Tariffs and Freight Costs Challenge US Supply Chains

President Donald Trump’s tariffs on China, and potential tariffs on Mexico and Canada, are reshaping supply chains and freight markets. According to SONAR market experts, these policies may drive companies to shift production to Vietnam, Taiwan, and India. “I think, in and of itself, it’s not enough to make a decision of whether you’re going to have manufacturing in China or someplace else,” said Mike Baudendistel, head of intermodal solutions at SONAR.

Freight Costs Surge Amid Tariff Announcements

The recent 10% tariff on Chinese goods, effective March 19, has led to a surge in air cargo spot rates from Asia Pacific. Kathy Liu, Dimerco’s VP of global sales and marketing, noted, “Most shippers had been holding their shipping schedules since January, waiting to see any new tariff announcements from the Trump administration.”

Shippers Face Rising Costs and Limited Options

Peter Sand, Xeneta’s Chief Analyst, highlighted the challenges for US shippers: “US Shippers are being hit by wave after wave of disruption and spiraling costs to import goods.” With ocean freight rates soaring due to Red Sea conflicts, and tariffs adding to costs, businesses struggle to absorb these increases without raising consumer prices.

Potential Shifts in Supply Chains

As companies consider moving supply chains out of China, Baudendistel observed, “You’re seeing others that are going to a China-plus-one strategy — instead of having all my manufacturing in China, I want to have some in China, some in Vietnam, just in case.”

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Future Outlook for US Shippers

The delay in tariffs on Mexico offers some relief, but concerns over a renewed US-China trade war persist. Sand warned, “If China retaliates and we enter another escalating trade war, an already very bad situation will get even worse for US importers.”