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A double whammy of tariffs and strikes is coming for U.S. trade and the global
supply chain in early 2025
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A double whammy of tariffs and strikes is coming for U.S. trade and the global
supply chain in early 2025
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State of Freight




State of Freight


A DOUBLE WHAMMY OF TARIFFS AND STRIKES IS COMING FOR U.S. TRADE AND THE GLOBAL
SUPPLY CHAIN IN EARLY 2025

Published Tue, Nov 19 20241:01 PM ESTUpdated Wed, Nov 20 202411:10 AM EST
Lori Ann LaRocco@loriannlarocco
WATCH LIVE
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Key Points
 * The expectation that President-elect Donald Trump will implement new tariffs
   early in 2025 and a labor impasse at East and Gulf Coast ports with a new
   strike deadline looming has shipping companies gaming out an uncertain supply
   chain environment.
 * Logistics firm C.H. Robinson told CNBC it is fielding inquiries about
   front-loading of freight ahead of potential Trump tariffs.
 * Inventories are already increasing, according to Everstream Analytics, and
   the supply chain pull forward may accelerate in December, according to a
   forecast from Honour Lane Shipping.

The Garden City Port Terminal in Savannah, Georgia.
Sean Rayford | Getty Images

Uncertainty among U.S. shippers is escalating into 2025 with the expectation of
new Trump tariffs and the possibility of a new ports strike that could begin in
mid-January.

Supply chain and logistics executives told CNBC that shippers are now trying to
game out the snafus that could be coming in the global supply chain and how much
inventory to order. This comes against a consumer backdrop that remains strong
but is subject to macroeconomic risks, and an early start to Lunar New Year, a
holiday period in Asia during which manufacturing operations halt for as long as
a month.



In an advisory to clients, Honour Lane Shipping said it did not expect a volume
spike in November because it took two to three weeks for production cycles to
adjust, but front-loading may start in the first half of December, it wrote. It
added the implementation of new tariffs could be delayed, though, and push back
the frontloading to a later date during the first half of 2025.

The earliest that new tariffs could be in effect is in late February or early
March, according to an alert from C.H. Robinson to clients. “With continued port
labor uncertainty and the potential for increased tariffs in Q1, shippers should
anticipate a strategic pull-forward of inventory out of Asia, which would impact
both international and certain domestic freight markets (e.g., Southern
California),” it wrote.

But shippers must now decide which coast to send freight to given exposure to a
possible strike by the International Longshoremen’s Association at ports from
New England to Texas that could begin in mid-January. Travel time for ocean
freight from China to the East Coast and Gulf Coast ports is 40 to 55 days. The
negotiation deadline between the United States Maritime Alliance and the ILA is
Jan. 15. Last week, USMX announced the ILA had walked away from negotiations
after an impasse over automation issues.

“Given the short duration of the extended deadline and the contestation of the
automation issue, it is most likely that this will play out again in January,”
said Corey Rhodes, CEO of Everstream Analytics. “The question then becomes how
long the USMX will hold out on conceding to ILA’s demands this time around.” 

Rhodes said the strategies employed by shippers will differ based on the
inventory management needs. Everstream clients include Whirlpool, AB InBev, and
Danone. He added that making these types of decisions has become part of the
typical uncertainty that the supply chain needs to be prepared to face.



“I was running a high-tech manufacturing operation before I took this job and we
did manufacturing through China,” Rhodes said. “We wanted to hold as little
inventory as possible on our books, but needed access to it on short notice and
we were dependent on sub-components that were sourced from other countries.
Managing that complexity was kind of the name of the game.”

watch now
VIDEO6:4406:44
Trump 2.0 risks a ‘global trade war’ if he imposes blanket tariffs on all
imports, says Stephen Roach
Squawk Box Asia


Mike Short, president of global forwarding at C.H. Robinson, told CNBC that the
logistics firm is seeing a variety of inquiries about front-loading freight, but
it might not be feasible if suppliers can’t ramp up production.

“For those who can and want to front-load, the reasons are split among the
pending second U.S. port strike in mid-January, the Lunar New Year starting on
January 29, and potential tariff changes,” said Short. “Others are simply trying
to figure out the timing — one customer asked about the last day their freight
could leave Asia and arrive in the U.S. before the new tariffs potentially take
effect.”

The congestion that followed the three-day ILA strike in October took weeks to
clear out. According to Everstream Analytics, there were 54 container ships
waiting outside ports on Oct. 4 when the strike ended, compared with five
vessels before the strike started.

“Almost three weeks post-strike, we saw that the backlog was clearing at a
slower pace than anticipated and not evenly across all affected ports,” Rhodes
said. “While some ports that saw significant congestion after the three-day
strike have already worked through the backlog, like New York and Houston,
others are still experiencing congestion, especially Savannah.”



Rhodes said companies with four to six weeks of inventory are at risk of another
disruption to supply if a new strike were to last for that length of time.

“Navigating the uncertainties is more than using stockpiling inventory,” he
said, adding that the cost of warehousing and expediting freight are critical
operational costs that need to be considered.

Everstream data is showing inventories building within organizations with the
means to stock up in anticipation of potential disruptions.

“It can be revealing to see how much inventory a company has on their books,”
Rhodes said. However, he added the picture can be incomplete with some companies
not taking ownership of the freight immediately and the bill of lading listing
another shipping or logistics company as the freight’s consignee.



Short said while China gets the most attention in trade war discussions, the
global supply chain and U.S. shipper reliance on other countries has expanded
vastly over the past 20 years, with the total value of goods imported into the
U.S. increasing by 153%.

“President-elect Trump has indicated that his supply-chain-related policy agenda
will center around ‘de-risking’ from China and other foreign manufacturing
centers, along with rolling back or eliminating renewable-energy mandates,” said
Short. “This approach would lead to higher tariffs for all imported goods and
potentially significantly higher tariffs from China.”

Trump’s planned tariff increases on Chinese imports are expected to range
between 60% and 100%, with 10% to 20% on all other imports. U.S. retail leaders
are starting to signal that the duties will raise prices for consumers and slow
spending, with Walmart CFO John David Rainey telling CNBC on Tuesday that the
retailer could have to raise prices on some items if Trump’s proposed tariffs
take effect.

Alix Partners advised clients in a recent note to expect both international and
domestic freight rates to spike given an increase in volume. Ocean container
rates, for example, rose more than 70% in 2018 after Trump increased tariffs on
Chinese imports.

But that pricing trend may only be short-term, and the long-term outlook “less
optimistic,” it wrote. “Trump’s high tariffs discourage imports, slowing
shipment volumes and subsequently, shipping rates,” the report said.



S&P Global Market Intelligence said Trump’s economic and international policies
could bring another round of restructuring to global supply chains.

The U.S. trade deficit with mainland China stood at $287 billion in the 12-month
period through Sept. 30, 2024, according to an S&P Global report. That’s down by
18.7% since 2021 but is still the largest individual deficit with any country.
S&P Global uses 2021 as a comparison point since that was when President Joe
Biden took office and it also removes any data distortions involving Covid
factory closures.

There has been a rise in Chinese manufacturing moving to Mexico under terms of
the Trump-negotiated USMCA trade deal, a legal back door to entering the U.S.
without paying tariffs, which Trump is expected to take a new look at in his
second term. More companies have also set up shop in countries such as South
Korea, Vietnam and Malaysia, which could also face tariff actions. Through
September, Vietnam’s trade deficit with the U.S. was up 30.6% in the previous 12
months compared with the 2021 level.

According to Chinese customs data, mainland China’s trade surplus with Vietnam
increased by 25.1% in the 12-month period through September, compared with the
2021 level. According to S&P Global Market Intelligence, China’s trade surplus
with Vietnam rose to $11 billion, versus a U.S. trade deficit with Vietnam at
$28 billion. S&P Global warns of increased trade risks related to Vietnam given
its relationship to China.

watch now
VIDEO19:0819:08
How China is using Mexico as a backdoor to avoid U.S. tariffs
Air Freight and Logistics


Related

 1. Target’s recent trade imports data tells the real story behind the massive
    earnings miss
    
 2. U.S. port, union talks break down over automation, with two months to go
    before potential strike
    
 3. Trump vow on new trade war sends shockwaves through supply chain, importers
    race to move up orders
    
 4. In U.S. trade war with China, Mexico is emerging as the big winner
    


MORE IN STATE OF FREIGHT

Target’s recent trade imports data tells the real story behind massive earnings
miss
Lori Ann LaRocco
U.S. port, union talks break down again over automation, with two months to go
before potential strike
Lori Ann LaRocco
Canada’s Labor Minister ends coast-to-coast port labor turmoil, forcing unions
back to work
Lori Ann LaRocco
Read More


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