Master US Logistics Amid Tariff Wars: Exporter’s Guide
Trump swore his 47th presidency on 20th January, making his comeback to office. But little did we know that would hint to the whole world about his tariff hike plans. In his initial moments, he famously declared that he would overhaul the entire US trade system to protect American workers and families. Sometimes he claimed, "If they tax us, we tax them the same amount" yet at other times, he lashed out at India, labeling it a tariff king. By pushing forward with his ‘America First’ policy under the name of protecting U.S. jobs, Trump was really setting the stage for a bigger logistics strategy.
Despite this aggressive posture, the U.S., still the world’s largest economy, continues to import more than it exports in terms of logistics value. Countries like India, China, and the European Union, all major players in global trade, have found themselves on high alert, constantly recalibrating strategies to protect their own economic interests. The Indian ministries are on the watch, analyzing every possible trade scenario and preparing for any move by the U.S. to intensify tariffs. As the dust of the tariff war begins to settle, the world is now tasked with adapting to new trade realities.
This blog is all about the key takeaways from the tariff war, India’s game plan to outsmart, and how an export company can fine-tune its logistics strategy.
Trump’s Tariff Strategy: A New Global Logistics Battle
Trump has vowed to roll out a 25% tariff on imports from Mexico and Canada and an extra 10% on Chinese goods, after his post-election victory. But let’s be real - this isn’t his first tariff rodeo. Back in his first term, Trump went head-to-head with China in an all-out trade war, imposing steep tariffs on over $360 billion worth of Chinese imports. In response, China fired back with retaliatory tariffs on U.S. goods, escalating global logistics tensions.
On his social media platform, 'Truth Social,' Trump had already fired warning shots at China, Canada, and Mexico, hinting at steeper tariffs aimed at more than just trade imbalances. His goal was to address broader issues, including illegal immigration and drug trafficking. Then came the ultimate shocker. On January 20, Trump went all in threatening 100% import tariffs on BRICS nations (Brazil, Russia, China, South Africa, and India) if they dared to reduce dollar dominance in global trade. This bold move is set to reshape logistics dynamics, especially for an export company on a global scale.
India’s Strategy: Tackling US Tariffs with Precision
Let’s just say India has been optimistic about the USA tariff tantrums. Right after the Trump victory last year India began a detailed sector-wise analysis, drawing upon multiple scenarios to be prepared for any logistics bottleneck coming our way. Back in round one, Trump implemented national security provisions to impose a 25% tariff on steel and a 10% tariff on aluminum.
India's government is weighing its options, including striking a trade deal, slashing tariffs, and ramping up import logistics. Officials in Narendra Modi's administration have mapped out different strategies to counter any moves the new Trump administration might make to reduce India’s $35.3 billion trade surplus with the US for the year ending March 31. As the US stands as India’s largest trading partner, PM Narendra Modi is strategizing to stay ahead in the tariff game.
- Indian and US diplomats are teaming up to arrange a meeting between Prime Minister Narendra Modi and President Donald Trump this February. As a key partner in countering China’s influence, India is keen to boost trade ties with the US. Strengthening these relations is likely to top the agenda when the two leaders sit down together. This could be a "preferential trade cum investment deal," which is more ambitious than any mini-trade deal and foster opportunities for export companies.
- The government is working on boosting its logistics with the US. The plan is to reduce tariffs on key products like bourbon whiskey, agricultural goods, and steel to create a more balanced trade. At the same time, India plans to increase imports from the US, focusing on essentials like soybeans, dairy, vehicles, medical equipment, and even aircraft. By striking the right balance, the hope is to make trade more beneficial for both ends. The fact that Trump could be a tough negotiator is well known. But India also has a history of negotiating with him.
- India is making a major push to become the preferred alternative to China in global logistics. This strategy is especially appealing as companies seek to hedge against the risks associated with manufacturing in China. The bet is heavily on industries like ready-made garments, automotive components, and high-end engineering goods, which are poised to benefit from this shift. The government already has a ‘Make in India’ Scheme or PLI scheme that can ramp up their manufacturing capabilities.
Sector-Wise Breakdown of U.S. Logistics Export Value
- Engineering goods: $17.6 billion
- Electronics: $10.0 billion
- Gems and jewelry: $9.90 billion
- Drug formulations and biologicals: $8.72 billion
- Petroleum products: $5.83 billion
- RMG cotton including accessories: $4.71 billion
(Estimated value as per IBEF)
How Exporters Can Thrive in a Tariff-Heavy World
All tariff news has been nothing but a wake-up call for export companies. The only way out is to understand the vulnerabilities in each of the sectors and adapt or pivot quickly if needed. Let’s see what the logistics future holds.
US-Chain Trade War: An Opportunity in Disguise
A new round in the US-China trade war could open the window of opportunity, shifting investments and manufacturing away from China. Sectors such as electronics, hi-tech machinery, textiles, footwear, and chemicals stand to gain if the US imposes higher tariffs on China. With a 10% tariff on China, India must rapidly diversify its manufacturing, sourcing strategies, and logistics operations to reduce dependence on a single market.
Mexico & Canada Tariff Hike: Your Chance to Shine
If the U.S. slaps additional tariffs on Mexico and Canada, industries such as automotive and agriculture could face major challenges. However, exporters can explore increasing their footprint in sectors such as automotive, agriculture, and IT services. Ultimately, those who act swiftly will gain the upper hand.
Duty Engineering: Make Tariffs Work for You
An export company can restructure its pricing and logistics strategies to reduce the impact of tariffs. By using free trade zones and government incentives, they can minimize additional costs. This tactical approach will enable them to remain cost-competitive in global markets.
Pass It On: Smart Pricing Strategies
Another effective approach is strategically passing some of the tariff costs onto customers. This can be done through adjusted pricing based on market conditions, ensuring that profits remain intact while still covering the increased costs due to tariffs.
Strategic Sourcing: The Ultimate Power Move
A critical move is to diversify sourcing, manufacturing, and logistics to tariff-friendly regions. This could include relocating production to countries with lower tariff rates or closer trade agreements. The focus should be on optimizing the total cost of ownership, considering long-term savings versus short-term investments.
Beyond China: Build New Logistics Alliances
Expanding supply sources to countries like Europe, the Middle East, or Africa offers opportunities to build resilient and diverse logistics networks. These new supplier alliances can mitigate risks associated with global trade disruptions, ensuring smoother operations in the face of tariff challenges.
To Conclude
By now, it’s clear that the stakes are high and so are the opportunities. To make the most of these shifts, you need a trusted logistics partner by your side. At Kenshine, we leverage our expertise in international logistics to help an export company navigate complex tariffs, optimize supply chains, and ensure seamless cross-border trade. We have been delivering premium freight forwarding services for more than a solid 3 decades. Our inside track on international logistics with connections and expertise that can help you reach every corner of the world.
