Just when US importers were starting to make sense of President Donald Trump’s 145% tariffs on Chinese goods, the negotiator-in-chief changed the deal again.
Now, with the plans on pause and current import tariffs dropping down from 145% to 30% for China, importers are having to rethink how — and when — they bring goods into the US, according to Ben Dean, VP at warehousing network Flexe.
Tariffs are indeed a lot lower than they were last week, but they’re still far higher than they have been for years, and there’s no clear answers about which way they’ll go in the next 90 days or beyond.
All of that has importers looking at an even wider menu of warehousing and transportation options than they were just a short while ago — if they’re not biting the bullet and paying the tariffs outright.
Before Monday’s announcement, the 145% tariffs on Chinese goods made for rather simple (if unpleasant) decision-making, since they were so high they effectively blocked all but the most essential products from crossing the Pacific.
For goods that were already en route, many businesses turned to a specialized type of storage facility, known as a bonded warehouse. These facilities allow importers to park their goods duty-free for up to five years, and only pay the tariff charge that is in effect at the time they accept their inventory.
“By holding the goods under bond, there’s the possibility that they might pay at a lower rate,” Dean said in a previous interview with Business Insider.
In a follow-up interview after the tariffs fell to 30%, Dean told BI that, as expected, interest in bonded warehousing has fallen precipitously — though not entirely.
Now, he said there’s more interest in foreign-trade zones.
FTZs are somewhat similar to bonded facilities in the sense that they allow importers to delay payment of tariffs, but the key difference is that FTZ lock in the tariff rate at the time of arrival, rather than when the items leave the facility and officially enter the US.
“Should we not make progress on a formal agreement and in 91 days, rates shoot up again, that is a risk,” Dean said.
At least now, “there’s an upside risk, which we didn’t have” before, he said.
Dean also said demand is up for trains and short-haul trucks, while long-haul trucking rates are comparatively down — an indication importers are trying to slow the roll of previously rushed inventory.
“The need for speed has gone away, and slower and more economical transportation modes are now coming into high demand,” he said.
In other words, importers who brought inventory in ahead of tariffs are using the country’s hundreds of miles of train tracks instead of actual warehouses to effectively hold their merchandise until it comes time to sell it.
For the impending surge of new shipments — container bookings are up nearly 300% between the US and China this week — Dean said there is ample warehouse capacity to receive it.
“The ports are trying to get their things in order to make sure that that surge can get off the ship,” he said. “And everybody’s seeking to avoid any kind of headline event like we had off the Port of Long Beach during the peak of COVID,” when massive backlogs on the docks kept container ships lingering at anchor for weeks.
Even so, there could still be some capacity challenges at the West Coast ports in the coming weeks.
“We are — in real time — changing the economics of the cost of inventory,” Dean said. “We’re getting this real pilot to see what happens to our supply chain domestically when that happens.”