Tariffs kicked off Tuesday morning on goods imported from Canada, China and Mexico, sparking a trade war with three of the U.S.'s largest trade partners.
President Donald Trump's new tariffs include a 25% duty on most imports from Canada and Mexico. Existing tariffs on Chinese goods increased from 10% to 20%.
China Tuesday morning almost immediately responded with tariffs of its own on various U.S. food exports: 15% on chicken, corn, cotton and wheat, and 10% on aquatic products, beef, dairy, fruit, pork, sorghum, soybeans and vegetables.
Canada is imposing 25% tariffs, effective immediately, on more than $20 billion in U.S. imports, while an additional tariff on $86 billion worth of products looms and takes effect in three weeks. Mexico is expected to announce sanctions of its own.
"Demand destruction is likely to commence rather quickly," said Jason Miller, interim chairperson and professor of supply chain management at the Eli Broad College of Business at Michigan State University. "We saw softening new order momentum in February from multiple PMI data (ISM and Dallas Fed), which was linked to tariff uncertainty."
[Related: Will tariffs boost domestic freight?]
Aimed at curbing fentanyl and illegal immigration crossing the border, President Trump's new tariffs are likely to come with consequences stateside.
Research shows that tariffs on aluminum and steel in 2018-2019 resulted in a net job loss. While employment in the aluminum and steel sectors saw modest gains, the broader impact on downstream industries led to greater overall job losses. Research by the National Bureau of Economic Research found that there is no evidence that employment increased in industries shielded by tariffs, even when assuming constant returns to scale in manufacturing over the short run, as suggested by Chad Syverson in a 2011 study. On the contrary, job decline was observed due to retaliatory actions, and this trend could repeat.
“As all of you remember, 2019 was a weak year for freight, so we’ve already experienced some of these consequences before,” Miller said during a webinar hosted by CCJ last month, adding tariffs with Mexico and Canada will likely lead to consumers taking on the higher prices, particularly in the auto and agriculture sector, and postpone capital investment.
"These tariffs will be inflationary," Miller warned. "ISM's PMI for February showed substantial pressure on raw materials prices, with February's reading jumping to 62.4 from 54.9 in January (over 50 = expansion)."
[Related: Tariff plans could disrupt truck production and pre-buying activity]
"As we work to make our communities stronger and safer, we must also avoid unintended consequences that could exacerbate another one of Americans’ top concerns: the high prices for goods and groceries," added American Trucking Associations President and CEO Chris Spear. "With the success of USMCA and the growing trend of nearshoring, the North American supply chain has become highly integrated and supports millions of jobs. Imposing border taxes on our two largest and most important trading partners will undo this progress and raise costs for consumers."
Uncertainty caused by tariffs could also impact OEMs and consumer decision-making based on its implementation, with ATA estimating that tariffs in Mexico and Canada could add an estimated $35,000 cost to a Class 8 tractor, "amounting to a $2 billion annual tax and putting new equipment out of reach for small carriers," according to Spear.
Spear noted roughly 100,000 full-time truckers haul 85% of the surface trade in goods with Mexico and 67% of the goods traded with Canada, and "will bear a direct and disproportionate impact. Not only will tariffs reduce cross-border freight, but they will also increase operational costs," he said.
