How Laufer can help you succeed in the midst of a perfect storm
Today’s global shipping environment is laced with confusion, concern, and questions about the future. Indeed, the elements of a perfect storm have gathered: conflicts that arise from supply-and-demand issues, political policy shifts, and currency economics. The unfortunate result is that global commerce is caught in the middle, with importers facing the need to absorb added costs or consumers poised to pay higher prices than they’re accustomed to.
The impact of low capacity and high tariffs
One part of the problem is that carriers, facing their own economic concerns, are reducing capacity in an effort to raise prices. Lower supply, more demand, higher prices.
“Add to this the fact that the unprecedented tariffs on products made in China actually eclipse the cost of shipping them,” says Mark Laufer, CEO of Laufer Group International. “Separate from China, tariffs on steel and aluminum imports are already in place. They range from 10 percent to 25 percent depending on the country of origin, and their effect will ripple into the US economy in the months ahead as prices increase to cover them.”
The first round of 25 percent tariffs on goods made in China went into effect on July 6th and affects 818 HTS subheadings, a second went into effect on August 23rd imposing an additional 25 percent duties on 279 more subheadings, and a third round of tariffs at 10%, which will impact more than 6,000 subheadings, went into effect September 24, 2018. And Trump has proposed to increase this group from 10% to 25% on January 1, 2019.
Across the Pacific, China is retaliating with tariffs of their own on American products. This affects US exports as companies reevaluate the cost of importing from here. Further, supplier penalties on such goods as walnut lumber will be passed on to US consumers when, months from now, they purchase furniture built from it. Other companies, having already placed orders, cannot pass the added costs along to their customers.
The impact of currency fluctuations and the trucker shortage
While the US Federal Reserve has raised interest rates, strengthening the dollar, Chinese currency is weakening. “Though the latter partially offsets import tariffs,” says Michael Van Hagen, Laufer’s Vice President of Sales and Marketing, “it also creates unwanted headwinds for exports. One result is that half of export bookings have been cancelled, leaving ships returning to China with far less cargo than usual.” Fewer bookings means US companies’ revenues are dropping.
One supply-chain complication isn’t on the high seas but on US highways. Due to the trucker shortage that was worsened by the ELD mandate, trucking prices have increased dramatically. This will continue to be a factor, and the resulting higher prices will be passed on to wholesale and retail customers.
Where to go from here
Global shipping is experiencing a period of enormous uncertainty. Beyond issues such as capacity, tariffs, and currency, the volatility of rates requires that contracts be renegotiated. These renegotiations place added stress on companies that rely on agreed-upon shipping rates.
“We’ve always worked very hard to be a resource for our customers,” Laufer says, “and we’ve helped them adapt to changing conditions. Right now, we’re offering multi-tiered pricing options that allow customers to maintain some degree of predictability in shipping costs.”
Van Hagen adds: “We look at all of this very carefully and respond accordingly. Our decades of work in logistics are a real advantage as we tailor solutions for our clients. We help them find the right balance between the capacity they need and the cost to secure it, then negotiate rates that will solidify bookings without overpaying. That’s how we can help move our clients through the perfect storm.”
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