On January 20th, President Trump signed an executive order mandating that certain members of his cabinet develop reports for recommendations on tariffs by April 1st. Since that date there have been numerous tariffs imposed, impacting the majority of U.S. trading partners. While there are many foreign countries being affected, the three main targets are Canada, China, and Mexico. Some of the tariffs have proved to be short lived or been subject to delays while further trade agreements were discussed. This in turn has caused uncertainty and unsettlement within the transportation and logistics industry. The following is a summary of tariff milestones during the first quarter of 2025.
At the end of the quarter, countries were awaiting the schedule of reciprocal tariffs to be applied.
As tariffs continue to be levied against foreign countries, internal inflation is expected to continue rising. The Federal Reserve believes that “trade disruptions may affect consumer prices not only through the direct effect of increases in import prices, but also indirectly as a result of induced increases in the prices of domestically produced goods triggered by higher input costs.” This idea led to many companies stocking their shelves earlier than anticipated with impending tariffs looming. The Bureau of Economic Analysis (BEA) states that in Q1 2025 the transportation industry received a short boost due to the stockpiling of certain goods from overseas. This can be expected to fall as tariffs continue to take effect across the world.
In addition to the standard tariffs discussed above, the removal of De Minimis exemptions will also impact the transportation industry. Section 321 of the Tariff Act of 1930 allows for tariff-free goods imported by individuals, assuming the daily value of the good does not exceed $800. These imports are known as “de minimis entries.” The act essentially allows for items that are too trivial to be taxed to obtain certain exemptions from tariffs. De minimis entries grew in volume from 153 million in 2015 to over 1 billion by 2023, the growth in popularity of websites such as Shein and Temu being the main factor. The total value of de minimis imports topped $60 billion in 2023. In early February, the administration announced that they were removing this act on low value imports from China. While the change was initially applied immediately, the change was since delayed. The application of a tariff of any size to previously exempt merchandise is expected to have a chilling effect on consumption in the U.S. This has the potential to affect the whole transportation industry within the United States and significantly lower the volume of imports by parcel airfreight and last mile companies.
Furthermore, Congress.gov has identified the copper and lumber industries as the next fields to receive possible tariffs. These include all copper, lumber/timber, and their derivative imports but the initial rate is unknown. They reported that in early March investigations were launched with no clear timetable as to when the industries will be affected. This could be the start of a second string of tariffs implemented later in the year.
While tariffs have created uncertainty in the first quarter of 2025 for transportation, there is still hope for improvements across the nation. International trade will continue to decline as tariffs continue to be levied, but possibilities of a slight pause will allow for importers and exporters to recoup some of their lost profits. The auto parts, steel, and energy sectors have already been impacted, but the door is open for more domestic transportation and shipping upheavals. With the threats of more tariffs looming, it prompts levels of skepticism on the transportation industry not seen since the COVID pandemic.
