The Economic Landscape: Putting Tariffs In Perspective

In the overall positive economic landscape of 2019, one issue continues to pose challenges and uncertainty for the interstate trucking industry: tariffs. In early June, President Trump announced an escalating tariff structure on goods coming from Mexico, and in May, the president announced that tariffs imposed on goods from China would increase from 10% to 25%. At the time this article was written, the US and Mexico had reached a temporary agreement that avoids tariffs, and the US and China had agreed to a temporary truce in the trade wars pending discussions at the G20 Summit.

Economists, politicians, and business owners have been arguing about tariffs since the days of Adam Smith. Between these discussions lie the industries that move goods and services across the world. Truckers and other freight transportation companies face potential challenges of reduced freight, higher costs, or increasingly complicated logistics questions. If consumers decide not to buy because of increased costs, demand for shipping and hauling goes down. But if production eventually shifts from overseas to domestic, logistics and increased demand can impact the trucking industry.

Fortunately, recent tariffs seem to have had only temporary impact on the US economy, at least for the moment. Though prices on appliances spiked briefly as a result of tariffs on China, they have once again leveled off. One theory suggests that the global nature of the modern economy renders tariffs less damaging to the consumer than in years past. For example, if tariffs are imposed on good coming from China, manufacturers simply move their operations to tariff-free producers in Taiwan or Vietnam.

In general, tariffs on goods that come from overseas sellers impact shipping more than land freight, whereas tariffs on goods coming from North or Central America will impact trucking and rail more than shipping. Between 70% and 80% of all freight in the US is moved by the trucking industry; in Oregon, it’s even higher—86%. So when trade is in flux—whether that means less freight in ports or more freight produced domestically—the trucking industry feels the impact. Either trucking companies suffer from lack of freight to move, or they have to shift resources to meet demand.

Although recent tariff increases have had only a small, temporary impact on the economy, that doesn’t mean they will remain a low-impact economic factor. Should tariffs continue to rise or should new tariffs be imposed, the logical conclusion is that prices on goods will rise as well. Eventually, consumers feel the brunt of those increasing costs, and demand falls. When there’s no demand, there are no products to move, and the transportation industry suffers.

For now, as the US continues to negotiate with governments around the world and economists continue to argue over the merits of free trade versus economic protectionism, the trucking industry is still suffering driver shortages. Should increasing tariffs drive increased domestic production of goods, those driver shortages will only increase. If you’re interested in pursuing a career as a driver or freight broker, check out our career page. Whatever the economic climate, American Freight and our sister companies, FV Martin and Martin Transportation, remain committed to providing the top notch, reliable service that moves freight across this country.

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