Freight market and tariffs, what will happen?

I may go along with your logic, but Walmart has raised prices on many items just like any other business too...maybe theirs isn't quite as bad due to their ability to purchase in bulk, but when an event has happened, they've passed the buck. They didn't keep eggs at a low price despite bird flu. They didn't keep orange juice prices down despite poor harvests. Tariffs aren't going to be any different. I saw a video of a gentleman that has worked in trade for 20 plus years. The minute costs go up, he emphasized that the country itself doesn't pay the tariffs. Ultimately, it lands onto the consumer. I don't even understand why the powers that be are trying to play hardball with China. The United States really doesn't have that much leverage in my view. They've spent decades outsourcing manufacturing to China and other countries. Not only that, it's not every mineral or item that is found in the United States. It's way deeper than just manufacturing. China is not backing down,
and neither is any other country, that's why the pauses keep coming. I don't really think these folks understand that they are doing nothing but destabilizing the world economy. So yeah get ready for the potential of harder times than covid.

 

I thought it was just the North East in Canada because allegedly their getting strict at the bordee snd some are being turned back. But according to this one driver Jersey area had a slowdown for freight ad capacity is up.

 

If Walmart is a behemoth that can dictate prices to their suppliers, why haven't they already demanded their suppliers drop their prices? A mainly rhetorical question (phrased with maximum sass), but the basic answer is Walmart knows their suppliers have to eat too. Walmart pushes the price point down to a point where they think the customer will buy and they still make a 2-4% profit.

Let's consider an oversimplified hypothetical:

• Widgets INC agrees to sell a product to Walmart at $10 a unit. Walmart's ultimate cost on the item is $19.50 (including existing tariffs, overhead, shipping, ads, etc), and they sell it for $20, leaving a net profit of 2.5% (Walmart's approximate net profit margin over the last 5 years is bounces between 2-3%).
• Let's double Widgets profit margin to 5%. Selling at $10 per unit means they make a profit of .50 cents per unit.
• If the tariff goes from 10% to 25%, the tariff changes from $1 per unit to $2.50 per unit.
• If Walmart is going to force Widgets INC to cover half the cost ($1.25), Widgets goes from making .50/unit to losing .75 per unit. At that point, it doesn't matter how much volume they can pump through Walmart, Widgets INC is going to go bankrupt.

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That's just spitballing numbers, but you get the idea. A 1% increase in tariff inclusive export cost results in a .3% drop in profits. Assuming a pre-tariff profit margin of 4%, a tariff increase of 13 percentage points would wipe out all profit if the producer paid all the increase. The 2018 tariffs showed that most of the cost got passed on to the consumer, the costs assumed by the retailer, importer, and manufacturer ended up reducing investments and wages.

 

If this was a targeted attack on China, you'd have a point. But this is a blanket attack on everyone with little forethought.

Say there are no tariffs and the price for a product is $9.50 from China, $10 from Kenya, and $10.50 from the US. If we make Chinese tariff 25% and the Kenyan tariff 10%, the product now costs $11.85 from China and $11 from Kenya. We will have succeeded in changing the origin of the product at the cost of increasing the price. "But Roger, it's ChEaPeR tO mAkE iT iN the US nOw!" - not by enough to justify the expense of expanding US production, particularly when there is no clear long term strategy and very lukewarm support from Congressional Republicans.

As for "It's hard to imagine people would just stop consuming." That's what happens in a recession.

 

Was looking around for threads where truckers discuss tariffs.... Steel haulers in Ontario, Canada are hurting bad right now. Used to make very good money running Midwest, East coast and now going on two weeks with no work. Carrier I work for is well established too.. .. But there's barely any work. 50% tariffs are screwing everything up.... just sad

 

Sorry to hear that.

With car sales slow and class 8 truck sales slow. That has to hurt steel too.

 

I literally past 3 trucks near London, ON all Skate boards just empty. I was actually thinking of getting into Flatbed a few months back when everything was slow. But, things picked up on thr spot market for Dry van. I figured once 6 to 7 weeks kick in those tarrifs are going to destroy Canadian Flatbed haulers and most will have to figure it out or switch.

 

Well that is good news for the USA haulers. I believe we need more work here in the states. We have way too many trucks on the road for the work right now. Glad to see some come back home. Sorry you guys are losing work as well so don't take that wrong.

 

How do you view this now? So far nothing has changed in prices and we now have a new deal in place with China.