Jaguar Freight | The Weekly Roar: D.C. Brake Checks: Will Supply Chains Skid to a Halt?

In this week’s Roar: A big week of trade deals, the government shutdown and air cargo, major infrastructure projects across the U.S., calls to rebuild American commercial shipping capacity, and uncertainty about manufacturing strategies.

Resolution of the U.S.-China trade dispute has always been the elephant in the room since the tariff fights began earlier this year. On Thursday, a breakthrough was announced, which lowers the overall tariff on Chinese goods. However, that was just the latest in a series of announcements from the week regarding U.S. trade relations with several Asian countries. Here is a rundown:

China: President Donald Trump and Chinese President Xi Jinping announced a softening of the United States’ trade policy toward China. The U.S. government will reduce tariffs imposed earlier this year on Chinese exports of chemicals used in fentanyl production from 20 percent to 10 percent, which lowers the overall tariff on Chinese goods from 57 percent to 47 percent. Additionally, China’s Ministry of Commerce reported that the United States will suspend its enforcement actions (a.k.a. port fees) under the Section 301 investigation concerning China’s shipbuilding and maritime industries for one year. In a reciprocal measure, China will pause its countermeasures.

Japan: The United States and Japan have formally signed a trade agreement previously negotiated between the two sides. Under this accord, the United States will impose 15 percent tariffs on Japanese imports, which is lower than the 25 percent threatened initially. In return, Japan has pledged to invest $550 billion in U.S. industries and to expand market access for American exports of rice, automobiles, and defense equipment. The agreement also includes a framework for bilateral cooperation on critical minerals and rare earth elements, aimed at enhancing supply chain security and reducing strategic vulnerabilities in both countries.

South Korea: The United States and South Korea have also reached a new trade agreement encompassing key industrial sectors. Under the arrangement, tariffs on Korean automobiles and auto parts will be reduced from 25 percent to 15 percent, aligning with the rate applied to Japanese competitors. South Korean producers of wood products and pharmaceuticals will benefit from the lowest tariff levels among all partner countries, while aircraft parts and generic pharmaceuticals will be exempt from tariffs entirely.

Malaysia: President Trump and Prime Minister Anwar Ibrahim finalized a reciprocal trade deal during Trump’s visit to Kuala Lumpur. The existing 19% IEEPA reciprocal tariff on Malaysian goods remains unchanged.

Vietnam: The U.S. reached an agreement with Vietnam maintaining the 20% reciprocal tariffs on Vietnamese products, consistent with Executive Order 14257 issued on April 2.

Cambodia: Cambodia agreed to remove all tariffs on U.S. goods. The U.S. will continue to apply a 19% reciprocal tariff on Cambodian products, as outlined in Executive Order 14257 issued on April 2.

Thailand: A trade framework with Thailand has been established to address tariff and non-tariff barriers on agricultural and industrial products. The U.S. will maintain the 19% reciprocal tariff on Thai goods, in line with Executive Order 14257.

Another dispute the Trump administration finds itself in, the government budget shutdown, is poised to become another supply chain problem the industry will have to deal with. The U.S. Airforwarders Association (AfA) is warning that the government shutdown could cause cargo backlogs and disrupt supply chains. There’s increasing concern over staffing shortages at the TSA, FAA, and CBP if workers remain unpaid. They’re urging Congress to end the shutdown and restore normal air cargo operations.

Despite the negative headlines and political rhetoric, the U.S. is taking steps to improve its supply chain. Many ports have been investing in major infrastructure projects to strengthen supply chains and handle larger vessels. Some upgrades include deepening the channels at Port Everglades and Corpus Christi, expanding rail capacity in Charleston and Long Beach, and modernizing terminal operations at Los Angeles and Savannah. Ongoing projects in Alaska, Virginia, Oakland, and New York/New Jersey are focusing on increased capacity, efficiency, and sustainability. This is all in hopes of ensuring U.S. ports remain competitive and ultimately improving regional economic growth.

An important result from the U.S.-China talks is the one-year suspension of the aforementioned Section 301 port fees. The “fix” is temporary, and the issue still demands attention.. At a recent Senate subcommittee, industry experts said the U.S. needs to urgently rebuild commercial shipping capacity, citing decades of decline and rising Chinese dominance. As it stands now, China produces over half the world’s ships, while the U.S. produces less than 1%. They urged Congress to pass the SHIPS Act, which would expand the U.S.-flag fleet, support American jobs, establish a Maritime Security Advisor, and provide tax credits and financial incentives for shipbuilding. Further recommendations included preserving the Jones Act and adopting innovative contracting models like the Vessel Construction Manager approach. In their opinion, doing so would help revitalize the industry and strengthen national security.

A new Gartner survey found that 49% of companies lack confidence in their manufacturing strategies to meet their business goals over the next three years. Two-thirds of them say they’re not being as bold as they should be when it comes to automation and AI. Some of the biggest challenges include integrating supply chain and manufacturing, modernizing operations, empowering plant managers, standardizing systems, and resetting their decision-making processes so that they align better with future initiatives.

For the rest of the week’s top shipping news, check out the article highlights here.

Compliments of Jaguar Freight – A member of the EACCNY