301 Tariffs Adding to Inflation and Transportation Prices

Sep 20, 2022Market Advisory

After the Section 301 tariffs were implemented, transportation costs and inflation began to rise. The question of whether to keep or remove the tariffs was put to the importers and businesses affected. Surprisingly, there was an overwhelming response to keep them, despite the costs associated, as those costs are typically passed straight to consumers by retailers.

Section 301 Tariffs

The Section 301 tariffs deal with technology transfer, intellectual property, and related innovation policies and practices. The 301 duties were ordered and added a 25% increase on $250 billion worth of Chinese imports. Domestic industries benefiting from the tariff actions have requested these tariffs continue. It costs roughly $4,782 per Forty-foot Equivalent Unit (FEU) to ship from Shanghai to Los Angeles, and paired with rising inflation and the 25% duty, things start to add up. After not expiring on the fourth anniversary date of inception, the US Trade Representative (USTR) is going forward with the next steps as provided in the statute. The formal notice of the continuation can be found here, while future notices will detail the next steps in the four-year review process.

The tariffs increase the overall cost of imports from China, and between this, the cost of spot rates rising, and inflation, cargo is expensive to import from China. The importers would again have the advantage if cargo costs and duties were lower since consumers are driven to spend when prices decline. Tariffs directly impact consumer behavior.

The Future of Section 301 Tariffs

However, with reshoring and nearshoring, the US market is finding workarounds. Reshoring brings back offshore jobs to the US, and nearshoring moves outsourced work closer to home. This could also make way for more antidumping cases and force US manufacturers to create new ways to compete with the surge of lower-priced imports.

The reviewing tariffs could take months and likely won’t have a resolution before the midterm elections. The Biden Administration considered the removal of the Section 301 tariffs to reduce inflationary pressures, but the consideration was put on hold following China’s military maneuvers near Taiwan after Nancy Pelosi, the Speaker of the House, visited the island.

“The Office of the US Trade Representative announced a tariff review [September 2nd] that will allow businesses the opportunity to seek relief by weighing in on whether they think any particular tariff is costing US jobs or competitiveness,” says Bloomberg.

While inflation, transportation rates, and the duty rate will remain unchanged for the foreseeable future, TOC Logistics International will tap into its supply chain expertise to find and develop customized solutions for you and your business. With our air and ocean freight options, we will increase efficiencies and boost savings with our consolidation programs. Optimize your supply chain with TOC Logistics today. If you have any questions, contact your local TOC Logistics representative for more information.


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