China is a major source of trucking parts and equipment
The next U.S. tariffs aimed at China will not only hit the intermodal and dray market in terms of freight carried, but could also directly affect the wallet in other ways.
As such, chassis providers and carriers fighting back against the tariffs which could raise costs on a host of equipment.
The U.S. Trade Representative is taking testimony from U.S. businesses starting this week on how they will be impacted by or should be excluded from the next round of tariffs targeting $200 billion in goods imported from China.
Those tariffs come on top of the two rounds of earlier tariffs on $50 billion in Chinese imports.
The testimony comes as talks over settling the trade disputes between the two largest global economies appears stalled. President Donald Trump says that there will be no quick detente reached between the U.S. and China.
Regarding progress on trade talks with China, “I don’t anticipate anything coming of it this week,” Trump told Reuters.
The stakes appear to be only getting higher as the U.S. Trade Representative is extending the testimony period to September 6 as the White House says it wants to increase the proposed tariff rate from 10% to 25%.
Once the last comments have been received and a final list of goods subject to tariffs is published, it can be just a matter of weeks before U.S. Customs and Border Protection starts enforcing the tariffs.
While the tariffs aim to help U.S. businesses, many business are signaling their opposition. Despite evidence of China’s theft of U.S. intellectual property and the significant trade barriers that country puts up, the U.S. Chamber of Commerce said in July “the escalating tariff threats made by the Administration will not effectively address or advance our shared goal of changing these harmful Chinese practices.”
The intermodal and dray industry is also opposing the tariffs due to potential for higher operating costs.
The U.S. has imported close to $2.2 billion worth of tires for trucks and buses through the first half of 2018, according to the U.S. International Trade Commission. That’s up 11% from the same period last year with China the second largest source of tires and one of the fastest growing sources of non-U.S. tires.
Imports of parts for trucks and other commercial vehicles has also reached $2.2 billion through the first half, up 12%. China accounted for over half those imports. While Mexico is the largest supplier, China is the second largest source of U.S. chassis imports, the total of which are up 18% this year to $914 million.
This Friday, leading players in the intermodal equipment market are expected to testify about the effect of tariffs on their industry.
Jeffrey Dudenhefer, executive vice president of the North American Chassis Pool Cooperative, is scheduled to testify that the “proposed tariffs would not be practicable or effective to obtain the elimination of Chinese government acts (and) the negative impact of the proposed tariffs on our industry and U.S. consumers.
Direct Chassislink vice president Jimmy Heidenreich, whose firm runs a chassis fleet of 207,000 in the U.S., is also expected to testify about the damage to the industry coming from higher tariffs.
Gregg Carpene, executive vice president of TRAC Intermodal, submitted a request to testify before the U.S. Trade Representative this week about the new tariffs.
The New Jersey-based firm, with an active fleet of 180,000 intermodal and marine chassis, said in its request to testify the tariffs on chassis, parts, tires and wheels “would not be practicable or effective to obtain the elimination of China's alleged unfair acts, policies, and practices, and would cause disproportionate economic harm to U.S. interests, including those of TRAC.”
Carriers, likewise are looking to stop the tariffs from going forward. Andres Rubio of California-based Maximum Direct Transport said in written testimony “there are too many factors already imposed to the trucking community” with dray rates unlikely to support additional costs.
“The proposed increase to the potential tariff on container chassis from 10% to 25% would be detrimental to our operational cost and would lead to loss of business as our beneficial cargo owners would not sustain additional rate increases,” Rubio said.