The tariffs the Trump administration has imposed over the last year as well as additional tariffs that may be in the future, are a hot button politically—and anyone who moves goods into or out of the United States should be aware of both the tariffs that have already been imposed as well as the potential for new tariffs in the future.
Steel and Aluminum
Probably the tariff that has gotten the most attention is the 25% tariff on steel and 10% tariff on aluminum that went into effect in spring of 2018. Here are some things to note about these tariffs:
- Over two thirds of the steel used in the United States is manufactured in the United States;
- The biggest suppliers of imported steel are Canada, Brazil, South Korea and Mexico. China comes in a distant fifth, supplying just 2% of U.S. steel;
- South Korea, which supplies about 10% of the steel imported into the United States, has been granted a permanent exception from the tariffs, as has Brazil, which supplies about 13% of imported U.S. steel;
- Canada is the largest supplier of steel to the U.S., accounting for about 16% of imported steel. Mexico accounts for 9% of steel imports to the U.S.
- Steel and aluminum only account for about 2% of global trade.
In spite of its high profile, the steel and aluminum tariffs won’t likely have a major direct impact on the shipping industry as a whole, but could impact specific importers/exporters and their partners. The tariffs could have ripple effects: Key American trading partners like the EU and Canada have already announced retaliatory tariffs.
Washing Machines and Solar Panels
Another major Trump tariff would make all imported washing machines and solar panels subject to a tariff of between 20% and 50%. Here’s some things to know about this tariff:
- The top suppliers of imported washing machines in the United States are China ($425 million), Mexico ($240 million) and South Korea ($130 million);
- The top companies making imported washing machines are Samsung and LG. Samsung had moved it’s primary production of washing machines for the US market to South Carolina weeks before the tariff announcement;
- China leads the world in solar panel manufacture and in supplying solar panels imported to the United States.
These tariffs will likely have a major impact on specific but fairly isolated industries, and probably won’t directly cause a major disruption in trade that would hurt the shipping industry.
For the shipping industry, perhaps the most concerning of the Trump tariffs is the tariff on goods produced in China. There are two reasons. First of all, the dollar value of the goods covered by tariffs dwarfs the value of the washing machine and solar panel imports. Secondly, the first round of tariffs was introduced in March—since then, China has retaliated with tariffs on U.S. exports and the U.S. has expanded the list of of covered goods. Here are some things to know:
- Soybeans are the biggest U.S. agricultural export to China. Part of China’s trade retaliation was to increase tariffs on soybeans, which has already led to canceled soybean shipments;
- The tariff announcements have followed a tit-for-tat pattern that makes it seem likely to continue escalating.
Of all the currently announced tariffs, the tariffs on Chinese goods should concern the shipping industry the most. It has already directly caused canceled shipments, covers an enormous amount of goods and the number of covered goods has expanded rapidly and unpredictably.
What are the conclusions for the logistics industry?
For companies that rely on imported goods or on the export market, new tariffs will mean reevaluating sourcing decisions, price points and customer relationships. It might mean less international trade, which will squeeze the shipping industry but could also lead to lower freight charges.
Regardless, a shifting tariff structure introduces more complexity into an already complex system, making things like expert customs’ assistance and real-time ETA visibility even more essential.