The global trade system has already started planning for potential Trump win, new China tariffs
- Logistics companies interviewed by CNBC at a recent logistics conference say they are already handicapping how much a Trump win would cost in the form of added tariffs, from 60% on Chinese goods to 10% overall tariffs on imports.
- Donald Trump said on CNBC on Monday morning said he is ready to ratchet up the trade war, and target the Chinese auto industry, which reportedly looking to use Mexico as a car export gateway.
- More Chinese trade bound for the U.S. is already coming into Mexico ports to avoid tariffs implemented under Trump and Biden, with15% of Chinese goods arriving into Mexico in 2023.
- U.S. retailers want to use Mexico as a port of entry for more U.S. bound goods to avoid tariffs in the future.
Global logistics companies tell CNBC they have started the planning for a potential Trump win in November and the strategies that will be needed to mitigate any additional tariffs, with Mexico a key import gateway for any escalation in the trade war against China begun under Trump and continued during the Biden presidency.
The planning started after the former president said in February he was considering a plan to impose tariffs of 60% or higher on Chinese goods as well as a blanket 10% tariff on all U.S. imports in his potential second term.
In a CNBC “Squawk Box” appearance on Monday morning, Trump escalated his trade war rhetoric, saying “I’m a big believer in tariffs,” and indicated that he’s likely to implement more duties on foreign goods should he win election to a second term.The Trump administration used delegated authorities under three trade laws to unilaterally levy tariffs without Congressional approval. The current range of the tariffs on a wide variety of U.S. imports today is between 10% and 25%.
Niki Frank, CEO OF DHL Asia, said in an interview last week at the TPM conference in Long Beach, California, that diversification of the supply chain away from China will ramp up if more tariffs are levied.
“I think it will accelerate the current movement of de-risking and diversifying away from China into other countries,” Frank said. “A 60% tariff will make it more attractive to move to other places,” he added. The Trump administration tariffs kickstarted a shift in supply chain strategy which, according to Frank, became more well-developed by customers during Covid, when they contemplated moving factories and production out of China.
He expects any increase in tariffs during a second Trump presidency to lead to a greater shift in trade from China to Mexico to avoid the tariffs. That’s already happening, with 15% of China’s trade bound for the United States crossing the Mexican border as a result of Chinese companies setting up shop in Mexico or using Mexican ports. The additional containers of Chinese freight avoiding the tariffs is adding to the bottom lines of both trucks and rail companies, a boom for railroad Union Pacific which is the only Class I railroad that serves all six major gateways to Mexico. It also connects with the two largest railroads operating in Mexico: Ferromex and Canadian Pacific Kansas City