Shipper groups warn tariffs could slow supply chain, raise prices

(Editor's note: This story has been updated to include today's White House announcement of a one-month tariff exemption for automakers associated with the USMCA.)

Several trade organizations representing shippers are sounding the alarm about the impact that the Trump administration's tariffs on imports from Canada and Mexico will have on the North American supply chain and U.S. economy.

Today, President Donald Trump announced this afternoon a one-month exemption on tariffs against Canada and Mexico for cars. The announcement followed the president's conversation earlier today with leaders of Ford Motor Co., General Motors Co. and Stellantis. The one-month tariff exemption will be for automakers associated with the U.S.-Mexico-Canada trade agreement (USMCA), The Hill reported.

As of yesterday, all imports from Mexico and Canada are subject to 25% tariffs, except for certain Canadian energy imports that are subject to 10% tariffs. The administration also placed 10% tariffs on China, which is in addition to the 10% tariffs imposed in February. 

Trump has said the tariffs are necessary in part to pressure countries into stopping undocumented immigrants and fentanyl from entering the United States.

Canadian Prime Minister Justin Trudeau said there is no justification for the new tariffs, noting that less than 1% of fentanyl intercepted at the U.S. border comes from Canada. As a result, Canada will enforce 25 tariffs against $155 billion of American goods, starting with tariffs on $30 billion worth of goods immediately, and tariffs on the remaining $125 billion on American products in 21 days’ time. 

Since Trudeau's announcement, Mexico and China also have slapped retaliatory tariffs on U.S. goods.

Automakers have said the tariffs would increase the price of some vehicle models by as much as 25%. Some auto parts can cross the border six or more times before final assembly, noted John Bozzella, who leads the Alliance for Automotive Innovation that represents all major automakers in the United States except Tesla, Reuters reported. 

"You just can't relocate automotive production and the supply chain overnight. That's the challenge and the dilemma: auto tariffs in North America could end up increasing costs on consumers before jobs come back to the country," he added, according to Reuters. 

The American Automotive Policy Council (AAPC) stated that its members' vehicles and parts meet the U.S.-Mexico-Canada Agreement's "stringent domestic and regional content requirements" and therefore should be exempt from the tariff increase.

"Our American automakers, who invested billions in the U.S. to meet these requirements, should not have their competitiveness undermined by tariffs that will raise the cost of building vehicles in the United States and stymie investment in the American workforce, while our competitors from outside of North America benefit from easy access to our home market,” said Matt Blunt, president of AAPC, which represents Ford Motor Co., General Motors Co. and Stellantis.

Meanwhile, members of the American Soybean Association maintained their view that tariffs will threaten their markets and raise costs for farmers.

"Farmers are frustrated. Tariffs are not something to take lightly and 'have fun' with. Not only do they hit our family businesses squarely in the wallet, but they rock a core tenet on which our trading relationships are built, and that is reliability," said Caleb Ragland, American Soybean Association president and soy farmer from Magnolia, Kentucky, in a prepared statement. "Being able to reliably supply a quality product to them consistently."

The Alliance for Chemical Distribution (ACD) raised concern about the economic impact its members and related manufacturers will face due to the retaliatory tariffs.

"These tariffs will not only drive up costs for American businesses and households, but may also impact the availability of products that are critical to production. When these products become too expensive to import and domestic alternatives remain unavailable, the repercussions will be felt throughout industries nationwide," said ACD President and CEO Eric Byer.

The American Association of Port Authorities (AAPA) said the tariffs will slow the flow of goods and increase costs for American businesses and consumers.

"Tariffs are taxes,” said AAPA President and CEO Cary Davis. “Though the port industry supports President Trump’s efforts to combat the flow of illicit drugs, tariffs will slow down our supply chains, tax American businesses and increase costs for hard-working citizens. Instead, we call on the administration and Congress to thoughtfully pursue alternatives to achieving these policy goals and exempt items critical to national security from tariffs, including port equipment."

The Association of American Railroads did not express an opinion on the Trump tariffs. However, a spokesperson reiterated the role railroads serve in North American trade.

"Railroads play a critical role in connecting U.S. businesses with the global supply chain with AAR analysis indicating that 38% of all rail traffic – or 11.3 million shipments in 2023 – directly tied to trade-related activity," the AAR spokesperson said.

"These shipments connect major industries, small businesses and farmers to global markets generating economic activity across the country. The industry’s primary focus is and will continue to be providing customers with cost-effective, efficient service that allows them to grow and compete into the future," the AAR spokesperson added.