The supply chain is facing a double threat of new Trump tariffs and port strikes in early 2025.

• The uncertainty in the supply chain is being gamed out by shipping companies due to the expectation that President-elect Donald Trump will implement new tariffs early next year and an impasse over the use of automation at East and Gulf Coast ports with a new strike deadline looming.
• C.H. Robinson is receiving inquiries about moving freight forward in anticipation of possible Trump tariffs, according to a statement from the logistics firm to CNBC.
• According to Everstream Analytics, inventories are already increasing, and Honour Lane Shipping predicts that the supply chain pull forward may accelerate in December.

The uncertainty among U.S. shippers is intensifying as they anticipate new Trump tariffs and the possibility of a new ports strike starting in mid-January. Supply chain and logistics executives are now trying to predict the potential disruptions in the global supply chain and determine the appropriate inventory levels to order against a strong consumer market, but with macroeconomic risks and an early start to Lunar New Year, a holiday period in Asia during which manufacturing operations halt for as long as a month.

Honour Lane Shipping stated that it does not anticipate a surge in volume in November due to the need for production cycles to adjust, which may take two to three weeks. However, frontloading may begin in the first half of December. The company also mentioned that the implementation of new tariffs could be delayed, causing the frontloading to be pushed back to a later date during the first half of 2025.

According to an alert from C.H. Robinson, the earliest new tariffs could be in effect in late February or early March. As a result of continued port labor uncertainty and the potential for increased tariffs in Q1, shippers should anticipate a strategic pull-forward of inventory out of Asia, which would impact both international and certain domestic freight markets (e.g., Southern California).

Due to the possibility of an ILA strike at ports from New England to Texas starting in mid-January, shippers must now decide which coast to send freight to. The travel time for ocean freight from China to East Coast and Gulf Coast ports is 40-55 days. The negotiation deadline between the United States Maritime Alliance and the ILA is January 15. Last week, USMX announced that the ILA had walked away from negotiations after an impasse over automation issues.

"Corey Rhodes, CEO of Everstream Analytics, stated that the short duration of the extended deadline and the ongoing debate over automation are likely to result in a repeat performance in January. The question now arises as to how long the USMX will withstand ILA's demands this time around."

Rhodes stated that shippers' strategies will vary depending on their inventory management requirements. Everstream's clients include Whirlpool, AB InBev, and Danone. He emphasized that making such decisions is now a standard part of the uncertainty that the supply chain must be prepared to handle.

"Rhodes stated that he previously ran a high-tech manufacturing operation and they sourced components from other countries. They aimed to keep minimal inventory on hand but needed quick access to it. The complexity of managing this dependency was a significant challenge."

C.H. Robinson's global forwarding president, Mike Short, stated to CNBC that the logistics company is receiving numerous inquiries about moving freight ahead, but it may not be possible if suppliers are unable to increase production.

"According to Short, the reasons for front-loading are varied among the upcoming second U.S. port strike in mid-January, the Lunar New Year starting on January 29, and potential tariff changes. Some customers are trying to determine the last day their freight can leave Asia and arrive in the U.S. before the new tariffs may take effect."

The three-day ILA strike in October resulted in weeks of congestion, with 54 container ships waiting outside ports on October 4, compared to five vessels before the strike began.

"Rhodes stated that three weeks after the strike, the backlog was clearing at a slower pace than anticipated and not evenly across all affected ports. While some ports that experienced significant congestion after the three-day strike have already worked through the backlog, others are still experiencing congestion, particularly in Savannah."

If a new strike lasts for four to six weeks, companies with that amount of inventory are at risk of another supply disruption.

He emphasized that stockpiling inventory is not the only solution to navigating uncertainties, and that the cost of warehousing and expediting freight are crucial operational expenses that must be taken into account.

Organizations with the means to stock up are experiencing an increase in inventories, as shown by Everstream data.

Rhodes stated that it can be informative to observe the inventory a company holds, but he pointed out that the picture may not be complete as some companies do not take immediate ownership of freight and the bill of lading may list another shipping or logistics company as the consignee.

While China is often the focus of trade war discussions, the global supply chain and U.S. shipper dependence on other countries have grown significantly in the past 20 years, with the total value of goods imported into the U.S. increasing by 153%.

"According to Short, President-elect Trump's supply-chain-related policy agenda will focus on reducing reliance on China and other foreign manufacturing centers, which could result in higher tariffs for all imported goods and potentially significantly higher tariffs from China."

The tariffs that President-elect Trump plans to impose on Chinese imports are predicted to be between 60%-100%, while the tariffs on all other imports will be between 10%-20%. As a result, U.S. retail leaders are warning that the duties will increase prices for consumers and slow spending. CFO John David Rainey of a major retailer stated on Tuesday that the company may have to raise prices on certain items if the proposed tariffs are implemented.

In a recent note, Alix Partners advised clients that both international and domestic freight rates are expected to increase due to an increase in volume. As an example, ocean container rates rose more than 70% in 2018 following Trump's imposition of tariffs on Chinese imports.

The report stated that the long-term outlook for shipping rates may be less optimistic due to Trump's high tariffs discouraging imports and slowing shipment volumes.

According to S&P Global Market Intelligence, Trump's economic and international policies may lead to another wave of restructuring in global supply chains.

In the 12 months to Sept. 30, 2024, the U.S. trade deficit with mainland China was $287 billion, a decrease of 18.7% from 2021, but still the largest individual deficit with any country, according to an S&P Global report.

The USMCA trade deal has led to an increase in Chinese manufacturing moving to Mexico, allowing companies to enter the U.S. without paying tariffs. Trump is expected to reevaluate this provision in a second term. Additionally, companies have established operations in countries such as South Korea, Vietnam, and Malaysia, which could also face tariff actions. Vietnam's trade deficit with the U.S. increased by 30.6% in the previous 12 months compared to the 2021 level.

The trade surplus between mainland China and Vietnam increased by 25.1% in the 12-month period through September, compared to the 2021 level, according to Chinese customs data. Meanwhile, S&P Global Market Intelligence reports that China's trade surplus with Vietnam rose to $11 billion, while the U.S. had a trade deficit with Vietnam of $28 billion. S&P Global warns of increased trade risks related to Vietnam due to its relationship with China.