Triple Threat: U.S. Importers Brace for Tariffs, Strikes, and Rate Spikes This Lunar New Year

If there is a strike after the January 15th negotiation deadline expires, U.S. importers know President Biden will not invoke the Taft-Hartley Act to end the strike. President-elect Trump said during the strike there was understanding and support for the dockworkers. Trump said the dockworkers were being “decimated” by inflation. No information is available on whether President-Elect Trump would invoke Taft-Hartley after he is sworn in on January 20th. The last strike was three days but took weeks to clear out.

The other unknown with the incoming administration is the tariffs.

Some believe the tariffs can be used as a negotiation tool with countries, and there are others who think he intends to fully implement them. But if they are applied, Kelly Ann Shaw, former senior trade adviser to President Trump who was involved in the implementation of tariffs during the first Administration, tells gCaptain, “Legally you could impose tariffs overnight but practically it makes more sense to give Customs and Border Protection time to update the Harmonized Tariff Schedule (HTS) and notify importers, particularly those that have products on the water that could be subject to higher tariffs on entry. During the first Trump Administration, tariffs didn’t go into effect for another week or two following the announcement of new tariffs or a new proclamation.”

Some companies have received calls to get ready for tariff frontloading, but the challenge for shippers is how much product to bring in with a customer who is not buying gangbusters. They do not want to get burned and bring in too much product that sits and collects dust in pricey warehouses.  It is early to see a dramatic increase, but if there is a freight forward bonanza, expect rates to hit nosebleed prices faster than the Red Sea diversion rate run. The current spot freight rate floor for a forty-foot container is between $6k and $7k. As a result, the runup to $10k, $15k, and $20k can be quicker.

Prioritizing freight and deciding on West Coast/East Coast container ports will be critical. The congestion at the West Coast rails is blaring red according to the ITS Logistics Port Rail Ramp Index.

According to Paul Brashier, vice president of global supply chain at ITS and author of the index, “Ocean container rail traffic off the U.S. West Coast continues to be problematic as the rail infrastructure is not able to keep up with additional volumes coming into Seattle and Los Angeles. While ramp operations throughout the U.S. rail infrastructure are running smoothly, the additional dwell time at U.S. entry, coupled with earlier issues getting capacity at origin in Asia, is forcing many to dray-off, transload, and one-way truck goods further east into their supply chains.” Meanwhile, Canada’s port woes are impacting both coasts, which could add to U.S.-bound container volumes. The BC Maritime Employers Association (BCMEA) announced no agreement during the Saturday negotiation session on Sunday. Montréal Longshoremen’s Union workers are officially locked out at the Port of Montreal.

These strikes, the threat of strikes, and tariffs only compound the enormous pressure on shippers to find the right balance of inventory and cost.