Trump’s Tariff Plans Could Spike Supply Chain Costs, Experts Warn

A cargo ship is sailing towards the docking of a foreign trade container terminal in Qingdao Port, Shandong province, in Qingdao, China, on June 7, 2024.
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Trump’s Proposed Tariffs Could Drive Supply Chain Inflation, Trade Experts Warn

Trade experts are raising concerns over new tariffs proposed by former President Donald Trump, warning they will likely increase inflationary pressures within the global supply chain and ultimately be paid for by consumers. During a recent presidential debate, Trump defended his plan for imposing tariffs of up to 20% on all imports and 60-100% on Chinese goods, dismissing concerns that this would lead to higher prices for American shoppers.

Historical Precedents: Rising Freight Costs

Judah Levine, head of research at Freightos, points to historical patterns. When Trump first introduced tariffs in 2018, ocean freight rates from Asia to the U.S. West Coast surged as importers rushed to move goods before the tariffs went into effect. Similar patterns emerged after the Biden administration’s announcement of new tariffs in May 2024, further fueling shipping costs.

“Shippers react to supply chain threats by accelerating imports before tariffs are implemented,” said Peter Sand, chief shipping analyst at Xeneta. “This rush raises demand and shipping costs, which are eventually passed down to consumers.”

Tariffs’ Potential Impact on the Economy

Lars Jensen, CEO of Vespucci Maritime, believes that if Trump wins the election, U.S. import volumes will increase significantly ahead of the proposed tariffs, leading to a short-term spike in freight rates. He noted that freight rates soared by 70% during Trump’s trade war with China in 2018. A similar increase could be expected if new tariffs come into play.

Supply Chain Disruptions and the Global Impact

Global supply chains are already under immense strain due to geopolitical events like the conflict in the Red Sea and potential U.S. port strikes. These challenges, along with new tariffs, could further disrupt the supply chain, with consumers bearing the brunt through increased prices and reduced product availability.

Nearshoring: A Shift in Trade Dynamics

As U.S.-China tensions escalate, many companies have turned to nearshoring to Mexico, with U.S. imports from Mexico surpassing those from China in 2023. Experts predict this trend will continue, particularly as the United States-Mexico-Canada Agreement (USMCA) approaches a crucial review in 2026.

During the debate, Trump expressed concerns about Mexican manufacturing linked to China, claiming that Chinese-owned auto plants in Mexico aim to sell cars to the U.S. without significant trade restrictions.

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