Shippers react to 2024 election supply chain risks

As the dust from the U.S. presidential election settles, many executives are left wondering about the potential impact of President-Elect Trump’s trade policies on global supply chains. Throughout his campaign, Trump promised to implement significant tariff increases on Chinese imports, ranging between 60-100%.¹ Additionally, he has suggested an incremental 10-20% tariff on all other imports.

What does this mean for global supply chains?

Short-term (2-8 months)

• Inventory buy-up: Importers will likely accelerate inventory purchases on Chinese goods (similar-to what happened in 2018). This will create downstream impacts on both warehousing and freight rates.
• Warehousing capacity: Purchasing pull-ahead will increase inventory levels, likely leading to a tertiary tightening of capacity, particularly in major port markets (e.g. LA, NYC, Savannah). Temporary space may be harder to find and will likely be at premium rates. Minimal impact is expected on long-term lease costs. 
• Freight rate increase: Both international and domestic freight rates are likely to spike given an increase in volume. Ocean container rates, for example, rose more-than 70% in 2018 after Trump increased tariffs on Chinese imports.²

Long-term (1-year and beyond)

• Long-term ocean outlook: While rates may increase over the short-term, the long-term outlook is less optimistic. Trump’s high tariffs discourage imports, slowing shipment volumes and subsequently, shipping rates. 
• Global sourcing strategy: Many shippers have already made investments to diversify away from Chinese manufacturing. This is likely to accelerate given the significant tariff Trump has proposed on China specifically. Other manufacturing-heavy Asian countries, such as Vietnam, Bangladesh, and Cambodia, may be winners in this space.
• North American shake-up: Uncertainty lingers around the USMCA. This free-trade agreement between the US, Mexico, and Canada is up for renegotiation in 2026. An increase in tariffs on imports from these countries may incentivize shippers to rethink their North American sourcing strategy. Recent investments in Mexico have been significant and may slow with rising uncertainty. (For example, John Deere and Tesla have both announced pullbacks from Mexican manufacturing plans.)³

What actions can companies take? 

Sources:

1. Supply Chain Brain: https://www.supplychainbrain.com/articles/40635-huge-impacts-on-supply-chains-likely-during-next-trump-presidency
2. CNBC/Xeneta: https://www.cnbc.com/amp/2024/11/06/companies-race-to-get-imports-to-us-with-trump-win-vow-on-new-tariffs.html
3. CNBC: https://www.cnbc.com/amp/2024/11/06/companies-race-to-get-imports-to-us-with-trump-win-vow-on-new-tariffs.html
4. Investing.com: https://www.investing.com/news/stock-market-news/maersk-shares-fall-as-traders-assess-impact-of-trump-win-on-ocean-freight-rates-3704567