Uncertainty Looms Over Global Supply Chain as Tariffs and Port Strike Threaten
As the new year approaches, uncertainty is growing among US shippers due to the expected implementation of new tariffs and the possibility of a ports strike in mid-January. Supply chain and logistics executives are bracing for potential disruptions to the global supply chain, which could have a significant impact on inventory management and consumer spending.
Frontloading Inventory: A Risky Business
Shippers are trying to game out the snafus that could be coming in the global supply chain, but the decision to frontload inventory is not an easy one. Honour Lane Shipping advises that production cycles take two to three weeks to adjust, and frontloading may start in the first half of December. However, the implementation of new tariffs could be delayed, pushing back the frontloading to a later date.
ILA Strike Looms Large
The negotiation deadline between the United States Maritime Alliance and the ILA is January 15, and the possibility of a strike is causing anxiety among shippers. Travel time for ocean freight from China to the East Coast and Gulf Coast ports is 40-55 days, making it a critical factor in inventory management decisions.
Managing Complexity in the Supply Chain
Corey Rhodes, CEO of Everstream Analytics, notes that making decisions in the face of uncertainty has become part of the typical supply chain experience. “Managing that complexity was kind of the name of the game,” he says. Everstream clients include Whirlpool, AB InBev, and Danone, and Rhodes advises that companies need to consider the cost of warehousing and expediting freight when making inventory decisions.
Tariffs and Trade Policies: A Game-Changer
President-elect Trump’s tariff increases on Chinese imports are expected to range between 60%-100%, and 10%-20% on all other imports. This could lead to higher prices for consumers and slow spending, according to Walmart CFO John David Rainey. Alix Partners advises clients to expect both international and domestic freight rates to spike given an increase in volume.
Rethinking Global Supply Chains
S&P Global Market Intelligence warns that Trump’s economic and international policies could bring another round of restructuring to global supply chains. The U.S. trade deficit with mainland China stood at $287 billion in the 12-month period through Sept. 30, 2024, down by 18.7% since 2021 but still the largest individual deficit with any country.
Diversifying Manufacturing
More companies are setting up shop in countries like South Korea, Vietnam, and Malaysia, which could also face tariff actions. According to Chinese customs data, mainland China’s trade surplus with Vietnam increased by 25.1% in the 12-month period through September, compared to the 2021 level. S&P Global warns of increased trade risks related to Vietnam given its relationship to China.
As the global supply chain navigates these uncertainties, one thing is clear: adaptability and flexibility will be key to surviving the coming disruptions.
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