As President-elect Trump prepares to take office, his administration is set to implement significant changes to U.S. trade policy, with tariffs playing a significant role. His proposed tariff increases target imports from Canada, Mexico, China, and the BRIC nations, aiming to address issues such as illegal immigration, fentanyl control, and challenges to the U.S. dollar’s global dominance. These measures could have far-reaching effects on businesses, potentially raising consumer prices and disrupting supply chains. With retaliatory actions expected from affected countries, companies will need to adapt quickly to this evolving trade environment. This article outlines the key proposals, legal considerations, and potential impacts on both businesses and consumers.

What We Know…

1. Canada and Mexico Tariffs (25%):

   • The proposed 25% tariffs on all goods from Canada and Mexico are set to take effect on day one of the Trump administration (January 20, 2025).
   • These tariffs are intended to pressure Canada and Mexico to do more to control illegal drugs (like fentanyl) and undocumented immigration.
   • Tariffs will be assessed based on “country of export,” rather than “country of origin,” potentially disrupting business plans for Canadian and Mexican exporters who currently benefit from duty-free access under the US-Mexico-Canada Agreement (USMCA).

2. BRIC Nations Tariffs (Up to 100%):

   • Trump has proposed 100% tariffs on goods from the BRIC countries (Brazil, Russia, India, China, and South Africa), with the additional inclusion of Egypt, Ethiopia, Iran, and the UAE.
   • This move is motivated by concerns over these countries’ attempts to replace the U.S. dollar as the world’s reserve currency.

3. China Tariffs (Additional 10%):

   • A further 10% tariff on Chinese imports is aimed at pressuring China to control the flow of fentanyl into the U.S.
   • The tariff will apply to goods based on the “country of export” criterion, in addition to existing duties like Section 301 tariffs and antidumping duties.

Legal Basis for Tariff Increases:

• The proposed tariffs are expected to be implemented under the International Emergency Economic Powers Act (IEEPA), which allows the president to impose tariffs during a national emergency, such as those related to security, foreign policy, or the economy.
• Critics have questioned whether IEEPA is an appropriate legal basis, as it historically addresses issues like sanctions rather than tariffs. The president can invoke these tariffs immediately upon sending a report to Congress, but they can only be stopped by a joint resolution from Congress.

Export Controls:

• Under the Biden administration, the U.S. has implemented stricter export controls on advanced technology to China, particularly targeting semiconductors critical for military applications.
• In December 2024, the U.S. Department of Commerce tightened these controls, aiming to impede China’s ability to produce next-gen semiconductors, artificial intelligence, and advanced weapon systems.
• In response, China has retaliated by banning the export of key rare minerals and imposing stricter controls on graphite and other critical materials used in semiconductor chips and advanced electronics.

Mexico Border Import Loophole Closed:

For many years, U.S. companies have been importing goods from China to Mexico, then shipping them one order at a time to the U.S., effectively avoiding tariffs under the Section 321 provision. This loophole has allowed duty-free entry of shipments valued at $800 or less, making it an attractive option for e-commerce businesses looking to minimize costs.

The new decree introduces several significant changes:

• Tariff increases:

  Import duties on 121 apparel products and 17 made-up textiles have been raised from 20-25% to 35%. Additionally, 17 tariff headings related to textiles now face a 15% duty, up from 10%.

• IMMEX program restrictions:

  The decree excludes certain finished products, including clothing and textile articles classified under HTS Chapters 61, 62, and 63, from temporary importation under the IMMEX program.

• Immediate effect:

  These changes are effective immediately, affecting even goods currently in transit.

Impact on Businesses and Consumers:

• Businesses importing goods from Canada, Mexico, China, and the BRIC nations will face higher costs, which may be passed on to consumers.
• Products affected include electronics, pharmaceuticals, fresh produce, and consumer goods, with significant price hikes expected. For example, laptops and smartphones could see price increases of $350 and $200, respectively.
• American manufacturers will be hurt by higher costs for intermediate goods, reducing their competitiveness globally. Additionally, retaliatory tariffs from foreign countries could target U.S. exports, further complicating trade relations.

Mitigation Strategies for Businesses:

• Review Tariff Codes: Ensuring accurate classification can avoid unnecessary duties.
• Speak to your suppliers and clients: Work to create a framework for how things might work if any or partial tariffs are implemented.
• Have a potential US-based 3PL: Have a local US based 3PL to fulfill your products if you currently ship to the US from Canada or Mexico.
• Evaluate Customs Values: Aligning transfer pricing with CBP rules can reduce tariff exposure.
• Supply Chain Adjustments: Exploring production in regions with fewer tariff risks, such as Southeast Asia, could reduce costs.
• Use Duty Deferral Programs: Foreign Trade Zones and Bonded Warehouses can help businesses defer or eliminate duties.
• Consider Duty Drawback and Exclusions: Businesses can apply for tariff exclusions and reclaim duties on exported products.

Building a nimble and flexible supply chain requires proactive planning and strategic adjustments to mitigate tariff risks and optimize operations. By leveraging tools like duty deferral programs and aligning with regulatory frameworks, businesses can enhance resilience and maintain cost efficiency in a dynamic trade environment.

Navigating Upcoming Changes:

With tariffs set to increase significantly under the new administration, businesses must prepare for a shifting trade landscape. Proactive steps, such as reviewing supply chains, classification codes, and exploring exemptions, will be crucial to managing costs and ensuring competitiveness.

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The world shipping and logistics industry is still constantly shifting with geopolitical events, markets, and new carrier initiatives. The report focuses on trends and developments that affect trade lanes and rate movements, mainly in the Transpacific, North and South America, European and Asia-Pacific regions. The ILA strike and transit surcharges at Panama Canal, as well as macroeconomic issues like the Red Sea crisis and US-China trade disputes are key issues. Additionally, regulatory reform and logistics shifted in e-commerce are about to reshape the marketplace for 2025, creating challenges as well as opportunities for supply chain stakeholders.

MARKET WATCH

Ocean Freight

Transpacific Rate Market and Trends

1. Transpacific Rates and Market Dynamics:

   Spot rates on the Transpacific trade lanes have slightly declined from the December 15 GRI peak. Rates are projected to decrease further by the end of the month as market conditions soften post-holiday rush.

2. East Coast Port Strike Looms:

   The January 15 ILA strike on the East and Gulf Coasts remains a key concern. Political backing for dockworkers by President-elect Trump complicates negotiations between the ILA and USMX. While the strike could disrupt supply chains, shippers are rerouting cargo through the US West Coast, creating rate surges on these routes.

3. Carrier Strategy:

   Carriers continue to deploy aggressive pricing strategies and blank sailings to maintain volumes during slack season. Meanwhile, the west-to-east migration trend for cargo may resume in February, reducing pressure on West Coast ports.

North and South American Rate Trends

North America:
Rates to the West Coast climbed due to the ILA strike and blank sailings.

South America:
Mixed dynamics prevail, with rates on the North Asia-WCSA lane declining, while North Asia-ECSA rates experienced a modest increase.

Panama Canal Transit Surcharges (Effective January 1, 2025) – $40/TEU

CMA CGM: Panama Canal transit surcharge applies to Asia-USEC services.

MSC: Panama Canal surcharge applies from Southeast Asia, China, Korea, and Japan to USEC and Gulf.

These surcharges come as the Panama Canal Authority modifies its transit reservation system and tariffs. Expect a ripple effect on USEC rates as carriers pass these costs to shippers.

European & APAC Updates

1. Europe:

   Asia-Europe spot rates held steady as carriers delay long-term contract negotiations to capitalize on the FAK market.

2. APAC:

   Rates from Southeast Asia to ECNA spiked due to GRI and potential ILA disruptions, with rates to the West Coast also increasing.

Air Freight

Week 49

Spot Rates:

• Global Air Freight rates hit a 2024 high seeing an increase of 4% week over week.
• Asia Pacific lane rates rose drastically with an increase of 8% Week over Week, seeing similar increase trends for both Africa and European markets.

Yearly Trends:

• The Middle East & South Asia origins saw the highest increases in rate growth of around 62%, which was followed by Asia-Pacific and Europe origin markets at around 19% each.

Outlook for 2025

1. Market Trends:

   Red Sea Crisis: The ongoing crisis continues to absorb capacity, maintaining higher rate floors and potential schedule disruptions.
   ILA Strike: The January 15 deadline could lead to renewed supply chain challenges, particularly on USEC and Gulf Coast lanes.

2. Key Drivers:

   Overcapacity Risks: Post-crisis capacity normalization may result in overcapacity and softened rates in late 2025.
   US-China Trade Tensions: Potential tariff escalations could drive early inventory frontloading, affecting Q1-Q2 volumes.

3. Rate Projections:

   Asia-Europe: Rates are expected to stabilize post-Lunar New Year but remain elevated compared to pre-2024 levels.
   Transpacific: Anticipated rate drops after Q1, with potential GRI spikes in peak seasons.

4. E-commerce Impact:

• Growth in sea-air logistics driven by Red Sea diversions and rising B2C demand.
• Regulatory changes, such as the de minimis exemption review, may shift e-commerce volumes away from air cargo.

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The newly announced tariff regulations under the Trump administration represent a significant pivot in U.S. trade policy, with far-reaching effects on businesses and supply chains. These changes aim to promote domestic industry while potentially increasing costs and creating new challenges for importers and exporters. As the global trade landscape evolves, businesses must remain vigilant in assessing how these policies will impact their operations, from sourcing strategies to pricing models. Proactively preparing for these shifts will be essential for navigating the complexities of the new regulatory environment.

What we know…

Overview
Significant changes are being proposed to the U.S.-China trade landscape that could dramatically increase costs for goods of Chinese origin. Here’s what you need to know:

1. China 301 Tariff Increase

   • Current rates (25%) may rise to 60%, with an additional universal 20% duty.

2. Restoring Trade Fairness Act (RTFA)

   • Proposes revoking China’s Normal Trade Relations (NTR) status, shifting tariffs to higher Column 2 rates.
   • Incremental increases:
     • Non-strategic goods: 35%+ tariffs.
     • Strategic goods (e.g., electronics, machinery): Up to 100%.
   • Full implementation would occur over five years.

3. De Minimis Eligibility

   • Proposed removal of small-value shipment exemptions for Chinese goods.

4. Valuation Changes

   • The proposed RTFA introduces a new system for calculating the value of goods from China, called “United States Value.” This system requires importers to declare the price at which goods would be sold in the U.S. market at the time of importation, rather than relying on traditional transaction values. Key details include:
     • Importers must submit the “United States Value” to U.S. Customs and Border Protection (CBP) at the time of entry.
     • CBP will independently verify these declared values and report findings to the U.S. International Trade Commission (ITC).
     • If discrepancies are found, CBP will assign a revised value, potentially altering the final duty owed.
     • The implementation process and enforcement mechanisms remain unclear, raising concerns about administrative challenges and delays.

This change could introduce additional complexity and financial uncertainty for importers, emphasizing the need for diligent compliance and proactive planning.

Impact and Recommendations

1. Speak with your suppliers in advance to understand how they can help support these potential increases
2. Avoid long-term contracts with uncertain landed costs.
3. Find alternative suppliers outside of China
4. Focus on spot rate quotations for deliveries through February 2025.
5. Speak to your clients/buyers to set expectations should tariffs come into effect
6. Wait until there’s more information to make a decision on whether to import significant inventory levels ahead of the new administration. For many, inventory is expensive to finance and store so the cost of bringing products in advance could create more financial hardship than necessary.
7. Monitor developments, as changes could be implemented quickly without extended comment periods.
8. Speak to your Customs Broker.

CargoTrans is here to help you navigate these changes and minimize financial risks. Contact us for tailored advice and updates on legislation as it evolves.

Stay informed to stay ahead!

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I recently had frustrating experiences with Airbnb and our PEO provider that highlighted the pitfalls of rigid customer policies.

Airbnb Clipped My “Coupon”

When I needed to adjust a Mexico City reservation using a $500 Airbnb “coupon”, I assumed it would be simple since I was within the cancellation period. Yet, I was told the “coupon” would be entirely forfeited if I canceled. This seemed punitive, especially as I was looking to upgrade my booking. For context I was given the “coupon” after a host cancelled an earlier stay for another reservation leaving me in a compromising position – so I saw it as a concession.

I questioned why Airbnb would penalize a loyal customer (Superhost with over 200 bookings at a 4.9 rating) trying to spend more with them. Calls to customer service led to a recitation of policy over and over again like a broken record rather than any empathy, missing a chance to keep a loyal customer satisfied. I already understood the policy—I wasn’t questioning its existence, but rather how it impacted the customer. In short, I thought the policy sucked and was lobbying for an exception. Even a Guru would’ve lost their shit. I was annoyed – actually I was pissed. WTF?

The Unexpected PEO Fee

This reminded me of our own challenge at CargoTrans when our PEO raised health insurance premiums by 30% and hit us with a surprise termination fee when we sought a more affordable alternative. (approximately $10k) because the contract date didn’t align with the benefits renewal date. This policy seemed designed to catch clients off guard and add costs on the way out. I couldn’t get any other explanation for why the two dates didn’t align. The policy felt engineered to trap clients in high costs on the way out, disregarding the real impact on customers and dismissing the idea that a customer may one day return. After all, we all know how the health insurance racket in this country works. We ultimately found a solution with a 10% increase (typical increases are 3-7%).

When Policies Become Corporate Bullying

After extensive back-and-forth, I did eventually recover my Airbnb credit and waived the PEO fee. But it was a time-consuming battle that shouldn’t have been necessary. Policies are important, but they should protect companies from abuse, not penalize loyal customers navigating genuine issues.

Empathy Over Policy

At CargoTrans, we’ve learned that real customer service shines in the moments when things go wrong. Our approach is an abundance mindset, to treat policies as guides – not immovable rules, and to collaborate with customers. It’s not about saying “no” to requests—it’s about showing empathy and seeking fair solutions.

Ultimately, empathetic service creates loyal customers who return, recommend, and trust your brand. Exceptional service isn’t just a “nice-to-have”; it’s the backbone of building a brand that lasts. In moments of conflict, businesses have a unique chance to turn a potential loss into a lasting win.

Let’s make the world smaller!

-Nunzio & Anthony

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Global shipping and logistics continue to feel the impacts of heightened demand following China’s Golden Week. Carriers are implementing a General Rate Increase (GRI) on Asia-to-North America routes starting November 1, alongside increased blank sailings on the U.S. East Coast as volumes rise. The approaching U.S. election and concerns over a possible strike tied to the new ILA deadline in January could further elevate import volumes. Meanwhile, rail congestion at LA/LB ports has reached a two-year high, delaying inland transportation significantly. Trans-Atlantic rates remain stable, while rates from the Indian Subcontinent continue to decline. Elevated air cargo rates persist globally.

MARKET WATCH

Ocean Freight

Asia to North America

Following the post-Golden Week surge in shipping demand, carriers have announced a General Rate Increase (GRI) effective November 1. The US East Coast (USEC) is expected to experience a high level of blank sailing in the coming weeks. We anticipate that USEC volumes will increase further in November, as US importers aim to receive their shipments as early as possible to avoid potential disruptions from a possible strike, with the new ILA deadline set for January 15. Additionally, it’s important to consider that volumes may surge again as we approach Lunar New Year on January 29, 2025. The upcoming US election could also drive a spike in imports if Trump wins and reintroduces his tariff plans. Carriers are currently dealing with significant rolling pools caused by backlogs built up after China’s Golden Week holiday in early October. Sailings from the US West Coast (USWC) have been especially impacted, reaching high rolling levels since last week.

Rail congestion at the LA/LB

Ports hit a two-year high due to record imports in September. The average on-dock dwell time is now 10 days, while off-dock cargo is waiting up to 17 days because of a shortage of railcars and space. In extreme cases, some containers are sitting for 4-6 weeks without moving. Major inland hubs like Chicago, Dallas, and Kansas City are also facing delays due to a lack of railcars. Some carriers, including ONE and EMC, are temporarily redirecting shipments to other ports to ease the situation, with the change expected to last 7-10 days.

Europe to North America

Trans-Atlantic rates have remained stable, with only slight reductions. Carriers expect rates to hold steady through October.

Indian Subcontinent

Container freight rates from the Indian Subcontinent to the US East Coast continue to fall.

Asia to Europe

Spot rates from North Asia to Europe held steady, benefiting from carrier-led blank sailings and high ship utilization. The market is watching for potential rate increases in November as carriers test demand.

Air Freight

Asia to North America/Europe

Global air cargo rates continue to stay elevated.

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We are ready to help

We have team members ready to answer your questions.
Give us a call 516.593.5871 or chat on our website 💬

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