Due to the recent presidential election, the number of Google searches for the word “tariff” has skyrocketed exponentially. Before his win in November, President-elect Trump promised that he would be placing tariffs, or taxes on imported goods, on products from China, Mexico, and Canada. With a possible 25% tax on goods from U.S. neighbors, Mexico and Canada, and a 10% tariff on goods from China, many American consumers are concerned about how much their budgets will have to increase to cover these costs. However, the average U.S. buyer is not the only one who has concerns. The trucking industry has already begun to brace for these price increases in various ways. Today’s LZBlog brings our readers more on this below.
“The Tax Man’s Taken All My Dough…”
While tariffs may seem like a new idea to those not well acquainted with history, they are, in actuality, an extremely old method of trying to boost domestic production and to keep domestic dollars at home. How old of a method is it? In America, there is the famous tale of Sam Adams and his band of friends that threw cases of British tea into Boston Harbor to protest the import taxes that the English placed on them in order to fund the defense of their American colonies. Tariffs are truly nothing new.
This isn’t even the first time that this particular incoming president has imposed tariffs. “In 2018, the Trump administration imposed tariffs on $250 billion in Chinese goods coming into the U.S., covering items such as microwaves and other home appliances, electronic components, and pumping and valve systems.” At that time, China hit back with their own tariffs on American products, such as soy beans. Mexico, facing similar import taxes on products, added their own tariffs to American steel. This is a standard operating procedure for countries arguing over import taxes. However, many millennials and the generations that come after are unused to seeing this due to acts like NAFTA, the North American Free Trade Agreement that came about during the Clinton administration. Younger Americans have been reaping the benefits of a global economy for decades, and it will be a huge change for them, should tariffs be imposed on day one of the new presidential administration.
When it comes to the trucking industry, experts are rightly concerned. In 2023, it was estimated that 11% of America’s gross domestic product was imported, adding up to over $3 million in goods shipped into the U.S. These products were taken off of the docks and driven to their intended destination by truck drivers. The most affected items are “lower-cost or cost-sensitive goods that are frequently manufactured out of China and where suppliers or some subset of manufacturers have not yet diversified that supply chain out of China…” While some suppliers have started to shift their supply chains out of China and into other Asian countries, such as India and Vietnam, there are still many retailers feeling the pressure from the potential tariffs on Chinese products.
There is a concern that small and medium-sized businesses will be hit hard, and, with them, the trucking industry. With some of them still reeling from the ups and downs of the pandemic-driven market, recovery has been extremely slow. Whether they are retail companies or trucking and transportation companies, these businesses will be forced to weather the $78 billion losses in American spending power. Not all of the small and medium-sized businesses will make it through these difficult times.
So, What Happens Next?
No one knows for sure what will happen first when President-elect Trump takes office in January. Experts, such as those at FreightWaves, have been looking into the potential of both short-term and long-term impacts of the proposed tariffs. They have found that some shippers have been ordering and stocking record numbers of imports, trying to get in as much as possible before the import taxes take effect. While this has spurred an increased trade deficit, it hasn’t done anything to help the trucking industry, which is still suffering the effects of the Great Freight Recession. According to FreightWaves, trucking companies are “yet unable to satisfy the tremendous glut of capacity that has survived in the market.” With consumers tightening their purse strings, trucking and logistics companies are finding that rates for transporting goods are looking at a great deal of supply, with very little demand. There is hope that the trucking industry will see an increase in the demand of the transportation of goods between the U.S. and their largest trading partners, Canada and Mexico, before inauguration day, particularly in the automotive industry. Not only do consumer vehicles travel back and forth across the northern and southern borders, but trucking companies themselves depend on cross-border factories for their semi-truck components. “A major portion of Class 8 production for the U.S. market occurs in Mexico,” and companies like Daimler Truck North America are preparing to make the shift to manufacturing their parts in American plants. However, these changes take time, and there is no estimate for how long it will take Daimler to make the moves necessary.
As for the long-term effects of these tariffs, many experts believe that cross-border freight volumes will dwindle, as well as see significant disruptions. For trucking companies, many will become “more uncertain as companies reassess their strategies to mitigate rising costs.” If Canada and Mexico decide to impose retaliatory tariffs, there is fear of a never ending loop of import taxes as these countries go head to head. There is even concern that the USMCA, which is the United States-Mexico-Canada-Agreement and the agreement that replaced NAFTA, will be in jeopardy. This means that the streamlined cross-border trade that relies heavily on the trucking industry could be in distress for years to come.
Trucking companies can attempt to make preparations for the coming tariffs. Some experts are seeing diversification as the key, and they are trying to switch to domestic freight opportunities as quickly as possible. With the large amounts of overstocked retail items, this can help some trucking companies minimize the effects of tariff-related volatility in the market for a short time. FreightWaves believes that this “volatility in global trade is likely to be a constant” for the foreseeable future, and the only way to ride it out will be with “having a highly agile supply chain and starting to be able to evaluate what makes sense to move to a China-plus-one strategy, or to be able to onshore” or bring the manufacturing and production of goods to American soil.
Conclusion
While the coming of a new year usually rings in lots of positive hopes and thoughts, the trucking industry is looking warily towards 2025. The incoming presidential administration is pushing the highest tariffs since World War II in the hopes of stemming the tide of illegal immigration and mitigate the ever-increasing drug trade in the U.S. However, studies by experts such as the National Bureau of Economic Research claim that these tariffs will have the opposite effect. In fact, retaliatory import taxes could lead to a decline in the number of available jobs as well as the increase in prices of goods and products. These issues could lead to more upheaval within the trucking industry, and no one is excited about that prospect. As usual, the LZBlog will be following this, and we will continue to update our research and blogs as we move forward into 2025.
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Meaghan Goldberg covers recruitment and digital marketing for Lionzone. A Patterson, GA native, after graduating from both Valdosta State University and Middle Tennessee State University, Meaghan joined Lionzone in 2018 as a digital recruitment strategist before becoming the social media manager.
Resources:
https://www.freightwaves.com/news/freight-markets-brace-for-impact-of-proposed-tariffs
https://www.truckinginfo.com/10232141/what-would-trumps-north-american-tariffs-mean-for-trucking
https://tlimagazine.com/news/north-american-truckers-face-new-challenges-with-trumps-tariffs/
