In the Q1 newsletter, we discussed the impact of the newly levied tariffs on the transportation sector. We focused on the main targets of the original tariffs (Canada, China, and Mexico) and the proposed removal of the De Minimis exemptions. These actions led to an increase in imports due to companies rushing to acquire inventory prior to the start of the tariffs, and speculation that inflation would be on the rise shortly after. Since Q1, the ever-evolving tariff landscape has created new implications for importers and exporters alike.
The second quarter’s tariff news started on April 2nd, when President Trump announced the levels of the previously proposed “reciprocal” tariffs. All imports would be subject to a base tariff of 10%, and various countries would have additional tariffs levels, ostensibly based on the trade deficit with each respective country. The European Union, South Korea, and Taiwan would be subject to tariffs of 20%, 25%, and 32%, respectively. Two days later, China would face a total tariff of over 50%. China announced a retaliatory 34% tariff on U.S. imports. The 10% baseline tariffs were scheduled to go into effect on April 5th, and the reciprocal tariffs were going to be effective as of April 9th.
On April 9th, President Trump announced that most of the April 2nd tariffs would be subject to a 90-day pause, to allow for the negotiation of country-specific trade deals. This pause in the reciprocal tariffs would expire on July 9th. The 90-day pause also influenced the European Union to pause their own retaliatory tariffs for 90 days as well. Canada and Mexico both received relief from U.S. tariffs late in the first quarter after it was announced that imports that claimed and qualified for USMCA duty-free preference were exempt again.
As we move into Q3 negotiations are heating up between the United States and its trade partners. The following is a summary of the tariff changes during the second quarter.
When tariffs are levied, they tend to lead to a variety of economic changes within a country with multiple driving factors. The key factor is that foreign products begin to become comparatively more expensive relative to domestic products. There can be an expenditure switch if imports from other countries become too expensive and domestic production can replace the imported goods. In either case, however, expenses to the consumer are expected to increase. During the first half of 2025, personal consumption expenditures were on the rise, up 2.6% on a year-over-year basis. This trend is expected to continue into the latter half of the year and as more tariffs continue to be levied.
Following the first quarter, there was much uncertainty for the transportation industry with the new implementation of tariffs. The second quarter of 2025 has included a 90-day pause, fluctuations in tariff rates, and new agreements between the United States and its trading partners. While we do not know the full extent of the tariffs, we are beginning to see some of the economic effects as we move into the second half of the year. The tariff outlook is an ever-evolving landscape with many deals expected in July which will lead to more updates as the year progresses. For now, the 90-day pause has allowed the transportation industry to take a step back before the cycle restarts.
Mercer Capital’s Transportation & Logistics team constantly watches the transportation industry and global events and economic factors that can impact the overall industry, the supply chain, or various aspects of transportation. Mercer Capital provides business valuation and financial advisory services, and our transportation and logistics team helps trucking companies, brokerages, freight forwarders, and other supply chain operators understand the value of their business. Contact a member of the Mercer Capital transportation and logistics team today to learn more about the value of your logistics company.
