Trump's Tariffs on China Set to Inflict Irreversible Damage on Many U.S. Businesses

On Saturday, the Trump administration announced that it would grant exemptions for technology items such as iPhones, personal computers, and chipsets from most of the newly enacted Chinese tariffs.
However, for many American companies, purchase orders coming from China are getting cancelled, and shipments of goods from China might be left unclaimed.
If the trade conflict with China doesn’t get a broader hiatus, the harm could quickly become "irreparable" for American companies, says a retail analyst, encompassing sectors like furnishings, toys, clothing, shoes, and athletic gear.

Apple's iPhones along with various technological equipment, including processors and personal computers, were impacted a China tariff reprieve From President Trump on Saturday, but for a large portion of the U.S. economy and many small business owners, the harm will quickly become irreparable. the 145% tariffs being imposed on imported goods from China.

Canceled freight orders and abandoned freight From China are rapidly turning into standard practice amid the trade conflict between the U.S. and China, say supply chain leaders, since companies spanning various sectors in the U.S. have halted all container exports, feeling the impact of the tariffs heavily.

Furniture manufacturers in China have experienced a total stoppage in orders from U.S. importers, and similar trends are being observed in sectors like toys, clothing, shoes, and sporting goods,” stated Alan Murphy, who founded and leads Sea-Intelligence.

Bourke, the chief commercial officer at SEKO Logistics, stated that we witnessed similar circumstances throughout Southeast Asia; however, following the 90-day pause, these reservations resumed. Meanwhile, the cancellations of container bookings from China persist.

"Pretty much all activities related to our China business have been put on pause," stated Alan Baer, the CEO of OL USA.

"Economist Erica York, who serves as the vice president of federal tax policy at the Tax Foundation’s Center for Federal Tax Policy, stated on Thursday during 'The Exchange' that Trump's proposed 145% overall tariff on goods coming from China would halt most commerce between the U.S. and China," she explained.

"Companies might still find certain items they can’t replace, so they end up bearing the cost; however, this generally resolves the issue," York stated.

Over the past week, it has become evident that China will continue to be the primary focus of the tariff policies implemented by the Trump administration—after the 90-day reprieve The exemption was extended to all other nations anticipated to face new tariffs — the underlying message being that low-profit items cannot be sustainably manufactured in China. This newfound exception for tech products can partly be attributed to the dynamics of the supply chain, yet it also underscores where the most significant distress will be experienced.

Murphy stated that higher-profit and more technologically advanced products like electronics, machinery, medical equipment, and pharmaceuticals can’t readily change their supply sources because establishing sophisticated manufacturing facilities requires significant time and substantial investment.

Prior to the removal of the tariff exemptions, he states that manufacturers of these products were assessing which components could be obtained from alternative sources. At the same time, they mainly focused on reducing their U.S. inventory levels in the near future. Efforts have been made to shift production to Southeast Asian countries like Vietnam or India. Additionally, lowering product prices for European markets or even halting certain manufacturing operations entirely were under consideration as well.

'A challenge too great for a small business to endure'

The CEO of the American Apparel & Footwear Association, Stephen Lamar, stated that abrupt shifts in policies along with substantial tariffs are causing significant disruptions in supply chains, comparable to those experienced during the height of the pandemic.

Due to extremely high tariffs on U.S. imports from China, numerous businesses find themselves compelled to revoke their orders," stated Lamar. "This unpredictable flip-flopping makes it impossible for firms to anticipate or account accurately for the additional tariff expenses until the products reach the ports. These exorbitant charges lead to invoices that these enterprises cannot afford to settle. This level of uncertainty and financial strain is beyond what smaller operations can endure.

Lamar stated that without new sources coming online soon for numerous firms, especially smaller ones, this abrupt reduction in orders will swiftly result in missed revenue opportunities and significant product scarcity. He emphasized, “There’s an urgent necessity for extending the truce in the trade conflict concerning U.S. goods imported from China before the harm becomes permanent,” as per Lamar.

The large integrated logistics company Maersk has cautioned that within its container liner division, the decline in booking volumes along with the potential for construction charges for "Chinese" ships Additionally, coming into play next week, this will lead to a significant overhaul of all shipping routes to North America.

"Resolving this chaos will require several months, accompanied by ongoing congestion and skyrocketing freight rates for an extended period," Maersk informed their clients.

Murphy mentioned that among all the manufacturers based in China that his company has consulted, none are presently considering relocating their production to the U.S. One factor behind this decision is the companies' lack of clarity regarding the administration's long-term objectives.

His main worry was the total ambiguity surrounding the ultimate objective of the Trump administration. He explained, “Nobody would commit substantial funds into American manufacturing if these tariffs are just a strategy to get more favorable trade terms.” According to him, should the government genuinely aim at reviving US industry, they must present a transparent long-term approach for these tariffs instead of continuously referencing ‘4D chess’ and ‘the Art of the Deal.’ Additionally, he noted that fluctuating tariff rates day-to-day only adds confusion."

Holding on freight processing is one way of mitigating the impact of tariffs. Logistics providers can offer bonded storage, which allows freight to come into the U.S. without being charged a tariff for a certain amount of time. Use of foreign trade zones Other techniques for postponing shipments enable the brief deferment of customs tariffs.

"Present conditions have never been seen before," stated Karsten Kildahl, who serves as the chief commercial officer at A.P. Moller-Maersk.

Abandoned freight

The situation regarding unclaimed or unpaid ocean and air freight—cargo not retrieved or settled by the shipping firm or the freight forwarder acting on behalf of their client to pay custom duties—is ambiguous, with regulations varying from one harbor to another and differing between contracts.

Authorities responsible for ports mention that they generally do not receive notifications about abandoned shipments. According to the New York Terminal Conference Agreement, cargo left unclaimed at the terminal beyond 30 days is deemed abandoned and can be auctioned off to recover demurrage fees owed under the NYTC—fees imposed when goods remain at terminals longer than allowed. The agreement specifies that who bears these expenses ultimately hinges on individual shipping agreements. They explain further: “Should the Bill of Lading (BL) have failed to transfer to the recipient, then the shipper holds accountability. In such cases, shippers might opt to retrieve their shipment again (for instance, by exporting it anew), dispose of it, or even offer it as a donation.”

Shipping companies typically create a "letter of abandonment" for U.S. Customs when they intend to sell or auction off cargo. The funds generated from these sales go towards covering costs like container and chassis usage, with whatever remains being allocated to the terminal.

The terminal has the option to relocate abandoned cargo to a bonded warehouse or keep it onsite and proceed with selling it directly from there. There exists a marketplace for purchasing abandoned goods where companies like JS Cargo & Freight Disposal, FR8 Auctions, or Merchandise USA acquire this type of cargo. These entities subsequently resell the items through various channels including discount stores, outlet shops, liquidation businesses, online platforms similar to Amazon, pharmaceutical chain stores, general merchandise retailers, redemption centers, close-out buyers, and more.

Many shippers are adopting a "wait and see" strategy according to Maersk, which recently informed its clients that without a more defined outlook, customers will remain wary regarding their stock levels and keep looking for methods to add extra adaptability within their supply chains. Throughout its extensive network of storage facilities, distribution hubs, harbor terminals, ships, and freight aircrafts worldwide, numerous clients are currently aiming for increased flexibility, as mentioned by him.