-January. Supply chain and logistics executives told CNBC that shippers are now trying to navigate possible disruptions in global supply chains and how much inventory to order and early starts as the consumption backdrop remains strong but impacted by macroeconomic risks. New Year’s Day is a holiday in Asia during which manufacturing operations are shut down for up to a month.

Honor Lane Shipping said in an advisory to customers that it does not expect a surge in sales in November as the production cycle takes two to three weeks to adjust, but that advance loading may begin in the first half of December. However, it added that the implementation of the new tariffs may be delayed and the early imposition of tariffs will be postponed to the first half of 2025.

The new tariffs could take effect as soon as late February or early March, according to an alert from Robinson to customers. “Shippers should expect inventory to be strategically moved out of Asia due to continued uncertainty about port labor and the potential for higher tariffs in the first quarter, which will impact international and certain domestic freight markets (e.g. Southern California),” the report reads. .

But shippers must now decide which coast to send their cargo to, as ILA strikes likely begin in mid-January at ports from New England to Texas. Ocean shipping time from China to East Coast and Gulf Coast ports is 40-55 days. The deadline for negotiations between the American Maritime Alliance and ILA is January 15.

“Given the short deadline for the extension and the controversy over automation, it’s likely that this situation will play out again in January,” said Everstream Analytics CEO Corey Rhodes. “The question then is how long USMX will hold out this time. Acknowledge the ILA’s request.”

Rhodes said the strategies shippers employ will vary based on their inventory management needs. Everstream’s customers include Whirlpool, Anheuser-Busch InBev and Danone. He added that making such decisions has become part of the typical uncertainty that supply chains need to be prepared to face.

“Before I took this job, I was running a high-tech manufacturing business, and we were manufacturing through China,” Rhodes said. “We want to keep as little inventory as possible on the books, but need to access it at short notice, and we rely on sub-components sourced from other countries. Managing that complexity is the name of the game.”

Mike Short, president of global freight at CH Robinson, told CNBC that the logistics company has received various inquiries about front-loading freight, but that this approach may not be feasible if suppliers cannot increase production.

“For those who can and want to load early, the reasons are divided into the second U.S. port strike coming in mid-January, the Chinese New Year starting on January 29 and potential tariff changes,” Short said. “Others are just trying to figure out timing — one customer asked about the last day their goods can leave Asia and arrive in the U.S. before new tariffs may take effect.”

Traffic congestion took weeks to ease following a three-day International Labor Organization strike in October. When the strike ended on October 4, there were 54 container ships waiting outside the port, compared with five before the strike began, according to data from Everstream Analytics.

“Nearly three weeks after the strike, we are seeing backlogs being cleared slower than expected and unevenly across all affected ports,” Rhodes said. “While some ports that experienced severe congestion after the three-day strike have experienced Backlogs have been resolved, such as in New York and Houston, but other ports are still facing congestion, especially Savannah.”

Rhodes said companies with four to six weeks of inventory would risk another supply disruption if new strikes last that long.

“Dealing with uncertainty is more than just using inventory to hold inventory,” he said, adding that the cost of warehousing and expedited freight are key operating costs to consider.

Everstream data shows inventory built within the organization And have a way to stockpile inventory to deal with potential disruptions.

“It can be enlightening to see how much inventory a company has on its books,” Rhodes said. However, he added that the picture may be incomplete, with some companies not immediately taking title to the cargo and another shipping or logistics company being listed on the bill of lading. Listed as the consignee of the goods.

Short said that while China has received the most attention in trade war discussions, global supply chains and U.S. shippers’ reliance on other countries have expanded significantly over the past 20 years, with the total value of U.S. imports increasing 153%.

“President-elect Trump has stated that his supply chain-related policy agenda will revolve around ‘eliminating risks from China and other foreign manufacturing hubs’ and scaling back or eliminating renewable energy mandates,” Short said. “This approach will lead to all Higher tariffs are imposed on imported goods and tariffs from China may be significantly increased.”

President-elect Trump predicts that tariff increases on Chinese imports will range from 60% to 100%, and tariff increases on all other imported goods will range from 10% to 20%. U.S. retail leaders are beginning to say tariffs will raise prices and slow spending for consumers, Walmart Chief Financial Officer John David Rainey told CNBC on Tuesday that the retailer may have to raise prices on some items if Trump’s proposed tariffs go into effect.

In a recent report, Alix Partners advised clients to expect both international and domestic freight rates to surge given the increase in freight volumes. For example, ocean container rates increased by more than 70% in 2018 after Trump raised tariffs on Chinese imports.

But that pricing trend may only be short-term, and the long-term outlook is “less optimistic,” it wrote. “Trump’s high tariffs have stifled imports and slowed freight volumes, thereby lowering freight rates,” the report said.

S&P Global Market Intelligence said Trump’s economic and international policies may bring about a new round of restructuring of global supply chains.

S&P Global reports that the U.S. trade deficit with mainland China was $287 billion in the 12 months to September 30, 2024, down 18.7% since 2021 but still the largest individual deficit with any country. . (S&P Global uses 2021 as a comparison point because that’s when President Biden first takes office and also removes any data distortions caused by COVID-19 factory closures.)

Under the U.S.-Mexico-Canada trade deal negotiated by Trump, increased relocation of Chinese manufacturing to Mexico is a legal backdoor into the U.S. without paying tariffs, an issue Trump is expected to revisit in his second term. More companies are also setting up shop in countries such as South Korea, Vietnam and Malaysia, which may also face tariff action. As of September, Vietnam’s trade deficit with the United States increased by 30.6% over the past 12 months compared with 2021 levels.

Chinese customs data shows that in the 12 months to September, mainland China’s trade surplus with Vietnam increased by 25.1% compared with 2021.. According to data from S&P Global Market Intelligence, China’s trade surplus with Vietnam increased to $11 billion, while the U.S. trade deficit with Vietnam was $28 billion. S&P Global warned that trade risks related to Vietnam will increase given its relationship with China.