Today, global supply chains are being forced to adapt in a market with many challenges and moving targets. During the second half of 2018, politics have taken center stage due to trade negotiations between the US and China. Fellow shippers are now trying to predict the timing of tariffs on imports and the increased costs associated with each HTS code.
Also, BCOs are educating themselves to anticipate artificial peak seasons caused by tariffs and potential labor constraints from carriers and ports. For instance, demands on US imports from China surged in anticipation of the 10 percent duty increase in September 2018. BCOs expect another surge if the 25 percent tariff ceasefire announced at the G20 summit fails to result in a US-China agreement.
Supply chains are identifying alternative vendors in duty-free countries to train and support their unique needs. Rather than overreact to tariffs, shippers must analyze the total “landed cost,” product quality, and lead time when deciding where they will source products. It will take time to change vendors, and shippers cannot uproot entire supply chains overnight.
Steamship carriers must also be able to adapt to these changes by being flexible with vessel placement and allocation. This being said, carriers will continue to closely monitor shipping data for ports exporting additional volume into the US. The question is if the US import demand from China is reduced significantly, how long will it take for carriers to react to this change?
If the trade war continues between the US and China, 2019 may be the year that changes the foundation of where supply chains originate.