The global logistics and transportation industry is facing new changes as the trade war between the U.S. and China intensifies with a 10 percent tariff increase on Chinese imports. This shift in global logistics is transforming the heavy equipment and transportation sectors, fundamentally changing equipment procurement, shipping routes, and operating costs.
– Since the early 2020s, companies engaged in global trade have been navigating an increasingly uncertain environment. From product shortages, congested transportation routes, and military conflicts to political upheavals and environmental disasters, supply chains have been pushed to their limits over the past five years, says Jackson Wood, Director of Industry Strategy, Global Trade Intelligence at Descartes.
The new 10 percent import tariff affects all Chinese goods entering the U.S. market, creating a ripple effect throughout the supply chain. For transportation equipment and machinery, this means higher costs for components, spare parts, and finished products.
– What has remained constant throughout these disruptions is that it is absolutely essential to build resilience and agility into global supply chains. This includes diversifying supplier and customer relationships, identifying alternative trade routes, and potentially utilizing Foreign Trade Zones and free trade agreements to mitigate risks. The same concept applies to the new paradigm of tariffs and protectionism—companies that have prioritized resilience and agility in their global trade operations will be better positioned to succeed, notes Jackson Wood.
In practice, tariffs are taxes on goods imported from other countries. Most tariffs are set as a percentage of the value of the goods, which is generally paid by the importer. For example, if a product imported into the U.S. from China (after the 10 percent tariff is imposed) is worth $5, it will be subject to an additional charge of 0.50 cents. By raising the price of imported goods, the U.S. hopes to encourage consumers to buy cheaper domestic products instead, in order to help boost growth in the U.S. economy, protect jobs, and increase tax revenue.
