March 7, 2024 - By :

Supply chains brace for new US-China tariff war

Cargo volumes and supply chain costs for China-US services could come under pressure after US president Joe Biden announced a range of new tariffs on Chinese imports.

The president yesterday announced tariffs covering Chinese imports with a value of $18bn, ranging from electric vehicles (EVs) to solar cells and semiconductors to come into effect between 2024 and 2026.

EVs are one of the hardest hit as tariffs will quadruple to 100% when they are hiked later this year. EV lithium batteries tariffs will triple to 25% later this year and non-EV lithium batteries will have their tariffs increased in 2026.

The last time the US and China launched tit-for-tat tariff increases – in 2018 under then US president Donald Trump – the air cargo industry saw cargo volumes weaken as a result.

Peter Sand, chief analyst at shipping and airfreight data provider Xeneta, said the tariffs will also add more red tape and complexity to supply chains.

“The new tariffs under President Biden may be a case of history repeating. If so, businesses will be braced for increasing supply chain costs and ultimately it will be US consumers who pay for it,” he said.

Sand said businesses may look to alternative supply chain routes into the US in light of the latest tariffs.

He pointed out that demand for container shipping imports from China into Mexico in the first quarter of 2024 had already increased by 34% compared to 12 months ago, fueling suspicions it is being used by some shippers as a “back door into the US”.

“We may also see US shippers look to import goods from nations such as Vietnam as an alternative to China – as has increasingly been the case since the 2018 tariffs hike hit the market.

“However, these are immature supply chain routes compared to the established transpacific trade direct from China to the US west coast. This means more complexity, more volatility and increased cost.”

He added: “There is no doubt this is an aggressive move by the US against China and, once again, we are seeing geo-politics impact global supply chains,” he added.

“The new tariffs will affect around $18bn in annual imports, which is not a huge amount in the grand scheme of US trade, but if China responds in the same way as 2018 then we could be at the start of another spiral of escalating tariffs.”

The US National Retail Federation (NRF) said it was also disappointed with the implementation of new tariffs.

The retail group pointed out that the 2018 tariff hikes failed to achieve their aims and ultimately raised costs for US consumers.

“We are extremely disappointed that the United States Trade Representative (USTR) and the Biden administration have chosen to double down on a failed and inflationary strategy by sustaining and expanding the Section 301 China tariffs,” the NRF said.

“Maintaining these tariffs on consumer goods will increase costs that consumers pay on everyday products imported from China.

“As consumers continue to battle inflation, the last thing the administration should be doing is placing additional taxes on imported products that will be paid by US importers and eventually US consumers.

“The ongoing Section 301 China tariffs have not worked to force China to change its trade practices. We need a new strategy that will address the core issues and provide actual incentives for U.S. companies to shift their supply chains from China.”

US trade representative Katherine Tai said the move would encourage the elimination of China’s unfair technology transfer-related policies and practices that “continue to burden US commerce and harm American workers and businesses”.

By: Damian Brett
Source: Aircargo News