Trump’s vow in a new trade war is sending shock waves through supply chains

Retailers and manufacturing companies are increasingly calling their logistics partners, in the days leading up to the presidential election and on Election Night, about “front load” shipments ahead of changes in tariff policy that will be implemented by President-elect Donald Trump, who is campaigning. about the aggressive expansion of US tariffs on cross-border trade.

Trump has promised 10% to 20% tariffs on all imports coming into the United States and 60%-100% tariffs on Chinese imports.

“It’s 2018 again,” said Paul Brashier, vice president of global supply chain for ITS Logistics, referring to the year Trump first imposed sweeping tariffs on his first term. “Calls are expanding beyond shippers who have Chinese imports. The threat of global tariffs is fueling calls for frontloading from all over the globe,” he said.

Brashier expects Trump’s election to increase container demand and ship orders, which in turn will drive freight, trucking and warehouse rates. Truck stocks, for example JB Hunt Transport Services, Knight-Swift, Schneider Nationaland XPOis in rally mode on Wednesday, including freight rail South Norfolk and CSX.

Among many major market moves on Wednesday as traders and investors digested the Republican victory, the US dollar rose against major international currencies tied for Wednesday’s trade, such as euros and Mexican peso.

Ocean shipping stocks are fueling market fears of a trade slowdown

The reaction of the knees in the shares of the sea carrier, there was negative, with a big slump led by Maerskalthough consumer demand remains strong in the US and frontloading imports will raise sea rates, at least in the short-term. Shipping analysts described the reaction at Maersk and its peers as overwhelming. But he adds based on his belief that tariffs increase trade costs, which in turn reduce demand and volume. He noted that this was not the case in 2018 and 2019, with volumes increasing by an average of 12% over the two years. “This speaks to uncertainty, rather than impending doom,” analyst Ben Slupecki of Morningstar wrote in an email.

Lars Jensen, CEO of Vespucci Maritime, said in the short-term there is an increase in import demand for containerized goods as US companies stock up ahead of any new tariffs. “Especially related to goods that are not time sensitive, said Jensen. “This will put pressure on the price of goods in the coming months.”

According to spot ocean freight rate data tracked by ocean and air cargo intelligence platform, Xeneta, cargo frontloading during Trump’s trade war on Chinese imports in 2018 resulted in a more than 70% increase in ocean container shipping rates.

Peter Sand, chief shipping analyst at Xeneta, told CNBC that shippers will be more fearful of this latest tariff threat. “Shipping is a global industry that provides international trade, so another Trump presidency is a step in the wrong direction,” Sand said. “A knee-jerk reaction from US shippers will freeze imports before Trump can impose new tariffs.”

He added that fears of a 100% tariff increase on Chinese imports, compared to 25% in 2018, would make the incentive to frontload “greater.”

Slupecki said through an email drop on the sea carrier can give the opportunity to buy, but he hesitated to say that Maersk will profit from front-loading the election, as there are many other issues in global trade to consider. He continued to weigh the fair value on Maersk and described the decline as an overreaction. “Potential rates cause uncertainty but poor performance, as evidenced by the performance of these names during pre-2018 rates.”

A “wave of pre-orders by retailers” ahead of the new tariffs will be good for marine carriers’ earnings power, according to Jefferies analyst Omar Nokta. However, he said the overall benefits of the volume are uncertain and long-term, the issue is the potential for a significant slowdown in the volume of trade in the coming year. “The volume of global trade has increased by 2x the GDP growth rate this year, and it is likely to moderate to 1x in 2025, but it could fall below that if tariffs will affect trade patterns, which will be negative for the income of maritime operators,” he wrote.

Republican tariff policy remains difficult to predict

Trump has vowed to move quickly on tariffs, with Robert Lighthizer, a former US Trade Representative during Trump’s first term, told Wall Street money managers in recent weeks that if Trump is re-elected, he can start implementing sweeping tariff proposals quickly after taking office. according to policy analysts at Piper Sandler.

But trade experts are expressing caution when reading Trump’s current tariff threats while trying to analyze where the policy ends. Matthew Rubel, who served on the Advisory Committee for Trade Policy Negotiations for the White House and the USTR for Presidents Obama and Trump, told CNBC that he does not see global tariffs as a result. In negotiations, everything will be on the table.

“Tariffs are a tool that can be used as an offense to ensure that we can trade freely and that we can strategically build jobs in the country in the appropriate categories,” said Rubel. “Lighthizer, in Trump brought to life the policy of negotiation of strength and focus on bilateral agreements. Agreements will be made to ensure that we gain the economy. It is nuanced and not one size fits all. The Trump administration will be clear in the case of business. , “he said.

Peter Boockvar, chief investment officer of Bleakley Financial Group, said the impact of rates would depend on execution.

“It really depends on whether there will be selective tariffs on certain products/industries or whether it will be a scattershot approach that sprays all imports,” Boockvar said. “The former market can tolerate, the latter I do not believe.”

“It’s an open question whether the rate will be imposed,” Jensen said. “Trump has mentioned between 100-500% and therefore it is not known what will actually happen. But, again, it means significant uncertainty for US importers, and the only way to reduce uncertainty is to import goods in advance.

Stephen Lamar, CEO of the American Apparel and Footwear Association, said he expected Trump to announce new tariffs “within the first few days of his presidency.”

“Companies deploy several strategies to reduce the impact of inflation that will be imposed by this import tax. Unfortunately, there is no good rate mitigation strategy; the challenge is to find the least bad one,” said Lamar.

He added that bringing in products before the inauguration is one approach, but it only provides temporary relief and this surge in imports will be further complicated by upcoming cargo problems, including the threat of another strike at East Coast ports, and Lunar New. Year, two in the second half of January.

“We will work with the new Administration and Congress to ensure that the new tariffs do not add to the regressive and misogynistic burdens that hard-working Americans already feel as a result of the existing tariff structure,” Lamar said.

National Retail Federation President and CEO Matthew Shay said in an emailed statement that his group stands ready to work with President Trump and Congress. effective trade policies that will increase America’s competitive advantage in research, development and innovation, and will protect critical strategic infrastructure. “However, the adoption of tariffs between consumer goods and other non-strategic imports is a tax on American families. It will cause inflation and price increases and will cause job losses,” he added.

Mexico’s trade boom could be a target

In addition to tariffs, the future of the three-nation free trade agreement that replaced NAFTA, the USMCA, will also be the subject of renegotiations in 2026. President-elect Trump has said that he wants to renegotiate the USMCA deal created in 2020. .

A logistics company serving Mexico’s cross-border trade to the US told CNBC the new Trump tariffs could have a negative impact on historic cross-border truck trade. Through September, year-over-year cross-border trade between Mexico and the U.S. rose by about 52%, a record.

Jordan Dewart, CEO of Redwood Mexico, which specializes in cross-border logistics, said that before and immediately after the election, his company raised a lot of concerns from customers about the changes in tariffs proposed immediately that would affect goods in the north that has been processed for delivery. to the US.

“Obviously this is going to have a big impact on US and Mexican companies,” Dewart said. “With more than $2 billion crossing the border every day, even a short-term change would have huge consequences and could cause companies to outpace those changes by importing their goods first.”

He added that it would create short-term demand for storage at the US-Mexico border and could increase overall trade volume in Q4. “The short-term impact of pulling freight forward will increase freight rates, especially in Mexico, where there are fewer drivers and fuel prices have caused upward pressure,” Dewart said. “The peso, devalued 2.5% overnight, will provide some relief because most rates are negotiated in US dollars.”

The proposed tariffs will cause some companies to further delay investment in Mexico, according to Dewart, who has been expanding. Many European and Asian companies have invested heavily in Mexico as a means of trade strategy. Companies including John Deere, which has been a target of Trump, and Tesla, have announced new withdrawals from manufacturing plans in Mexico.