This week:
- US President Trump announces tariffs on Canada, Mexico, and China but pauses duties on North American trading partners
- Trump’s tariff executive orders effectively remove de minimis exemption for imports from China, causing a stir in eCommerce circles
- ILA officials begin process of ratifying USMX deal with Florida meeting planned for this week
- Shippers told to expect US LTL rate “reset” as reclassification of freight system is underway
Trump Issues Executive Orders on Tariffs; Canada, Mexico Duties on Hold 30 Days
President Donald Trump issued three executive orders on Saturday, February 1, levying tariffs on the US’s top three trading partners. However, after speaking with leaders from Canada and Mexico, Trump put a 30-day hold on duties for those countries.
One of President Trump’s executive orders places 25% tariffs on goods imported from Mexico, while another implements a 10% tariff on Canadian energy sources and 25% on other products from the US’s northern neighbor. The third order levies an additional 10% tariff on top of any existing import duties for products from China. Although all new tariffs were set to go into effect on Tuesday, February 4, the President decided to delay the levies for Canada and Mexico for 30 days. The additional 10% tariff on imports from China went into effect as scheduled.
While the announcements were not unexpected, as Trump made tariffs a central part of last year’s campaign, some observers expressed concern over their potential impact on the global supply chain. The Trump administration has said the tariffs are an attempt to stop the flow of fentanyl and illegal immigration into the US. The duties on Canada and Mexico were paused after those countries’ leaders agreed to strengthen border security, the White House said. Canadian Prime Minister Justin Trudeau announced the appointment of a “fentanyl czar” as part of the deal to pause the tariffs.
A White House memorandum published on Inauguration Day, January 20, directed multiple federal agencies to conduct a trade policy review by April 1. Some observers took that to mean any new tariffs wouldn’t arrive until spring. However, in recent days, President Trump and White House Press Secretary Karoline Leavitt reinforced the previously announced February 1 target for issuing the executive orders.
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Trump’s Tariff Orders Remove De Minimis Exemption for Imports From China
A side effect of President Trump’s executive orders is the removal of the de minimis exemption for all imports to the US on products for which the tariffs apply. With a minimum 10% tariff on imports from China now in place, the former exemption for products worth less than $800 has been removed. The de minimis rule will also no longer apply to imports from Canada and Mexico if the tariffs for those countries go into place next month.
On Tuesday night, February 5, the United States Postal Service (USPS) temporarily suspended package delivery for parcels from China and Hong Kong in response to the removal of the exemption. However, by the next day, the USPS said it had resumed delivery and was working on a plan to collect any newly applicable import duties.
The de minimis exemption has been in the spotlight for the past year as eCommerce business from China to the US has boomed. The US Customs and Border Protection agency (CBP) has already announced plans to restrict some goods from the exemption as part of broader efforts to keep contraband from entering the country. However, industry experts say Trump’s executive orders will immediately impact the eCommerce sector.
“The days of intense optimization of your supply chain are over,” Maggie Barnett, CEO of LVK Logistics, said in an email to Supply Chain Dive this
ILA Officials to Present USMX Deal to Members, Begin Ratification Process
Following two years of challenging negotiations and a brief strike last October at US East and Gulf Coast ports, the International Longshoremen’s Association (ILA) is preparing to present a proposed six-year collective bargaining agreement to its members. According to the Journal of Commerce (JoC), ratification of the master contract with the United States Maritime Alliance (USMX) is expected to take a month.
According to sources who spoke to the JoC, the USMX’s board of directors approved the contract last Wednesday. Neither the ILA nor the USMX has commented publicly on the ratification process. Sources also say ILA officials will meet in Florida this week with the union’s local wage scale committees from the 14 ports covered in the deal. The meeting agenda will include a review of the contract’s details, which were finalized after four days of talks last month in New Jersey.
Following a brief strike last October, the ILA and USMX reached a tentative agreement, which included a 62% wage increase over the six-year contract term. The work stoppage was the first at East and Gulf Coast ports since 1977.
Changes to US LTL Freight Classification System Underway in Rate “Reset”
The US less-than-truckload (LTL) freight classification system is undergoing its most significant overhaul in decades, leading to shipper concerns about the impact on LTL pricing. According to a JoC report from last week’s SMC3 Jump Start 25 conference in Atlanta, industry insiders deny any intentional rate hikes but acknowledge that the changes will likely lead to a “reset” of LTL rates.
“Customers are asking if this is a veiled attempt to raise rates,” Clete Cordero, vice president of pricing and traffic at Southeastern Freight Lines, said at the conference. Cordero assured attendees that’s not the intention, but the JoC says shippers are right to be apprehensive.
“I think what’s really going to happen is a resetting of rates,” Cordero said at a breakout session on proposed changes to the National Motor Freight Classification (NMFC). The National Motor Freight Traffic Association (NMFTA), which manages the classification system, has released a docket with more than 90 proposed changes — a stark contrast to the usual 15 proposals in a standard docket.
The NMFTA will review feedback on the proposed changes starting February 25, hold a public meeting on March 3, and implement the final changes on July 19. These revisions will impact nearly all US LTL shippers. According to the JoC, the NFMC dates back to 1936 and is considered outdated. The goal of the latest revision cycle is to reduce reclassification and repricing.
Trans-Pac Air Cargo Rates Flat Despite Increase in China-to-US Volume
Despite continued growth in air cargo volumes on key trans-Pacific routes, freight rates have eased throughout January after hitting a peak in December.
Data from the air freight analytics firm Rotate shows a 3% weekly increase in China-to-US volumes and a 17% year-over-year jump. WorldACD, another air freight analyst, reported a 5% week-over-week tonnage increase out of Asia in the third week of January, with a 5% rise compared to the same week last year. However, the year-over-year comparison is affected by the later Lunar New Year in 2024.
While cargo volumes have been rising, average rates have been declining. Industry observers attribute this to the exceptionally high rates seen in December rather than a weakening market.
