As the U.S.- China trade war marches forward, its impact is being felt by supply chains across the country and around the world.
The Tariff Timeline
Earlier this month, trade talks between the U.S. and China broke down, pushing President Trump to announce an increase on tariffs to 25% (up from 10%) on $200-billion in Chinese products. June 1st, 2019 has been announced as the date the new tariffs will take effect. Goods on the water arriving before June 1st will not be subject to the increase.
This new round of tariffs comes on the heels of several hikes since January, 2018. For a recap, see the chart below:
The tariffs will impact a wide variety of consumer goods, including; clothing, electronics, luggage, food, and household cleaning products. And while tariff hikes will ultimately mean higher prices to consumers, the greater impact to the transportation industry will be less visible to consumers, but will weigh heavy on the shoulders of supply chain professionals.
The Transportation Impact
Goods arriving from China typically do so by way of cargo containers delivered to the West coast. The Port of Los Angeles is the largest container port in the U.S. and has already felt the impact of the tariffs, stating that over 15% of all the cargo it handles could be affected.
The Port of Los Angeles is one of the more visible areas of the transportation industry, but the trickle-down effect of these increased tariffs impact all modes of transportation and transportation logistics.
Higher tariffs mean less shipments from China, but consumer demand for goods will force manufacturers to look elsewhere for the production of these goods. This means tighter short-term capacity, higher supply chain costs, and longer wait times for deliveries. Higher tariffs have also forced shippers to overstock inventory in domestic warehouses ahead of tariff hikes. This has placed domestic warehousing space at a premium over the last year, causing rate hikes in that arm of the transportation logistics supply chain.
Now, with continuing consumer demand thanks to s strong U.S. economy (retail sales hit $514 billion in March,) those inventories are starting to diminish, forcing businesses to seek production at home or elsewhere.
As larger companies like Walmart look for production outside of China, domestic shipping lanes and patterns will also need to shift. Where carriers on the West coast were adding to their fleets to meet demand a year ago, they are now faced with excess capacity. Fleets on the East coast are now looking for ways to meet increased demand to move shipments from the Atlantic and great lakes.
What it Means for You
By taking the time to understand how these new tariffs are impacting the transportation logistics branch of the supply chain, your organization and supply chain professionals can look to new suppliers, carriers, and warehouses who will be best equipped to meet your needs.
As a leading 3PL in the Great Lakes region, Amware is well-suited to help you leverage their relationships with the majority of the national freight carriers. Additionally, Amware can help absorb some of these increased costs to the supply chain by helping you consolidate your warehousing and LTL/FTL transportation costs.
During a down stock market, smart people look for ways to capitalize and find opportunities to invest when prices are low. Such is the case in today’s transportation logistics space. By working with the 3PL professionals at Amware, you’ll be able to mitigate your risk by being proactive. With the help of Amrate, your transportation costs may look more competitive today than they have in a long time.
For a free trial of Amrate, click below. Or contact us today to learn more about how your company can stay ahead of the curve.