Menu Close

Logistics Operators Brace for imports rush ahead of U.S. tariffs on Mexico products

Threat has shippers scrambling at busy border crossings marked by tight trucking, warehousing capacity.

Some importers have started considering moving goods more quickly into the U.S. from Mexico to get ahead of threatened new tariffs, a logistics operator said Friday, raising the prospect of a shipping surge to border crossings already marked by heavy congestion and tight trucking and warehousing capacity.

“We started getting calls first thing this morning”, said frank McGuigan, Chief Executive of Frisco, Texas-based Transplace, a transportation management and logistics operator with large operations along the southern U.S. border. “These are major companies who are saying they need to start moving their goods. It’s happening today”

“Shippers are saying, ‘What are our options?’ Right now, you need capacity and you need speed…. This is the very definition of supply-chain disruption,” Mr. McGuigan said.

The Trump administration said Thursday that it would impose 5% tariffs on all Mexican imports starting June 10 unless Mexico stems the flow of undocumented migrants to the U.S. The tariffs would escalate by 5 percentage points each month, reaching 25% by october, the administration said.

Several trucking industry executives said their primary concern is over the long term if tariffs continue to rise and manufacturers shift production or seek new suppliers to minimize the impact of the levies.

“It won’t be like day one the sky will fall”, said Tommy Barnes, president of project44, a Chicago-based provider of tracking technology for trucking shipments. “It’s going to cause some challenges, it will be choppy”.

That will include delays and congestion if companies pull forward inventory similar to the heavy importing from Asia in the second half of 2018 that strained warehouse capacity in Southern California, Mr. Barnes said. Over the long term, companies may move production, although “supply chains are not tha nimble, not that flexible. It’s not like you can move a manufacturing location tomorrow,” he said.

“If the tariffs stick around into mid-August and September, that could have a significant impact”, said Gary Nichols, director of business development at trucking management.

U.S. goods trade with Mexico has remained robust despite tensions between Mexico City and Washington over the past two years during the negotiations for the now-completed pact between the U.S., Mexico and Canada to replace the North American Free Trade Agreement.

Trucks carried nearly 70% of the goods trade by value across the U.S. – Mexico border last year, and the trade rose 10,2% in 2018 over the previous year, according to the U.S. bureau of Transportation Statistics.

The strong trade flows have prompted significant investment in warehouses near border crossings, but Mr. McGuigan said the demand has outpaced supply. “The timing is pretty challenging”, he said. “We are already tight on northbound trucking and we are already tight on warehouse capacity, so you are going to have to find a way to move goods further inland just to be able to store them.”

Truck shipments were slowed sharply earlier this spring when U.S. Customs and Border protection moved some agents from the checkpoints to work with Border Patrol agents. Those backups have eased but could return if the new threatened tariffs trigger a surge in northbound demand.

“If we have to go through another pull-forward, we are talking about levels of congestion that I’m not sure we’ve seen in the last 10 years”, said Eric Fuller, chief executive of Chattanooga, Tenn-based trucking company U.S. Xpress Inc.

Source: The Wall Street Journal

Leave a Reply

Your email address will not be published. Required fields are marked *

15 − 2 =