Effective supply chain management hinges on a stable trade environment.
So what happens when long-standing trade agreements are revamped?
Since taking office in January 2025, the Trump Administration has dangled the prospect of higher tariffs on its key trading partners, China, Mexico, and Canada. And that’s on top of a potential 10-60% blanket tariff on all US imports.
Whether or not those will come to pass remains to be seen, but one thing is certain: every stakeholder in the supply chain industry will have to contend with the new norm of inconstant trade policies.
Whether you’re a supply chain manager, logistics provider, or import-export business, you’ll want to be prepared to better navigate the challenges ahead.
The consequences of higher US tariffs
Here are some of the anticipated effects if the US pushes through with its proposed tariffs.
- Higher prices for businesses and consumers. Higher tariffs directly increase the cost of imported goods. Freight and forwarding companies might see shipment volumes decrease even as operating costs go up. Consider Australian beef exporters, for example—a 10% tariff would add about millions in yearly costs. So, businesses must either set lower profit goals or pass on the costs to consumers.
- Reduced market access and competitiveness. By design, tariffs are meant to make it hard for imported products to thrive in any market. As a result, overseas companies will often re-route shipping and look for new markets. Recovering from this massive disruption will take some time. Even if tariffs are later rolled back—a plausible scenario under the Trump Administration—the damage to supply chains may already have been done.
- Bleak economic outlook. Higher tariffs put countries and companies on defense. When there’s uncertainty in the business climate, there’s typically reduced investment, which feeds into a cycle of slower economic growth. With less demand, logistics providers will most probably face significantly lower cargo volumes.
- Additional customs hurdles. With higher tariffs come tighter customs control over imported goods—a challenging situation for anyone working in logistics. Even seemingly minor mistakes on procedures and forms might result in hefty penalties. Some companies may need to spend more on hiring tariff specialists or consultants.
- Tariffs beget more tariffs. Countries hit with higher tariffs rarely do nothing in response. Canada, Mexico, and China have already expressed their intentions to hit the US back with retaliatory tariffs. This presents a worst-case scenario: dealing with complex tariff regimes in multiple countries.
5 Tips to navigate a likely future of higher tariffs
Logistics and freight companies should take proactive measures to adapt to the rapidly evolving supply chain landscape—starting with the following.
1. Diversify supply chains
It’s time to reduce dependence on a single market or region. Your operations should spread out sourcing and manufacturing to avoid bearing the brunt of disadvantageous trade policies. Consider establishing regional supply networks to reduce cross-border movement and minimize tariff impacts. For businesses, shifting production to countries with lower tariffs is also an option.
2. Reduce operational costs and outsource
In an era of higher tariffs, identifying cost-saving opportunities can make or break your business. Streamlining team composition or entire departments will likely be needed. Outsourcing tasks like inventory management, order tracking, accounting, and customer service helps you stay competitive while ensuring cost-efficiency.
3. Lean into data-driven decisions
Real-time tracking, predictive analytics, and AI-powered logistics solutions are needed now more than ever. Harnessing data will help you forecast the potential impact of different tariff scenarios. Additionally, those insights will be invaluable for strategic decision-making.
4. Emphasize value-add services
Make your clients and partners feel that they’re getting their money’s worth working with you. You can do this by offering value-added services—which can include customs brokerage, trade consulting, and supply chain optimization services.
By providing these solutions, logistics companies can become trusted partners in a volatile trade environment. That trust can go a long way in fostering closer business relationships that won’t be easily impacted by supply chain disruptions.
5. Stay in the loop
Be informed about the latest developments in the supply chain industry—from new trade agreements and duty drawback programs to government support/incentives. A good example of this is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP, which doesn’t involve the US. Businesses within countries that are part of this free trade agreement can potentially mitigate the negative impacts of higher tariffs.
Chart through economic uncertainty with Offshore Hive
Navigating the complexities of higher tariffs require nothing less than effective supply chain management.
Streamline your operations by outsourcing to Offshore Hive. From document and shipment registration to accounting and order tracking/management, we provide cost-effective solutions that help keep your clients happy. Tell us what you need. Shoot us an email or send a message here.