It’s hard to keep up with news on the Trump administration tariffs. Here is what I think is the latest:
After a month reprieve, new 25% tariffs on imports from our former NAFTA partners Mexico and Canada are now scheduled to start in March.
Also in March, there will be another 10% layer of duties on Chinese imports following one that went into effect this month.
There are plans – but no action as of yet – for “reciprocal” tariffs, meaning if a country levies say a 15% tariff on some imports from the US, the US will match that with a similar tariffs on any imports from that country.
Gilmore Says.... |
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As I have noted many times, while there are a few reshoring successes anecdotally - many driven by US government incentives – there has been little change in the trade numbers
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This week, Trump also threatened to impose 25% tariffs onimports from the European Union, claiming that the economic and political bloc was formed “to screw” the US.
There are also plans to levy 25% duties on all imports of steel and aluminum, to start in mid-March.
And did you hear this one? Late last week, the US floated a proposal to levy a hefty fee on any visits to US ports by container or bulk ships that were made in China. That means a carrier such as Maersk Line, from Denmark, will have to pay the fee if it is hauling containers to the US in a Chinese-made vessel – and China leads the world in ship building. Add in the increasing use of multiple port stops on a single tour, and the cost to the carriers could be extreme.
The New York Times recently did a nice “tariffs 101” piece, which I will summarize here:
It first notes that tariffs are hardly new. Most goods imported by the US are subject to some tariff.
To determine what that duty is, importers and exporters must reference what the Times calls “a wonky system” run by the Us International Trade Commission known as the Harmonized Tariff Schedule, which determines tariff rates for different products and categories.
It’s complicated. For shoes alone, there are with over 430 different classifications based on materials and styles.
Trump is threatening to dramatically increase those values.
Who pays the tariff? Before the shoes can enter the country, the importer pays a tariff to US Customs. So that means say Walmart must pay the tariffs on the goods it imports, not the foreign country where the goods were made.
But that of course makes the cost of those goods, say made in China, more expensive, with the hopes, at least for Trump, that over time the importing company will switch to a US source (if one exists).
But in practice, there are several paths for who really pays the tariff, as provided by The Times:
Consumers: To offset higher import costs, retailers often increase prices, passing the burden on to consumers. As a result, consumers effectively pay for the tariff.
American retail and manufacturing companies: American companies and manufacturers that use imported materials face higher costs, whether they continue sourcing from China or switch to more expensive domestic suppliers.
Foreign government and companies: To maintain their competitive position in American markets, foreign manufacturers can sometimes cut their prices and accept lower profits. Alternatively, the targeted government may institute a tax rebate to help offset the tariff burden.
 American exporters: Imposing tariffs on imports can drive up the value of the US dollar, making American exports more expensive and less competitive. As a result, US exporters may suffer and indirectly pay the cost of the tariffs.
So let’s just say the situation is complex.
So will all this work as Trump envisions, and dive much sourcing back to US soil?
This comes as a mini-trend since the COVID pandemic in 2020 f more local sourcing, driven by the severe supply chain disruptions that were seen for a couple of years. But as I have noted many times, while there are a few reshoring successes anecdotally - many driven by US government incentives – there has been little change in the trade numbers, save some import volumes into the US having moved from China to countries such Vietnam and Cambodia.
During a panel discussion at the recent Manifest conference in Las Vegas, a UPS executive made the point that all this tariff change is great news for supply chain professionals, as we’ll all have to figure new strategies for how we do it after 20 years of a global model.
But there are so many questions, the most pressing being will Trump really do it, or just continue to use the tariffs as a threat to gain changes in trade numbers some other way.
But I will note a report in January from the Wall Street Journal that said in a meeting between Trump and leading CEOs, the message from Trump was clear: start making your products in the US.
I think many will listen to this.
There are absurdities, such as Trump criticizing the level of oil exports from Canada to the US earlier in the year, but then last week touting the restarting the Keystone pipeline project – designed to ship oil to the US from Canada.
Will the tariffs cause a ruinous trade war and resulting in a recession or worse? Maybe. That’s the trillion question.
So I am not sure all this means the end of global supply chain, but I believe this time there will finally have a real impact – for better or worse
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