Some shippers have paused transport into the US amid the chaos thrown up by the new tariff regime, with hopes of a rash of reshoring into the country fast fading.
Dubbed “Liberation Day” by Donald Trump, the US announced imposition of sweeping tariffs on almost every country on Wednesday to address administration beliefs of exploitative practices by trade partners.
China today responded with a multi-pronged attack, announcing that from 10 April, it will hit all US goods with a 34% tariff – in line with the 34% tariff announced by the US, although not in line with the full 54% tariff rate Chinese imports into the US are now subject to.
Together with what it described as “resolute countermeasures”, Beijing has placed export controls on several rare earth metals essential in consumer electronics manufacturing, suspended export qualifications on six US companies, and added 11 foreign firms to its “unreliable list”, claiming they have engaged in “so-called military and technical cooperation with Taiwan”.
The response domestically has been mixed, with increased concern that the cost of the tariffs will simply be passed on to US consumers.
However, President Trump and others within his cabinet believe they will provoke a rash of reshoring, bringing jobs back to the US, a position that has won support from automotive workers.
But head of supply chain research at S&P Global Market Intelligence Chris Rogers questioned the strategy, and the prospects for US manufacturing.
He said: “Corporate supply chain managers are likely to incorporate the new duties into their pricing and cost negotiation strategies in the near-term, with options to reshore sourcing limited, due to the sheer breadth of coverage of the duties.”
Others share Mr Rogers’ position, pointing out that even where they have facilities in the US that could be used, the cost of relocating may not make economic sense.
And now it seems some shippers are simply pausing shipments into the US, with one forwarder telling The Loadstar major customers had requested all US-destined cargo waiting in port be held until they “get a better handle on what is going on”.
Asked when this may be, the forwarder said that neither they nor the shippers “had a clue”.
Forwarders have said many customers appeared to be adopting a “wait and see” approach, with expectations of the administration offering a slew of “carve outs” that would reduce certain countries’ or companies’ exposure to the tariffs.
Almost as soon as the new tariffs were announced questions began to be raised on how they had been calculated, and the level of thought that had gone into them.
One forwarder pointed out that a “big quandary” would be the implementation of the tariffs, noting that Customs systems “aren’t fit for purpose at such short notice” – which will have consequences for congestion.
Part of the problem surrounds the fact that tariffs only apply to the non-US content of the goods imported; if at least 20% of their value originated in the US.
“This is likely to dramatically increase the workload for shippers scrambling to demonstrate US content value to reduce tariffs – and for Customs to verify such claims,” said Vespucci Maritime CEO Lars Jensen.
Maersk said that, with “several scenarios” still possible, customers would need to be able to speed up, slow down, or potentially reroute cargo to alternative markets.
It added: “In the very short term, we’re likely to see some rush of airfreight orders ahead of tariffs going into effect. It’s also likely we’ll see an increase in demand for bonded storage, as customers will want to hold off clearing goods while they await more certainty.”
Both Maersk and Mr Rogers at S&P Global noted that the “sheer breadth” and reach of the tariffs had upended global trade.
But rather than prompting any sort of movement to bolster US manufacturing, the sense seemed to be that the tariffs had prompted inertia, with no company keen to fork out massive amounts of investment into the US for what may turn out to be a lost cause.
With Canada and the EU lining up retaliatory measures, it seems no one wants to be the first to act. One forwarder said the “reality” was that the true impact on supply chains would not be “seen for months”, when the higher costs should begin to filter through.
“Inflation will be the next phase, which will put a strain and different sentiment on the situation and decisions made by the Trump administration version 2.0,” they continued.
“Deals will be done along the way and capitulation throughout by most governments involved will inevitably change today’s landscape.”
