International Tariffs and the Supply Chain Industry

Throughout the past year, international tariffs being put into place by the Trump Administration have dominated global headlines – and have added to the list of considerations for many organizations that rely on commercial truck fleets. For the shipping and trucking communities alike, the international climate is in a period of uncertainty, which makes it all the more important to keep a pulse on any ongoing updates to the trade landscape.

Many in the supply chain industry, particularly commercial trucking companies, are wondering what they should know about international trade tariffs and what they should expect as a result of new tariffs that are put into place. Let’s take a look at what these tariffs are, what they mean for the commercial trucking industry, what’s on the horizon and how the right technology will be essential in the coming years.

What you need to know about tariffs

In January 2018, the U.S. imposed the first international tariffs on imported solar panels, which began a wave of new escalations in the ongoing trade dispute with China.¹ In March 2018, the Trump Administration signed proclamations imposing a 25% tariff on imported steel and a 10% tariff on imported aluminum, saying the tariffs “are designed to protect American industries.”²

Recently, as reported by AgriBusiness Global, “as part of the United States’ continuing response to China’s theft of American intellectual property and forced transfer of American technology,” the U.S. released a list of approximately $200 billion worth of Chinese imports subject to tariffs. These additional tariffs became effective on September 24, 2018 for the amount of 10%, which will increase to 25% on January 1, 2019.³ A full list of all products included in all stages of these tariffs can be found here.

As tariffs are put into place, it is critical for shippers and trucking companies alike to carefully track what products may be affected, particularly on an international shipping scale, and know the potential risks of these tariffs to their everyday operations and bottom line.

The risks of ongoing trade concerns

A shift in workforces around the country

A recent article in Heavy Duty Trucking shares a few of the perhaps-unintended consequences of tariffs, most notably on steel. When economists from the Council on Foreign Relations analyzed the data of a 25% steel tariff on auto sales, they projected that “steel tariffs will force an increase in auto prices, leading to a decrease in sales, which could result in auto-industry job losses ranging from 18,000 to 40,000 by the end of 2019 – up to nearly a third of the industry workforce.”⁴

Additionally, a number of ports have concerns about how their cargo business could be affected. The largest container port in the U.S., Los Angeles, estimated that “15% of its cargo business may be subject to levies” with the new tariffs implemented.⁵ This could also affect supply chain workforces in key ports across the country.

Increases in product costs

According to Forbes, “If President Trump continues the trade war, supply chains will be highly stressed. But even if the war cools off, other risks abound.”⁶ And while these tariffs are taxes on imported goods, they can also have a ripple effect, ultimately causing price increases on domestic products as well.⁷ Any increase in product prices, whether domestic or international, can dramatically impact businesses that rely on commercial supply chains

This potential increase in domestic prices is also coupled with the ongoing driver shortage in the trucking industry, and the fact that lower unemployment rates are leading to a more positive consumer outlook – and, by extension, an increase in the purchase of goods.⁸ This “perfect storm” of industry issues makes it critical for companies to integrate strategies to combat the potential negative impacts of tariffs into their supply chain operations.

There is hope on the horizon

However, there is good news. Although there are risks to be considered when it comes to tariffs and trade wars, FreightWaves assures the industry that both the state of trucking and the overall economy will be able to remain steady. According to Ibrahiim Bayaan, chief economist at FreightWaves, “The size of these tariffs and the goods they are being placed on are really not big enough to derail the [overall economy]; they really impact specific industries but [won’t significantly hurt] the broader macro economy. What you do worry about is how these tariffs spill over into the rest of the economy. Just thinking about how the growth of the economy is, much of it is driven by how consumers feel about the economy, how businesses feel about the economy.”⁹

Bayaan commented on another key trend in the trucking industry: tight capacity. According to The Washington Post, “About 76% of freight operators expect their volumes to continue to increase in 2018, but are struggling to meet these demands, particularly because of new electronic logging mandates and a continuing shortage of drivers.”¹⁰ Bayaan noted that as the environment continues to push rates up, shippers will begin to investigate other modes of transportation, such as intermodal or rail networks.

How telematics can help

Technology is transforming operations as businesses are looking for ways to keep themselves sustainable and profitable, particularly in the logistics space. And as commercial trucking fleets stay up-to-date with these ongoing tariff changes, it’s important to remember that the new age of business management requires that employees at every level of the business utilize technology.

From dispatcher to driver, supply chain technology helps managers and owners track where their trucks and drivers are, the status of any job or delivery, as well as driving behavior and truck maintenance histories. Despite price uncertainties caused by tariffs and other ongoing challenges brought about by the driver shortage, technology can help trucking companies keep things running smoothly and weather any disruptions caused by the current international climate. Prepare for the connected future now with the right fleet management technology.  

Sources

¹ https://www.supplychaindive.com/news/tariff-tracker-trade-war/528842/

² https://www.usatoday.com/story/news/politics/2018/03/08/trump-planning-make-formal-tariff-announcement/406065002/

³ https://www.agribusinessglobal.com/markets/trump-tariffs-on-chinese-imports-to-begin-sept-24 

⁴ https://www.truckinginfo.com/306234/on-tariffs-trade-wars-and-unintended-consequences

⁵ https://www.marketwatch.com/story/us-ports-worried-that-tariff-battle-could-hit-shipping-volume-2018-06-28

⁶ https://www.forbes.com/sites/billconerly/2018/07/28/trumps-tariffs-supply-chains-and-other-risks/#649ee1ad3bff

⁷ https://www.forbes.com/sites/billconerly/2018/07/28/trumps-tariffs-supply-chains-and-other-risks/#649ee1ad3bff

⁸ https://www.forbes.com/sites/stevebanker/2018/07/19/shippers-caused-the-truck-driver-shortage/#3d06262c64ff

⁹ https://www.freightwaves.com/news/market-insights/trucking-remains-on-course

¹⁰ https://www.washingtonpost.com/news/on-small-business/wp/2018/01/23/more-and-more-truckers-are-saying-theyre-running-out-of-capacity/?utm_term=.e1880134a4ca