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Global trade braces for a new Trump presidency: The world is gearing up for US President-elect Donald Trump’s potential trade war, which could see a 10 to 20% tariff on imports from all foreign countries and an additional 60 to 100% tariff on imports specifically from China, with several logistics players urged to front load their shipments ahead of any changes in tariff policy, CNBC reports. The tariffs will likely impact US retailers and manufacturers as they grapple with increased prices.
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“2018 all over again”? The frontloading of freight during Trump’s trade war on Chinese imports in 2018 drove a rise in ocean container shipping freight rates by more than 70%, but fears of a 100% tariff — compared to 25% in 2018 — is making the incentive to front load greater. “This is 2018 all over again… the calls expand beyond shippers who have Chinese imports. The global tariff threat is fueling calls for frontloading from all around the globe,” VP for global supply chain at ITS Logistics Paul Brashier said.
The impact of Trump’s proposed tariff increase will lead to “dramatic” double-digit percentage price spikes in all six retail categories, including footwear, furniture, household appliances, travel goods, toys, and clothing, according to an NRF report (pdf). The tariff hikes will “create an enormous headache” for retailers, which are prone to pass those increases on to consumers, resulting in decreased spending from already price-conscious shoppers, CNBC reports, citing comments by GlobalData managing director Neil Saunders.
Which companies will be affected? Which companies will suffer from tariff increases will depend on where their goods come from and whether they have the pricing power and popularity to force higher profit margins or raise prices. Giant retailers like Crocs, Skechers, and American Eagle Outfitters are at a higher risk because 20% or more of their goods are sourced from China, retail analyst Lorraine Hutchinson said in a Bank of America research note. On the other hand, companies that source their products from the US would be less vulnerable to the tariffs.
Countries set to be impacted the most:
- China will likely face a squeeze on its supply of cheap Iranian crude if Trump ramps up his enforcement of sanctions on Tehran, putting more pressure on its refining sector (Reuters)
- Vietnam will likely face trade volatility and potentially benefit from the increased US-China trade tensions as companies shift production there, but it may also become “collateral damage” of US protectionist measures (Reuters)
- South Korea will likely face renegotiations of a series of trade and investment agreements with the US should Trump roll back American concessions granted under President Joe Biden’s administration, and is planning on launching consultative bodies and implementing a cohesive step-by-step plan to address market volatility (Bloomberg)
