US Tariffs and Policy changes: What they mean for global supply chains

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This week the United States announced new tariffs on imports from Canada, Mexico, and China, with all three countries responding with their own tariff announcements. These changes will most certainly have an impact on global trade flows, and while Australia is not directly affected by the changes, there are potential knock-on effects for APAC shippers.

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Key Changes in Trade Policy.

• US Tariff Increases: Canada and Mexico face a 25% tariff on imports into the US, while Chinese goods are subject to an additional 10% tariff.
• China’s Response: China has imposed tariffs ranging from 10-15% on key US exports, including crude oil, LNG, coal, and agricultural machinery.
• Canada’s Response: Canada has introduced a 25% tariff on $155 billion of U.S. goods, with $30 billion taking effect immediately and the remaining $125 billion set to be enforced 21 days later.
• Mexico’s Response: While Mexico’s tariffs have been postponed for now, retaliatory measures are likely should negotiations with the US not result in a resolution.
• Postponements & Retaliation: The US has delayed Mexico’s tariffs by one month following discussions with President Claudia Sheinbaum. Similarly, Canada and the US have agreed to postpone their reciprocal tariffs for a month.
• E-Commerce Impact: The removal of the Section 321 de minimis customs exemption means shipments under US$800, often e-commerce orders, will now be subject to tariffs.
• US Refinery Costs: Tariffs on Canadian and Mexican oil imports may increase costs for US refineries, potentially benefiting European and Asian refiners.‍
• Panama Canal Tensions: The US has raised concerns over Chinese influence in the Panama Canal, adding another layer of geopolitical uncertainty.

Despite these changes, trade among these economies is expected to continue, with businesses adjusting their supply chains accordingly.

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What Australian Businesses Need to Know.

Although Australia is not directly affected in these tariff measures, there are several key considerations for APAC shippers:

• Impact on Trade Partners: China is Australia’s largest trading partner, accounting for 29% of exports, while the US ranks third at 6.8%. Changes in their trade relationships may indirectly affect Australian supply chains.
• Commodity Demand Uncertainty: If Chinese exports to the US decline, demand for raw materials could weaken, potentially affecting commodity prices and the Australian dollar (AUD). However, stimulus measures from China could offset some of these effects.
• Market Volatility: Trade tensions can lead to fluctuations in global markets, impacting investor confidence and shipping rates.
• Potential Trade Discrimination: The US is prioritising new trade agreements, which could give preferential treatment to some countries over others, affecting Australian export competitiveness.
• Risk of Additional Tariffs: US trade representatives have flagged certain Australian trade barriers, including those on beef, pork, turkey, apples, and pears, as potential targets for future negotiations.

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What’s Next?

For APAC shippers, staying informed and adaptable will be essential in the coming months. To help mitigate risk, we suggest:

• Keeping an eye on China’s response
• Adjusting sourcing strategies where needed
• Planning ahead for potential tariff adjustments

While trade remains strong, shifting policies highlight the need for flexibility and proactive supply chain management. Want to know how these changes could impact your supply chain? Speak to your Explorate operator today to get expert insights and tailored solutions.

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