Tariffs are imposed to help increase government income, protect domestic businesses from foreign competition, and to keep other countries’ business practices in check. However, new tariffs currently being imposed between China and the United States are predicted to have a serious impact on supply chain industries.
Profound fluctuations in U.S. import and export volumes are expected to emerge as a result of these tariffs, which is estimated to make the process of importing goods more expensive and complicated. The optimal means of preparing for the new tariffs is to stay informed about the latest regulations and their anticipated trajectories. Here are a few things to keep in mind about the new international trade policies and their effect on the shipping industry.
U.S. and China Tariffs Explained
After putting tariffs on an assortment of Chinese goods, the U.S. is planning to propose an additional bundle of tariffs again directed at China. Consequently, thousands of standard goods have a 15% tariff pending implementation, and over 800 more products, such as auto, industrial and medical equipment, currently have a 25% tariff.
At this point, China has responded to the tariffs with matching regulations on over $30 billion dollars’ worth of United States goods. They have implemented tariffs on a range of products, including agricultural products and automobiles.
The Impact of Tariffs on Supply Chains
The consequences of the new international trade regulations are beginning to appear. For example, there has been a notable increase in U.S. exports compared to imports. Many companies sought to make their international shipments earlier in an attempt to take preemptive action and avoid the impact of reciprocal tariffs. Take a look at a few of the ways international tariffs may affect supply chains in the future:
Tariffs implemented on only $50 billion dollars’ worth of Chinese imported products might mean a loss of over 100,000 jobs for supply chains in the U.S. These tariffs, in conjunction with those implemented by China in response, may endanger around 887,000 TEU of international container shipments encompassing approximately seven percent of container trade between China and the United States and around. 2.5 percent of the entire U.S. container volume. Demand is expected to exceed U.S. volume, which is likely to result in higher container rates.
United States exports most vulnerable to these tariffs are energy and agricultural goods. The new regulations will also impact certain states more than others. For example, the tariffs make Louisiana especially susceptible to job loss because one in six jobs in the region depends on international trade and commerce transactions.
The regulations are estimated to reduce the total economic output through the Port of Louisiana – America’s largest port – by a minimum of 7 percent.
Chinese officials have also told the United States that while the pending ban on U.S. exports including plastic materials, waste paper, car batteries, and copper hasn’t been put in place yet, this proposal may be implemented soon, which would have a major impact on shippers and carriers across the board.