Last week, the Trump Administration announced plans to hike tariffs on U.S. imports, and shippers could soon see these tariff increases impacting trucking. On President-elect Donald Trump’s first day in office, he will impose a 25% increase on importations from Canada and Mexico. He also plans to add an additional 10% tariff on imports from China. The reason for the hikes is to stop drugs and illegal migrants from entering U.S. borders through U.S. imports. Another purpose is to bring production back to the U.S., which will increase domestic purchases and stimulate the economy. While it will directly impact international shipping, the tariff increases will also affect moving cargo domestically.
How Do Tariffs Typically Impact Trucking?
Governments imposing tariff hikes impact the trucking industry directly and indirectly. The increase may immediately lead to a reduction in freight demand due to the higher cost of U.S. imports. As a result, importers could soon bring fewer goods into the U.S., which decrease the need for domestic transport. For example, drayage services rely on U.S. seaport imports, but if there is less volume, this could mean less business. Carriers could raise freight rates to compensate for potential monetary loss. The customer receiving the goods will soon feel the rise in trucking costs. Another effect is a possible disruption of supply chains that rely on outsourcing.
Shippers typically use trucking as the beginning or end of a supply chain for moving cargo internationally. Since countries like China, Mexico, and Canada are the most prominent U.S. importers, a large volume of freight will feel the tariff increases. Many companies in the U.S. could soon look for manufacturers in other countries. For truckers, this can lead to rerouting to different locations, such as from East Coast ports to West Coast ports. Adjusting to the shift in routes may not be simple for trucking companies that shippers use for timely delivery. Customers requiring their products within a short time frame could exit their long-term freight contracts with their carriers.
Trump’s Tariff Increases Impacting Trucking Positively
While higher tariffs can adversely impact trucking, there is a belief that Trump’s tariff hikes will have a positive effect. One of the primary purposes of the Trump administration’s hikes is to bring production back to the U.S. An increase in the number of companies producing goods locally could result in a greater need for domestic trucking services. Carriers may increase their rates due to the higher freight demand, leading to greater profits. Higher volumes of truckers could soon enter the market as more customers and shippers begin requiring shipping domestically. Many companies in the U.S. have already started insourcing manufacturing operations as Trump’s January 20th inauguration date approaches.
Higher importation tariffs could potentially affect domestic shipping soon, so shippers must prepare beforehand to prevent disruptions. Along with being up-to-date on the current situation, this can include coordinating with a freight broker. Brokers are the middlemen between carriers and shippers who must transport goods domestically. They manage the entire transportation process and find the best course of options for shippers to take. A1 Freight Solutions has freight brokers and other solutions to ensure the success of your shipment. Reach us at 786-375-9420 or info@a1wwl.com to speak to a broker regarding transporting your cargo anywhere in the U.S.