Global News Potential Trump tariffs would reset business strategy for US importers: analyst

While freight contracting for 2025 may seem a long way off for many, the factors affecting the strategy for beneficial cargo owner (BCO) freight for next year are more immediate — and potentially more exponentially disruptive.

The most immediate is the outcome of the US presidential election on Nov. 5. A Harris administration is likely to keep the status quo vis-à-vis China. A Trump administration has declared a tariff war on all countries, but particularly China. Whether this is just preelection populist bluster or not, it is reasonable for any importer in the US to plan for a scenario of tariff disruption and major unpredictability.

The most likely outcomes if a Trump administration delivers its (most recent) promise for 200% tariffs would be an unknown/unplanned increase in landed cost due to increased tariffs from a single destination. Or it could potentially be different landed-cost increases should the importer have similar or the same products sourced on a distributed basis (multiple origins). What is also unknown is the timing of any increases, whether it be across the board for all imports, whether it applies for product on the water or whether it is sourced after a certain date. Many other variations could also apply.

Importing BCOs in any of these scenarios need to involve all parts of the organization now because these outcomes (and others they will also have considered) will affect their ability to sell and compete in the US. Let me clarify: Take a scenario where a business competes with locally assembled and/or produced goods or even goods sourced from somewhere other than China. As of today, you have a likely comparative advantage as the lower-cost player. Depending on where you import from, that advantage may disappear, assuming price is the key determinant of consumer purchase decision-making (not allowing for your competitor(s) claiming “Made in the USA” to further erode your advantage). You have an existential problem and will immediately need to raise your price, even before you take any other action. You will then need to reconsider your sourcing strategy, assuming you have no domestic production. It is reasonable to assume your suppliers will have a limited margin to reduce their price; shipping is subject to major fluctuations, although you can try to smooth your imports, which will increase inventory and warehousing costs. US exporters not untouched This does not leave US exporters untouched. It is also reasonable to assume that increased tariffs on imports will prompt retaliatory action by the governments of the origin countries affected. This may mean the usual ways of suddenly discovering that US-origin products don’t meet a new, unheard of or unneeded requirement that only affects US-origin products — ranging from tariff increases or outright bans on imports (again, assuming the product is not competing domestically and is needed).

The options for the exporters are more limited but no less problematic. If the product is a traded agriculture product, then the options are to increase prices or not buy or trade at all. Alternatively, as for secondary (B2B) or final state (B2C) products, the option is to push the product to the domestic market or to other nonretaliatory international markets. The remaining option for those exporters is to stop export production. This will reduce operating expenses but increase costs, as there is less volume to spread selling, general and administrative costs and other operational fixed costs.

The industry sector that should convince the Trump administration of the folly of tariffs is the automotive sector. It is true there are many imports of foreign cars; these are for a specific consumer section that does not overly impact most of the domestic production. Raising tariffs on these vehicles may not actually reduce their demand. However, by penalizing importers, there is the risk of retaliation, which could have awful consequences for the export of automotive parts made in the US. Finally, if China is targeted, you can imagine the impact for Tesla sales in China, notwithstanding that it produces many cars locally in China.

None of these options and alternatives are viable in the long term and will do significant harm to companies and individuals/voters. Let’s hope economic sense prevails.

The other looming issue is the completion of the master contract between the International Longshoremen’s Association and the United States Maritime Alliance. It is too late now to change tack should these negotiations blow up before the Jan. 15 deadline. The only encouraging thought is volumes are usually lower in January and some inventory delays will probably not greatly affect operations, assuming importers have some degree of buffer inventory