Donald Trump has been elected the 47th President of the United States of America and is ready to implement new policies. The potential changes ahead will have important implications for U.S. trade policy, likely affecting companies reliant on international supply chains. Let’s examine what Trump’s victory might mean for the U.S. and the global supply chain.
After Donald Trump was elected President in 2016, newly imposed tariffs impacted ocean volumes from China, as well as freight rates. The market was more active in 2018 as U.S. importers rushed to beat the tariff deadline, but it got weaker in 2019 due to the inventory hangover from pulled-forward cargo.
Donald Trump is back at the White House for another four years and proposes a 60% tariff on all imports from China as well as a 10% tariff on imports from other countries. Suggested tariffs could affect the supply chain in both the short and long term.
In short, the President’s current take would be harmful to container shipping due to increased costs and might be damaging for dry bulk due to potential retaliatory tariffs. At the same time, it could also be positive for rates in the near term due to a pull-forward of imports.
Reintroducing Tariffs on Foreign Goods
Donald Trump has proposed a 60% tariff on all imports from China and a 10% tariff on imports from other countries. The newly elected U.S. president aims to incentivise American businesses to source materials and products domestically or at least from U.S.-friendly countries. As a reminder, during the previous Trump presidency, the tariffs, mainly focused on China, significantly affected import timing and spot container freight rates.
The new proposed policy could boost some sectors of American manufacturing, but at the same time, it may disrupt the global supply chains. Many U.S. businesses depend on foreign suppliers; therefore, higher import costs could increase prices across consumer goods, electronics, and automotive sectors. As a result, American consumers might face higher prices, while foreign producers could lose market share.
Updated 26th Nov: Donald Trump has pledged sweeping 25% tariffs on all products from Mexico and Canada, escalating trade tensions with two of the United States’ largest partners. Additionally, China faces a 10% tariff increase due to accusations of insufficient measures against illegal immigration and drug trafficking. These moves have already jolted financial markets, with currency declines in Mexico, Canada, and China. These tariffs underscore an urgent need to reassess supply chain strategies to navigate higher costs and operational disruptions for global logistics.
Tariffs-Driven Temporary Increase in Demand
If Trump’s proposed policies come into action, tariffs on foreign goods could reach the highest levels since the 1940s. As a result, U.S. importers will likely pull cargoes forward to beat tariff deadlines. This is what happened during Trump’s presidency when the new tariffs in 2018 led to temporarily higher spot rates.
The same pull-forward dynamic could potentially lead to increased rates in 2025 or 2026, followed by a decline a year later. In simple terms, importers are expected to rush to bring in goods from tariffed countries, especially China, which will most likely receive the most significant tariff. In this case, the front-loading strategy will temporarily increase demand, putting pressure on international shipping and the supply chain sectors.
Potential Labour Shortages
Trump’s hardline stance on immigration has direct implications for supply chains, especially within industries like agriculture, construction, manufacturing, and logistics that rely on immigrant labour. His proposed tighter restrictions and a renewed focus on border security could limit the workforce available for critical supply chain roles, exacerbating labour shortages that already challenge these sectors.
Labour shortages in key supply chain sectors could lead to delays and inefficiencies, particularly in agriculture, shipping, and logistics, where immigrants make up a significant workforce. This could increase operational costs for businesses and create additional struggles in logistics, leading to some countries shifting to imports from other countries, changing the global supply chain map.
Make America ‘Buy American’ Again
President Trump has proposed expanding the federal government's 'Buy American' policies, requiring federal agencies to prioritise purchasing goods made in the country to create a more reliable market for U.S.-manufactured goods, particularly in defence, infrastructure, and technology sectors.
Strengthening 'Buy American' rules could increase demand for U.S.-made products, supporting domestic industries. However, it would lead to the federal government decreasing or entirely cutting business with some established trading partners. As a result, some foreign shipping and logistics firms would lose important clients and even respond with retaliation or reciprocal restrictions on American goods. For example, during the previous Trump presidency, China shifted some of its soybean and corn sourcing to Brazil. In other words, increased tariffs could provoke opposition from U.S. trading partners, including China and U.S. allies such as the European Union.
Speaking of allies, despite its focus on 'Buy American', Trump has also suggested supporting trade with countries deemed reliable U.S. allies, encouraging American companies to source materials and set up production in the so-called 'friendly' nations. This strategy, known as 'friend-shoring', aims to make the supply chain less vulnerable to disruptions caused by politics. Therefore, while 'Buy American' mandates could receive retaliation from some countries, U.S. trading with other countries could increase simultaneously.
While future changes in U.S. trade policies will bring unique challenges and opportunities, businesses need logistics partners who understand the nuances of supply chain management in a rapidly changing environment. KATA Global Logistics prides itself on offering tailored solutions that adapt to shifting market needs, focusing on efficiency, cost-effectiveness, and customer satisfaction. Contact us today to learn how we can help your logistics strategy and make the best decisions to be future-proof.
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