Within the past couple of weeks, President Trump announced that he would be implementing a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China. Energy resources from Canada would have a 10% tariff. On Sunday, Trump said that he would impose a 25% tariff increase on all steel and aluminum imports into the U.S. on top of existing duties, and could announce a further set of reciprocal tariffs later this week.
For many, this is beginning to feel like a Tariff roller coaster ride. It seems like there have been Tariff announcements almost on a daily basis! Tariffs going up, Tariffs going down, Tariff increases on hold etc. Obviously, this is causing a great deal of concern for many business owners as well as consumers in the US.
There are many questions that folks are pondering now. For example; will these increases really come to pass? If yes, how will it impact me/my business/my bottom line? How long will these tariffs remain in place? What other changes are coming?
Unfortunately, no one has all the answers to these questions. There is only one thing that we can predict at this point and that is this- The future of Tariff increases and decreases will be continue to be uncertain for quite some time.
The most important question that businesses should be asking right now is, what are we going to do to protect ourselves from these potential ongoing fluctuations? Now is the time to build a strategy that will contribute to a company’s ability to maintain targeted sales revenues and profit margins.
Smart businesses have already been exploring this prior to President Trump being elected. After all, he had been very vocal about these plans prior to the election. We have spoken with clients that have already set up alternate sourcing plans to avoid the increased Tariffs on products shipped from China. Others have informed us that they have built up their inventories ahead of the increases.
But, these strategies might not be feasible, or even wise for some companies. For example, inventory carrying costs could be greater than increased tariffs in some cases. Alternate sourcing arrangements are not easy or inexpensive to set up. Also, the cost to manufacture and ship from a different country may also be costlier than just paying the increased tariffs.
The important thing here is to consider and analyze all of your options. Companies that want to consider alternate or diversified sourcing options need to engage with experts that have knowledge of specific country manufacturing capabilities, and boots on the ground in the geographies being considered. These industry experts can help streamline the process for setting up solid, new suppliers and help keep costs down.
Companies that are considering increasing inventory face a whole different set of challenges. Increased inventory may create the need for increased warehousing space. If a company does not currently have sufficient space for additional inventory, they may need to lease additional space, or partner with a 3PL (Third Party Logistics) provider.
Choosing the right warehouse or 3PL partner can be extremely confusing given the thousands of available options that exist in the US alone. Not all warehouses and 3PL’s are created equal. Additionally, warehouses and 3PL’s typically specialize in handling specific kinds of merchandise or materials. So, it is crucial to choose one that has experience with your particular product. Other factors to consider in choosing the right warehouse and/or 3PL partner include their location, systems integration capabilities, complexity of cost structure, and overall cost.
At this point your head might be spinning from all of the questions that you have, along with all of the issues that need to be considered to build a solid plan to mitigate potential Tariff increases. You might be just as dizzy from all of this as you are from the current Tariff roller coaster ride!
Many companies at this point simply might not know where to even start. There are a lot of questions to be answered, along with a great deal of analysis that needs to be done to help guide the right decisions. However, there is no need to be too concerned about all of this. At ICC Logistics, along with our strong strategic partnership network, we have the resources to provide a variety of logistics solutions to meet your firms every need; especially now in this time of great uncertainty. So, just reach out to us for some help and guidance- And, don’t worry- we got a guy!
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