Analysis: Companies race to ship goods to the US ahead of potential tariffs

Applied Industrial Technologies

30/01/2025 13:51

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      From cheese to cars, manufacturers worry about tariffs 
    

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      Companies have expedited US deliveries
    

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      Clothing company has set up 'tariff taskforce' -CEO
    

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      Trump has threatened duties on imports from Mexico and
Canada
from Saturday
    

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      Tariffs could derail global trade, fuel inflation 
    

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      Some execs say front-loading risky; storage costly
    

  
    By Arriana McLymore, Helen Reid, Emma Rumney
       NEW YORK/LONDON, Jan 30 (Reuters) - In recent months,
plenty of business executives have said they were taking a
wait-and-see approach to U.S. President Donald Trump's broad
threats of tariffs. Early holiday-quarter earnings reports show
many of them were not. 
Automakers like General Motors  GM.N  and Mercedes  MBGn.DE ,
French cognac makers, and Italian producers of parmesan cheese
and sparkling wine have all expedited deliveries to the United
States. Commodities buyers meanwhile stepped up purchases of
steel, aluminium, and soybeans.
    "We see companies currently front-loading their imports into
the U.S.," said Patrick Lepperhoff, managing director at supply
chain consultancy Inverto in Cologne.
    "They have modelled scenarios on how much they could be hit
by tariffs, and decided quite broadly to import the volumes in
order to be covered for a certain time."
Executives have described to Reuters and on conference calls the
challenges of an environment made more uncertain by Trump's
shifting plans for tariffs that could upend world trade and
prompt some companies to move production to the United States.
Even before he returned to office this month, uncertainty
motivated businesses to rush shipments. The U.S. trade deficit
spiked to a record $122 billion in December as goods imports
rose 4% and exports dropped 4.5%.        
    PacSun, which sells casual clothing for teens and young
adults, is one of many retailers importing goods.
    CEO Brieane Olson told Reuters the privately-held company
had brought in a portion of its first-quarter sales earlier as
part of contingency plans. It also has a "tariff taskforce" that
meets twice a week to work with suppliers on the issue. 
    "PacSun has a very proactive plan for what we can do to help
our suppliers and vendors best," Olson said.
Trump's threats have ranged from possible 100% to 200% fees on
cars from Mexico to universal tariffs on all imported goods.
    A test of his resolve will come on Saturday, when the U.S.
president has said he plans to introduce duties on imports from
neighbours and major trade partners Mexico and Canada. 
Numerous sectors could be affected. The U.S. imported about $844
billion in goods from Canada and Mexico in 2024, about 28% of
all imports, according to U.S. federal data.
Efforts to prepare have already given some companies a boost.
German chemical company Lanxess  LXSG.DE  said fourth-quarter
profits were significantly better than expected due to advance
buying by U.S. customers. 
    Italian producers have shipped more Parmigiano Reggiano
cheese to the United States, according to the industry's trade
association, which said it hopes to get exemptions for its
premium foods.
    Overall U.S. imports of 20-foot containers surged in
November and December to the busiest since 2021. 
    Traders in Tampa and Houston bought steel from South Korea,
Japan and Turkey, anticipating tariffs on Trump's first day in
office, said Jose Severin of The Mercury Group, a commodities
supply chain consultancy. That left large quantities of steel in
warehouses and ports, causing bottlenecks and raising costs.
    "We could re-route supply from our Canadian smelters to
Europe. While it is an advantage to have this optionality, it
certainly is not a benefit for our customers and supply chains
like them," Alcoa  AA.N  CEO William Oplinger told investors
earlier this month.
     
    ASSEMBLY LINE
The automotive sector is particularly exposed to Canada and
Mexico, where many companies built factories to tap relatively
cheap labour close to the lucrative U.S. market following the
1994 North American Free Trade Agreement. 
GM accelerated shipments from its facilities there in Q4. 
    "Every delivery that we can make before a tariff is
instituted, it's that much better ... than sitting on
inventory," said GM chief financial officer Paul Jacobson.
    All of Japanese automaker Toyota Motor's  7203.T  Tacoma
model pickups sold in the United States - more than 200,000
units a year - come from Mexico. A person close to the company
said before November's election that tariffs could cause Toyota
to shift production to its San Antonio, Texas, assembly plant.
    Nearly 40% of S&P 500 earnings come from overseas, according
to LSEG, whose data shows the sectors with the highest foreign
exposure - tech, consumer discretionary goods and industrials -
have talked the most about supply chains and reshoring. 
     
    COLLECTING DUST?
    Some companies are not advancing orders without certainty
over demand.
    Privately-held toy maker MGA Entertainment has not shipped
in extra product, according to CEO Isaac Larian, who said he'd
voted for Trump. Its key holiday season is over and storing
extra inventory is costly.
"The toy business is a fashion business. It changes all the
time," Larian said. "We can't buy that much inventory in
anticipation of duties."
    The drinks industry faces something similar, as sales fall
across the sector. Some were also burned when they stocked up at
the outset of the president's first term.  
    When Trump threatened tariffs on champagne in 2019. U.S.
wine importer Old Bridge Cellars (OBC) spent "a fortune" on a
year's worth of fizz, company president Rob Buono said, only to
be left with pricey stock when it was excluded from tariffs.
    That experience means he would only buy extra now if tariffs
were confirmed. 
    OBC cleared the excess inventory during COVID, when supply
issues meant large champagne producers were regularly unable to
meet demand.  
    "We got lucky," Buono said.  
     
       
     

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U.S. container import volumes rise ahead of potential tariffs   
https://reut.rs/3CpmEyb
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(Additional reporting by Jessica DiNapoli in New York, Kalea
Hall in Detroit, Norihiko Shirouzu in Austin, and Divya
Rajagopal in Toronto, Elisa Anzolin in Milan; Writing by David
Gaffen; Editing by Josephine Mason and Catherine Evans)