U.S. Import Market under Trump's 2.0 Tariff Policy: Calm and Wait-and-See

Since Trump was re-elected president of the United States, one of the most concerned topics in the industry is the version 2.0 tariff policy he may implement against Chinese and other Country. Unlike when he was elected for the first time, this time everyone seems convinced that the Trump administration will really impose tariffs, and the rest is only a matter of time, magnitude and rhythm. However, although the 60% tariff is a huge additional burden for U.S. importers, the market is currently extremely calm, freight rates continue to fall, and the spot price in Western U.S. is even testing a new low of 2000. So, where is the shipment tide in the intended? We might as well think calmly.

Reasons for lagging logistics response

Logistics is not as sensitive as the stock market, and a little disturbance can immediately trigger stock price fluctuations. The response of logistics is relatively lagging behind, mainly because the professionals in charge of purchasing and logistics will not make a "knee jerk response" immediately because of a news. For Trump 2.0 tariff, it is still in the speculation stage, and there is no actual policy and timetable. Questions such as how much tariff to add, which goods to target and when to implement it are full of uncertainty, which makes it difficult for importers to respond immediately and purchase goods blindly.

U.S. Retail Inventory Sales

The latest inventory-to-sales ratio (September) was 1.33, down from 1.46 in the same period in 2019 before the pandemic. Theoretically, a lower inventory-to-sales ratio means that there is a basis for early shipment. However, the actual situation is not so simple. First of all, importers who have just emerged from the trough of "destocking" have not mindlessly replenished inventory, but carefully control the rhythm; Second, U.S. retail sales kept growing in tandem. In the third quarter of this year, U.S. seaborne imports are likely to be the highest except for 2022, especially at western U.S. ports. High volume and good sales growth have kept the inventory-to-sales ratio at a low level. In September 2024, U.S. retail inventories grew 24.8% over the same period in 2019, while sales rose 37% over the same period. Therefore, even if imports increase, inventory pressure is not great.

Multiple considerations faced by importers

Although from the perspective of inventory level and inventory-to-sales ratio, American Line has the basis for early shipment, there are many factors that importers need to consider. There is a cost to stock up in the warehouse in advance, especially in the current situation of high loan interest rates in the United States, and financial pressure is an important issue. In addition, cargo owners also need to worry about a potential secondary strike at the East Coast terminal. There is not much window period for the entire waterway to the eastern United States. If there is no positive progress in negotiations before the end of the month, it will be safer to send it to the West Bank after mid-December. Any supply chain change will create additional work and costs for importers.

The calm attitude of the cargo owner

Under the "dark cloud" of Trump 2.0 tariff, the "calmness" shown by the cargo owner seems unexpected but is normal. Recently, Ravi Shanker, Morgan Stanley's principal analyst for the North American transportation industry, conducted a survey asking 100 cargo owners. The results show that more than 70% of the companies surveyed said they would not change their inventory replenishment plans because of Trump's re-election. A third of companies said they would consider increasing inventory moderately or significantly. Surprisingly, 42% of cargo owners said they would not change their behavior because of potential tariffs.

Future Outlook

The tariffs in 2018 were implemented in three batches before and after, and the levy time was delayed twice, artificially creating five "small peak seasons". How will the 2.0 tariff war in 2025 be interpreted? Compared with the first nervousness and panic, this time everyone seems to be emotionally stable, making decisions before moving. Maybe there really won't be a wave of shipments caused by tariffs? Yes, but until the specific policies and timetables are clearer. If only a small number of customers act in advance, it is not enough to affect the entire supply and demand relationship. November is originally the off-season, and the main factors affecting the trend of short-term market volume are the potential second strike in the eastern United States and the Spring Festival.

Data Table

From the above analysis, it can be seen that although Trump 2.0 tariff policy has brought uncertainty, importers have shown a rational and calm attitude. Future market movements will depend on specific policy details and timelines, as well as other key factors in the supply chain.