Alternates exist to handle U.S. tariffs, look for them, says Xeneta

“The tariffs will shift global trade on its axis and the impact will be profound and lasting,” says Peter Sand, Chief Shipping Analyst, Xeneta. “The journey to overcome these challenges will be painful, but it must start today. If shippers have the right tools at their disposal and are willing to adopt new approaches to supply chain set ups and freight procurement, perhaps they may be all the stronger for it in the long term.” Sand sets out key considerations to tackle the challenges:

 “Carriers will tap into the fear caused by the tariffs to arrest this decline – just as they did on April 1 when spot rates increased eight percent into the U.S. East Coast and 14 percent into the U.S. West Coast. This increase will not last, so shippers must trust the data, shut out the noise, and target the right level of the market for their business needs,” says Sand. The dust is yet to settle and the sheer scale of the tariff schedule means it will take some time to fully assess the implications on individual supply chains, the update added. Sand says: “Whether you are exploring new trade routes, moving volumes between service providers or shifting manufacturing set ups, this will take time and you do not want to lock into a contract today that limits your options down the line. This means the T&Cs you agree to in your next long-term freight contract are just as important as the rate. For example, you can insert clauses to trigger renegotiation against agreed market movements.” Tariffs are a game of compliance, which means getting creative in your supply chains…Sand says: “It is no longer enough to have freight rates from Shanghai to New York. You must have access to data across all the world’s major and secondary trades so you can build a global map of alternative routes. Future supply chains will need to be more dynamic than they have ever been before if businesses are to react effectively to these evolving threats.” If businesses are ready to utilise new supply chain routes, they must also consider factors such as port infrastructure, available capacity on those services, schedule reliability and the spread of rates offered by carriers, the update added…Sand says: “Diversifying supply chains may take you to regions or ports you are unfamiliar with or service providers you haven’t worked with before. For example, another option to ship goods into the U.S. West Coast could be via Peru on the South America West Coast – and we can see the geo-political games at play in this region. “China hasn’t been sitting on its hands waiting around for the tariffs – they have been working to protect interests and Chancay Port in Peru is one such example. The port is majority owned by COSCO – the Chinese state shipping enterprise – in an effort to strengthen the nation’s maritime footprint globally. “Whether this is a positive or negative for shippers sending cargo into this port for onward transport is open to further debate, but clearly it will be used as a pawn in the U.S.-China trade war and therefore something shippers should be aware of before making any commitments.”

Trade will fight back and it will eventually find a way to overcome any barriers put in its way. It always does, the update added.