President Donald Trump’s tariffs on China and those threatened against Mexico and Canada may slow freight markets and shift supply chains to Vietnam, Taiwan and India, according to a panel of SONAR market experts.
SONAR’s Zach Strickland, director of freight market intelligence; Tony Mulvey, senior analyst, economics and transportation; and Mike Baudendistel, head of intermodal solutions, hosted a webinar on Tuesday titled “Navigating the Trump Administration’s Tariff Policies: A Roundtable Discussion.”
Trump’s tariff policy centers around stopping illegal immigration and fentanyl from entering the United States, along with his America First trade policy, which emphasizes tariffs as a cornerstone of the administration’s strategy.
Baudendistel said it’s unclear whether the tariffs, especially the 10% tariffs against China, will force more shippers to shift their supply chains away from China to new countries.
“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,” Baudendistel said. “I don’t think that 10% is going to move the needle. Now Trump did say that’s maybe the precursor to a much more significant tariff. You do have to keep that in mind. But another thing that we’ve seen over the last several years is there’s been a gain elsewhere in Southeast Asia, places like Taiwan and Vietnam, an increase in manufacturing there that has exceeded the growth rate in China. We’ve seen a lot more growth in Taiwan and Vietnam, and a lot of companies just really want to reduce their exposure to China, because there’s just more geopolitical risk there.”
There has also been a migration of some companies from China to India, highlighted by the growth of inbound freight containers to the U.S. from that country, according to Strickland and Baudendistel.
“Apple is trying to not have all of its production in China and have some of it in India,” Baudendistel said. “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. … I think India is a good place to do that.”
Trump signed an executive order Saturday putting 25% tariffs on imports from Canada and Mexico, while Chinese products face an additional 10% tariff. Canadian energy imports will only be tariffed at 10%. However, authorities in Mexico and Canada reached agreements with Trump on Monday to postpone tariffs on their countries’ imports for one month.
The 10% tariff on all goods from China went into effect at 12:01 a.m. EST on Tuesday. Trump also banned all low-value, e-commerce parcels from receiving duty-free benefits under the de minimis entry program.
Strickland questioned whether U.S. companies have prepared for the potential impact of Trump’s tariffs by pulling forward their freight by months to stay ahead of disruptions.
“Do you think that any of this initial disruption is going to potentially have an upward pressure on Inbound Ocean TEUs Index moving forward throughout the rest of the year, or do you think that we’ve kind of already had enough pull forward to where shippers are relatively comfortable?” Strickland asked.
SONAR’s IOTI index represents the daily volume of twenty-foot equivalent unit (TEU) volumes being booked with ocean container lines for a specific country of origin or a specific port within a country of origin.
The IOTI.USA index shows that current container movements to the U.S. from Asia, Europe and other parts of the world are higher than during the same period in 2024 but below COVID years in 2021 and 2022.
“I do think we’ve had a lot of pull forward,” Baudendistel said. “If you look at IOTI.USA and just concentrate on the Port of Los Angeles, they’ve been hitting new records for a number of months in a row, trending 15% or 20% above where they typically would be. Some of that was avoiding the potential longshoremen strike situation. But a lot of it also seems to have been a pull forward.”
The U.S. imports a variety of commodities from Canada and Mexico that could be affected if Trump’s tariffs were to go into effect in March.
“About 28% of the overall value that comes from China is through electronics and 18% from appliances,” Strickland said. “From Mexico, 26% of the value was automotive, equipment and parts, another 17% from electronics, and 17% appliances. With Canada, a third of it was oil, and then 12%, coming in second, was automotive.”
Mulvey said oil could be one of the imports most affected by Trump’s tariffs against Canada.
“On the Canada side, the big one is energy; we’re big importers of Canadian energy,” Mulvey said. “If you look at crude oil production in the U.S., it’s right around 13 and a half million barrels a day. The average consumption is right around 20 million barrels a day. We are going to have to offset basically 7 million barrels a day.”
For Mexico, tariffs could have an impact on imports of auto parts and fresh produce.
“The automotive sector is also big, probably bigger than Canada, with the Mexico side. That’s the largest commodity that flows back and forth. One of the other interesting ones from Mexico is fresh produce. I think that’s probably where this would have been the most impactful,” Mulvey said.
Source: https://www.freightwaves.com/news/tariffs-loom-over-freight-market-may-shift-supply-chains-sonar-experts-say
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