President Trump pauses tariffs on imports from Canada and Mexico for nearly a month after negotiations between the countries. On February 1st, Trump signed an executive order to enforce a 25% tariff on cargo from Canada and Mexico. The order also includes a 10% tariff increase on goods from China. However these taxes took full effect last week. The reason behind the hikes is to pay attention to the illegal immigration and illegal importation of drugs. Trump notes, “Thousands of people are pouring through Mexico and Canada, bringing crime and drugs at levels never seen before.” While the tariff will directly affect international shipping, it will also impact moving goods domestically by truck.
What Can The Trucking Industry Expect as Trump Pauses Tariffs on Imports?
When tariff hikes happen for U.S. imports, it can directly impact trucking due to its importance in supply chains. For example, goods that arrive at ports typically rely on drayage services to move them to the final destination. Higher tariffs usually increase the likelihood of port congestion due to the higher shipment volume happening before they take place. The current pauses could still increase import volume with shippers preparing by importing before they take effect. When congestion occurs, it can lead to delays and disrupt other parts of the supply chain. Fluctuating demand may significantly impact smaller trucking companies that cannot adjust to the changes.
Another expectation for the trucking industry is that the pauses will extend the time before cost increases happen. Tariff hikes for imports typically fall on drayage carriers, which truckers tend to give to customers. Trucking companies could soon raise freight rates to compensate for potential monetary loss and optimize costs. Players in the trucking industry also fear that the tariffs may halt the post-pandemic recovery that is still ongoing. This is due to the increasing carrier costs while simultaneously decreasing freight volumes. Many trucking companies have downsized in the past years or gone bankrupt due to an inability to stay profitable.
Will The Tariffs Be Beneficial to the Trucking Industry?
While some believe the tariffs will be detrimental to the trucking industry, others think they will benefit. In particular, for domestic shipping inside the U.S. rather than importing to the U.S. by truck. As the cost of importing starts to increase, manufacturers could start to bring production back to the U.S. Finished U.S. products will still need the assistance of carriers to move the goods to the final destination by land. As the volume of sourcing in the U.S. increases, so will the demand to move cargo domestically. Carriers could soon charge higher rates for transport, meaning more profit.
Situations like tariff increases can intimidate shippers that move goods domestically or require drayage services. However, it shouldn’t stop cargo transport, but you should take the proper steps to protect your shipment. An ideal way is to talk to a freight broker. Brokers act as intermediaries between shippers and carriers and coordinate the movement of goods on behalf of the shipper. They do this by being connected to a network of trucking companies offering numerous solutions. Brokers also guide you through the process from start to finish. Reach A1 Freight Solutions at 786-375-9420 or info@a1fsinc.com to speak to a broker regarding your cargo’s movement.