Supply Chain News Roundup: Truck Tariffs and More

Among the latest in tariffs: The Trump administration has announced a 25 percent tariff on imported medium- and heavy-duty trucks that is set to start November 1. Delivery trucks, school buses, garbage trucks, transit vehicles and semi-trucks are some of the types of vehicles impacted.

The move is a continuation of President Donald Trump’s push to bring manufacturing back to the U.S. and protect American industries and business. It is expected to benefit such manufacturers as Peterbilt and Kenworth, owned by Paccar, and Daimler Truck-owned Freightliner, according to various news sources.

“Under trade deals reached with Japan and the European Union, the U.S. has agreed to 15 percent tariffs on light-duty vehicles but it is not clear if they will face that rate for larger vehicles,” Reuters reported. “The Trump administration has also allowed producers to deduct the value of U.S. components from tariffs paid on light-duty vehicles assembled in Canada and Mexico.”

In a May letter to Stephen Astle, director, defense industrial base division in the Office of Strategic Industries and Economic Security at the U.S. Department of Commerce’s Bureau of Industry and Security, the U.S. Chamber of Commerce contended that manufacturers should not be penalized with tariffs on imports from Mexico and Canada.

The two countries are “top sources for parts used in the manufacture of medium- and heavy-duty trucks — accounting for 53 percent of total U.S. imports in the sector last year — many such trucks built in Mexico have U.S. powertrains, which is a huge part of the overall vehicle cost,” the letter said. 

25-Year-Old Trade Agreement Has Expired

In other tariffs news, long-standing legislation with certain African nations has expired. The law granted duty-free access to the U.S. market for Lesotho and other sub-Saharan countries.

Trump had been amenable to extending trade agreement, called the African Growth and Opportunity Act (AGOA) and enacted in 2000, for at least another year, The Washington Post reported. It was last extended 10 years ago.

Given the government shutdown and focus on reciprocal tariffs, the article stated, the law lapsed before it could be extended. “By the time Trump got around to expressing support for an extension — a view the White House confirmed in an email (last) Tuesday — it was too late to prevent it from lapsing at midnight. Old trade duties, some very large, snapped back into place,” the article states.

Steven Lamar, president of the American Apparel and Footwear Association, told The Washington Post that the agreement has served as “a litmus test for the strengths of the U.S.-Africa trade partnership.” It also has signaled that the U.S. wants to engage with African countries, he said.

A Reuters article noted bipartisan support for renewal of the agreement. Since the agreement lapsed, there has been concern over jobs in the impacted countries.

Survey: Tariff Implications on Large Companies

The latest KPMG Tariff Pulse Survey found that tariffs are continuing to cause uncertainty, increased prices, sinking margins, and hiring and investment pauses.

Other findings:

• Sixty-three percent of survey respondents say they are considering reshoring, but only 10 percent have taken action.
• The main obstacles to reshoring were cited as higher labor costs, higher operating expenses and capital investment needs.
• “While 60 percent of businesses reported decreased overseas sales, this marks an improvement as only 22 percent experienced declines between 16-25 percent, a 5 percent drop from a 27 percent in the July survey,” according to a KPMG press release.
• Nearly four in 10 businesses say they have experienced gross margin declines in the six months since the “Liberation Day” reciprocal tariffs.

“Despite efforts to optimize supply chains, we continue to see profits decline due to increases in tariffs,” said Brian Higgins, U.S. sector leader for industrial manufacturing at KPMG, in a press release. “Uncertainty is not going away. Instead of taking the wait-and-see approach, U.S. businesses need to invest now in driving meaningful productivity gains as well as to help build resilience.”

KPMG surveyed 300 U.S.-based C-suite and business leaders representing organizations with an annual revenue of US$1 billion or more.

(Photo credit: Getty Images/Joel Carillet)