The recent announcement of a trade deal between the U.S. and China has recently changed the game of international commerce. This improvement represents a drastic change in the global economic landscape. This bargain includes a 90-day suspension of high tariffs. Consequently, we should anticipate a big increase with all that freight moving over the next month and a half. This decision has received a mixed reaction from stakeholders. Retailers are relieved, but worried about the impact on prices and inventory in the fast-approaching holiday season.
Rick Muskat, a major national industry player in the shipping space, painted the disaster. His company’s first shipment through the port was slapped with a huge 145% tariff, which has since been moved to a bonded warehouse. He highlighted that the short-term relief may increase expenses. That means his firm’s costs could increase by nearly 40%. Muskat’s sentiments are echoed by countless other businesses who remain in the dark about how to operate in a new, unpredictable tariff environment.
As the pause enters its 90th day, some industry experts are projecting another surge in U.S. ocean import volumes. They project an 11% increase over last year at this time. The wrinkled 20% tariff on imports tied to fentanyl still hangs on, still targeting certain industries with tension.
Surge in Freight Shipments Expected
The trade deal has ignited optimism among small businesses and retailers who have been grappling with high tariffs that have hampered their operations. Bruce Kaminstein, an industry expert, stated that the 30% tariff for 90 days will facilitate the flow of goods again for small businesses. This decision is especially important as many are hoping to restock inventory in time for the busy holiday shopping season.
Once we know what the landscape is going to be, our supply chain is just phenomenally nimble,” added Paul Brashier. He’s got clients with thousands of these containers pre-loaded in China, ready to be shipped. I know that some sectors of the supply chain are slower moving. We’ll adjust to this new normal in no time!
While many are optimistic about increased shipments, concerns linger regarding the supply chain’s ability to keep up with demand. Stephen Edwards, CEO of the Port of Virginia, has been a scenario wrestling champion. They’re sketching out concepts of how to handle an expected wave of Chinese containers. The port’s preparedness might play a key role in reducing future backlogs and making sure deliveries arrive on time.
Impact on Prices and Inventory
So while the trade deal offers welcome relief, especially on the heels of additional positive developments, industry leaders are warning that price hikes are still likely unavoidable. Muskat pointed out that container rates would likely soar from the pent-up demand during the 90-day moratorium. Matt Priest underscored a key point of contention on behalf of our kids—children’s shoes are subjected to a whopping 97.5% duty due to current tariffs. That would be a huge benefit to consumers through improved pricing.
Companies will need to raise costs and take on some margin to succeed in this highly challenging landscape. Yet it is this combination that is critical for their success. Kaminstein cautioned the severe obstacle that owners of affected businesses are now encountering because of the erratic nature tariffs take on. The unpredictable is a killer for businesses,” he added. How do you quote 90 days out How do you project a cash flow statement.
Steve Lamar echoed the call for a long-term solution, not a series of short-term band aids. He stated, “What’s needed now is a long-term deal — not just with China but with all our trading partners — so we can predictably make long-term trade, investment, and sourcing decisions.” Today’s climate is inspiring hope for more than DMAs. They hope that this trade agreement will result in more enforceable accords.
A Mixed Bag for Businesses
Pleased as many businesses are with the final decision, there’s concern about the long-term commitment—or lack of it—expressed by the administration. As our friend Judah Levine noted, even tariffs set as high as 20% were not enough to stop shippers from frontloading shipments earlier this year. This highlights a troubling reality that even with this much-needed relief, businesses will continue to face a challenging climate of high costs and uncertainty.
Muskat shared his frustration regarding the situation: “Now we will release that inventory into our distribution center and will have absorbed all the costs involved for no good reason!” Most of the folks in our industry seem to feel this way. They’re hesitant to make deep, long-term commitments because they feel trapped by an unpredictable policy environment.