Garden City Port Terminal in Savannah, Georgia.
Sean Rayford | Getty Images
Uncertainty is growing among US shippers through 2025 with the prospect of new tariffs from Trump and the possibility of a new port strike starting in mid-January. Supply chain and logistics executives tell CNBC that shippers are now trying to iron out the snafus that could hit global supply chains and how much inventory to order against a backdrop of consumer demand that is strong, but macroeconomic. Subject to risks, and an early start for the Lunar New Year, a holiday period in Asia during which manufacturing stops for a month.
In an advisory to clients, Honor Lane Shipping said it did not expect volumes to pick up in November as the production cycle took two to three weeks to adjust, but front loading could begin in the first half of December. It added that the implementation of the new tariffs could be delayed, pushing front-loading back to a later date during the first half of 2025.
According to an alert sent to clients by CH Robinson, the initial new tariffs may come into effect in late February or early March. “With continued port labor uncertainty and the prospect of tariff hikes in Q1, shippers should expect a strategic pull-forward of inventory out of Asia, leading to international and some domestic freight markets (eg, Southern California) Both will be affected,” he wrote.
But shippers must now decide which coast to send cargo to in anticipation of a possible ILA strike at ports from New England to Texas that could begin as early as mid-January. The transit time for sea freight from China to East Coast and Gulf Coast ports is 40-55 days. The deadline for negotiations between the United States Maritime Alliance and the ILA is January 15. Last week, USMX announced that the ILA had pulled out of negotiations after a stalemate over automation issues.
“Given the shortness of the extended deadline and the competition for the automation issue, it’s most likely that it will start again in January,” said Corey Rhodes, CEO of Everstream Analytics. “The question then becomes how long the USMX will hold off on giving in to the ILA’s demands this time around.”
The strategies used by shippers will vary based on inventory management needs, Rhodes said. Everstream clients include Whirlpool, AB InBev, and Danone. Making these kinds of decisions has become part of the general uncertainty that supply chains need to be prepared to face, he added.
“Before I took this job I was running a high-tech manufacturing operation and we did manufacturing through China,” Rhodes said. “We wanted to keep as little inventory on our books as possible, but needed access at short notice and were dependent on sub-components that were sourced from other countries. Managing this complexity was the name of the game. “
Mike Short, president of global forwarding at CH Robinson, told CNBC that the logistics firm is seeing a variety of inquiries about front-loading freight, but that won’t be possible if suppliers can’t ramp up production.
“For those who can and want to front-load, the reasons are split between a second U.S. port strike pending in mid-January, the Lunar New Year starting Jan. 29, and potential tariff changes,” Short said. “Others are just trying to figure out the timing — one customer asked about the last day their goods can leave Asia and arrive in the U.S. before the new tariffs potentially take effect.”
It took weeks for the congestion that followed a three-day strike by the ILA in October to subside. According to Everstream Analytics, when the strike ended on October 4, there were 54 container ships waiting outside the ports, compared to five before the strike began.
“About three weeks after the strike, we noticed that the backlog was clearing at a slower pace than expected and not uniformly across all affected ports,” Rhodes said. “While some ports that saw significant congestion after the three-day strike have already worked through the backlog, such as New York and Houston, others are still experiencing congestion, particularly Savannah.”
Rhodes said companies with four to six weeks of inventory are at risk of another supply disruption if a new strike lasts that long.
“Navigating uncertainty is about more than stockpiling inventory,” he said, adding that warehousing costs and expediting freight are key operational costs that need to be considered.
Everstream data showing inventory build-up within organizations. with storage means in anticipation of potential disruptions.
“It can be revealing to see how much inventory a company has on its books,” Rhodes said. However, he added that the picture may be incomplete as some companies do not immediately take ownership of the cargo and list another shipping or logistics company as the consignee of the freight on the bill of lading. .
Short said that while China gets most of the attention in trade war discussions, the global supply chain and the dependence of U.S. shipping on other countries has expanded over the past 20 years, with imports into the U.S. The total price of goods has increased by 153%.
“President-elect Trump has indicated that his supply chain policy agenda will center around ‘de-risking’ China and other foreign manufacturing hubs, along with renewable energy mandates,” Short said. to withdraw or terminate”. “This approach would lead to higher tariffs for all imported goods and potentially significantly higher tariffs from China.”
President-elect Trump’s tariffs on Chinese imports are expected to range between 60%-100%, and 10%-20% on all other imports. U.S. retail leaders are beginning to signal that duties will raise prices for consumers and slow spending Walmart CFO John David Rainey told CNBC on Tuesday that the retailer may have to raise prices on some items if Trump’s proposed tariffs go into effect.
Alex Partners advised clients in a recent note that international and domestic freight rates will increase due to volume growth. For example, ocean container rates rose more than 70 percent in 2018 after Trump imposed tariffs on Chinese imports.
But this price trend may only be short-term, and the long-term outlook “less optimistic,” he wrote. “Trump’s high tariffs discourage imports, reducing shipment volumes and consequently shipping rates,” the report said.
S&P Global Market Intelligence said Trump’s economic and international policies could lead to another round of restructuring of global supply chains.
The U.S. trade deficit with mainland China stood at $287 billion in the 12 months to Sept. 30, 2024, according to an S&P Global report, down 18.7 percent from 2021 but still the largest individual deficit with any country.
Chinese manufacturing moving to Mexico has surged under the terms of the Trump-negotiated USMCA trade deal, a legal gateway to the U.S. without tariffs that Trump is expected to reshape in his second term. More companies have also set up shop in countries like South Korea, Vietnam and Malaysia, which could also face tariff actions. As of September, Vietnam’s trade deficit with the U.S. was 30.6 percent higher than the 2021 level in the previous 12 months.
Compared with 2021 levels, mainland China’s trade surplus with Vietnam increased 25.1 percent in the 12 months to September, according to Chinese customs data.. According to S&P Global Market Intelligence, China’s trade surplus with Vietnam widened to $11 billion, compared with a US trade deficit with Vietnam of $28 billion. S&P Global has warned of an increase in trade risks related to Vietnam given its relationship with China.
