Check Call: Tariffs finally arrive in US supply chains
In this edition: Breaking down the impact of tariffs on U.S. supply chains and a new project44 and SONAR partnership. The post Check Call: Tariffs finally arrive in US supply chains appeared first on FreightWaves.
The day that seemed it would never come has arrived: Tariff Day. As of Tuesday morning, 25% tariffs are imposed on most goods flowing into the U.S. from Mexico and Canada. As of right now, the only exception is Canadian energy, which is facing a 10% tariff.
Tariffs were originally supposed to start in February, but the leaders of Mexico and Canada were able to negotiate a 30-day pause as they strengthened their border presence to crack down on fentanyl coming into the U.S.
In February, the 10% tariff on Chinese imports went into effect, and as of Tuesday, an additional 10% has been added for a grand total of 20%.
While this is expected to add roughly $1,200 in costs to consumers annually, it stands to wreak havoc on certain industries more than others.
The automotive industry could be crippled, as many car manufacturers have expanded operations throughout North America. Vehicles and their components cross between Canada, the U.S. and Mexico multiple times during the production process. Ford CEO Jim Farley warned last month that the threat of the tariffs was creating chaos in the auto industry and could have devastating consequences for American automakers.
The aluminium industry is expected to take a hit as two-thirds of the primary aluminum used each year in the U.S. comes from Canada. U.S. smelters cannot keep up with the demand for domestic aluminum.
Automotive and aluminium aren’t the only sectors expected to take a hit. Tariffs will hurt consumer packaged goods companies and the agricultural sector significantly. A large amount of produce is grown for the U.S. in Mexico, and with the rising costs of imports, grocery prices will increase and there could be shortages in stores before the domestic produce season gets underway.
In response to the tariffs levied against them, Canada and Mexico have promised to impose similar tariffs. Mexican President Claudia Sheinbaum has not announced the actual amount yet and says she is continuing to explore a negotiated solution. Canadian Prime Minister Justin Trudeau retaliated with tariffs on $30 billion worth of American goods immediately and promised an additional $125 billion in products from the U.S. will face levies in three weeks.
As shippers consider this “new normal,” some will struggle to adapt and others will find the rising costs unsustainable. If most of a shipper’s revenue comes from automotive manufacturers, it might be time to diversify to avoid the crash that could strike an entire industry.
Market Check. Raleigh, North Carolina, has experienced a noticeable tightening in freight capacity the past few weeks, with outbound tender rejection rates climbing to 9.01%, marking a 2.1% week-over-week increase. While capacity is still available, securing trucks for outbound loads is becoming more challenging. Most outbound lanes are starting to see rate increases as carriers gain more pricing power due to tightening conditions.
As rejection rates rise, shippers can expect increased disruptions to their routing guides, which means secondary carriers are going to see some more volumes. Increasing lead times, diversifying the carrier base and strengthening relationships with core carriers will also be critical in maintaining service consistency.
Who’s with whom. Project44 has a new freight procurement analytics solution in partnership with SONAR. The partnership provides shippers with contract benchmarking, procurement optimization and visibility into carrier rates.
“As freight capacity shifts and cost pressures rise, outdated, manual RFP processes are no longer sustainable. Many shippers still manage procurement over email — an inefficient method that no longer meets today’s fast-paced market demands. Having experienced these challenges firsthand as a broker, I know how critical it is to have the right technology to solve them and we now can through this partnership,” Jett McCandless, founder and CEO of project44, told FreightWaves in an email.
“This integration between SONAR and project44 delivers our mutual customers a seamless way to access high-frequency supply chain market data within their existing workflows. … By combining SONAR’s data-driven insights along with project44’s advanced technology, we are enabling continuous procurement for organizations that ship goods all over the world,” said Nick Persin, director of strategic partnerships at SONAR.
The more you know
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The post Check Call: Tariffs finally arrive in US supply chains appeared first on FreightWaves.
