Talk of federal tariffs has been inescapable over the past few months - mainly in relation to the U.S. trade war with China. New talk of a tariff on Mexican products has been added to the mix. President Trump announced, effective June 10, the U.S. will impose a 5% tariff on all goods imported from Mexico. The tariff is set to increase to 25% by October if Mexico does nothing to halt “its illegal flow of aliens to the U.S.” The proposal of a 5% tariff on Mexican goods, and the potential for it to increase to 25% over the next several months, has shippers worried about what this could mean for their businesses.
For some shippers, Mexican products are a substantial portion of their business. But a tariff could greatly reduce Mexican products coming through their warehouses. So, what does this mean for shippers in the logistics industry, and what can they do to keep their business safe in an uncertain economy? Much of it comes down to thinking ahead:
1. Shippers should expect cancellations. While it seems counterintuitive to expect the worst, it is better to be prepared than caught off-guard. Even though no Mexican tariffs are official as of now, that doesn’t mean customers aren’t aware of it. As a precautionary measure, customers may cancel shipments they have already scheduled. Anticipate this and be proactive. Reach out to customers before they have a chance to cancel their shipment and talk through a solution together – this could save the shipment from being cancelled!
- Think about the domino effect. It’s rare that a tariff is imposed on a country without a response from that country. By imposing a tariff on Mexico, Mexico could likely respond with a similar tariff on the U.S. If this happens, carriers will not only be dealing with cancelled shipments but could also have less product to ship to Mexico and the Southwest because of decreased demand both ways.
To prevent this from happening, start thinking of ways to acquire new business now. Another potential solution: some Mexican firms may relocate to the U.S. to avoid these tariffs. In that case, would it make sense for your business to form a contractual partnership with them? These are things to start considering.
- Customer relationships, customer relationships, customer relationships. This relates back to the point made above: Work on building relationships with new customers to hopefully acquire new business, and— even more importantly— nurture relationships with existing customers! During times of economic uncertainty, customers may look to take their business elsewhere as a cost-reduction measure. Don’t let your customers leave you. Make sure to go above and beyond for customers and continue to consistently demonstrate value. A loyal customer who appreciates and understands the value you add is less likely to part ways with you, even in times of economic uncertainty.
While it is important to think ahead and nurture customer relationships, it becomes even more important during times of economic uncertainty. Follow these tips to ensure business continues to thrive, even with potential tariffs looming.