Following the inauguration of a new U.S. administration, President Trump directed his federal agencies to conduct several trade-related reviews and investigations, putting his administration down the path for potentially implementing new or modified tariffs.
Read also: Resilience in Uncertainty: How Businesses Can Prepare for Potential Tariffs
Changes related to higher tariffs on Chinese imports, a universal tariff on all imports, and a suggested 25% tariff on Canada and Mexico are only under discussion at this point and have not entered the formal written policy process. Nevertheless, given the administration is familiar with the process, this could presumably accelerate the typical timeframe if these tariffs, or others, were to move into the formal written process.
As a result, shippers can begin scenario planning now to minimize the impact of any potential new tariffs. At C.H. Robinson, we have deep experience dealing with tariffs and trade policy changes. Already, we’ve had extensive conversations with customers about the possibility of new tariffs. Some of the most pressing topics that have come up in our conversations include:
1. The timing of new tariffs.
This is the number one question our customers are asking, and it’s top of mind for everyone as we await the administration’s next move.
Historically, tariffs take months to implement through administrative action. However, the process could be accelerated if the administration uses the International Emergency Economic Powers Act (IEEPA). Going this route would be uncharted territory because IEEPA has never been used to impose tariffs. Yet, it can’t be ignored because the administration has indicated it’s considering this as an option.
Given the uncertainty surrounding potential tariffs, it’s crucial for shippers to prepare for various scenarios. With a century of experience in Canada and 35 years in Mexico, and managing 1 in 10 of all truckload border crossings from Mexico into the U.S., we’ve had numerous meetings with customers to assess the risks if tariffs are imposed on Canada and Mexico. Conducting similar assessments within your own operations can help you understand the impacts at different rates and identify opportunities to enhance agility and diversify your supply chain.
2. If freight should be front-loaded.
Front-loading freight can be an effective way to gain more control of a supply chain and get ahead of risks like tariffs and disruptive events. We saw this following last October’s East and Gulf Coast port strike, and some companies already using front-loading to mitigate the risks of tariffs before the new U.S. administration took office. One customer in the healthcare industry worked with us to front-load specific inventory before the end of 2024 to get in front of possible tariffs, turning one of its lighter import months into one of its busiest.
It’s important to remember that front-loading is not a quick or easy activity. Ocean is the main mode used for front-loading freight because it’s less expensive than air, and it requires months of planning.
Front-loading is a trend we expect to continue as shippers seek greater control over their supply chains, but it’s not the right move for every company. Factors like production ramp-up and storage costs need to be considered. It is essential to evaluate your entire supply chain to determine if front-loading is the best strategy for risk mitigation. C.H. Robinson Managed Solutions, which combines 3PL and 4PL solutions is helping shippers achieve that end-to-end visibility, enabling them to develop strategic solutions for mitigating disruptions, with front-loading being one potential component.
3. How tariffs may impact free-trade agreements.
The U.S.-Mexico-Canada (USMCA) Free Trade Agreement signed during President Trump’s first administration included a commitment to keeping products with zero tariffs at zero tariffs. As a result, if the proposed 25% tariff on Canada and Mexico goes through, it could violate USMCA.
However, the administration may claim the border-security issues that it’s using as the basis for making the tariffs allowable under the USMCA’s Article 32.2. The article says a USMCA party can implement measures that it deems necessary for the “protection of its own essential security interests.”
What does this all mean for shippers? It’s hard to say as it’s not known how the policy would be written, or if it will be imposed at all. If tariffs are imposed on Mexico and Canada, it could lead to a variety of responses, like a months-long dispute settlement process, retaliatory actions, or withdrawal from the USMCA, which would likely not be immediate as the agreement notes a 10-year sunset clause.
USMCA is one of many free-trade agreements (FTAs) that the U.S. currently has. If a tariff is placed on a country with a current FTA in place, or a universal tariff is implemented, it’s imperative you stay close to your customs broker to understand the exact language in the trade policy to determine if it impacts your freight, and what actions, if any, may be necessary.
4. The need for diversification.
In today’s uncertain shipping environment, shippers are looking for ways to reduce their susceptibility to events that impact logistics but are out of their control. By diversifying their supply chains, shippers can gain something they don’t always have when disruptions and policy changes strike – options.
If a universal tariff is implemented, it will likely spark negotiations that aim to end the tariff as soon as possible. This means that the “China plus one” strategy that many companies have adopted will remain valid. Still, companies should consider using sourcing analytics tools to see if there are opportunities to switch to suppliers in countries that have more preferential trade agreements.
