How the US Tariff Scenario Will Effect Truck Driving in 2019

As the New Year begins, it is the prime time to focus on your shipping costs for 2019.  One key aspect of these costs is tariffs that are implemented by the current US administration.  Find out how these tariffs are affecting the trucking industry below.

Steel and Aluminum Tariffs 

A tariff is a tax that is paid on a class of exports, or in this case, imports.  A tariff can be classified as a specific tariff or an ad valorem tariff, which is a fixed percentage added to goods.  

A tariff is added as a tax to goods, which also increases the price of these goods.  This cost increase is generally incurred by each entity in the supply chain including shippers and receivers.   

The theoretical purpose of a tariff is to get domestic manufacturers to increase production.

This is achieved by increasing the costs of imported raw materials and finished goods via the tariffs.  Since imported products become more expensive, domestic goods are preferred, which then stimulates the economy at home. 

Effects of Global Tariffs 

The current administration is attempting to strike a deal with China, Canada, and Mexico in a revision of the North American trade pact known as NAFTA.  So far as a result of the tariff war, the president set steel and aluminum tariffs on imports in June 2018.  These tariffs include a 10 percent duty on all imported aluminum, as well as a 25 percent tariff on imported steel as reported by the Wall Street Journal.  Trump has also mentioned tacking on a 25 percent tariff to global auto tariffs by February 2019.  

Expected Economic Results 

According to Forbes, the US tariff scenario will result in little economic change.  The federal revenue will not be increased, as the administration has only received $22 billion in tariffs so far in comparison to the $2.4 trillion tax debt of the nation.  

While the theory of increasing domestic production is valid for boosting the US economy, there is a major concern.  Until there are manufacturers set up and in production to fill the void in the loss of imported goods, there will be a lack of domestic goods available to replace the demand in these imports.  Therefore, consumers who want goods that are only available as a more costly import will have to pay the price or do without the item.  

What this means for the trucking industry is there may be an increase in the price of intermodal freight from air, ship, and train cargo.  In addition, if domestic companies are able to produce the same materials and goods to replace imports, this would have a positive impact on the economy in the years to come.  Ultimately, if the tariff war achieves its goal of stimulating domestic production, there could be an increase in shipping demand.  The result is an even greater demand on the trucking industry.  In order to keep up with the freight shipping, the trucking industry needs to hire more truck drivers across all haul types. 

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