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Tariffs Signal a Trade War; Importers Pivoting West; UPS Under Pressure By Paul Page

The Trump administration is setting the groundwork for a trade war with America's biggest trading partners through an extraordinary array of tariffs due to take effect on Tuesday. The U.S. will impose a 25% levy on imports from Canada and Mexico, a 10% tariff on energy products from Canada, an additional 10% tariff on China, and the administration says there will be no exception to the levies.

The WSJ's Gavin Bade, Anthony DeBarros, Vipal Monga and Santiago Pérez report that the unprecedented action, imposed under emergency economic authority never before used for tariffs, includes a provision to increase penalties if the trading partners retaliate with their own levies. The tariffs threaten to pile on new costs to both U.S. imports and exports. They also add a new, significant layer of uncertainty to long-established supply chains at the heart of a broad range of business sectors.

The retaliation from America's neighbors is already forming. Canada plans a first wave of 25% tariffs on imports from the U.S. that include alcohol, coffee, clothing and shoes, furniture and household appliances. A second wave would include tariffs on cars and trucks, agricultural products, steel and aluminum.

Mexico's government is considering so-called carousel retaliation, which would periodically rotate the U.S. products subject to retaliatory tariffs. This generates uncertainty in U.S. export sectors and has a political impact when hitting sectors such as agriculture that are likely to lobby Congress.

The bigger threat to Canada and Mexico is that a trade war risks pushing their economies into a recession. Both nations are heavily exposed, with 80% of their exports heading to their bigger partner.

Stock futures fell and oil prices rose, in an early glimpse of Wall Street's response to the reality of President Trump's threatened trade wars. (WSJ) The coming weeks will bring confusion to supply chains as businesses consider how to respond. (WSJ) Prices for a host of items could rise under the new tariffs , depending on how much of the costs to suppliers are passed along. (WSJ) The head of the United Auto Workers says he backs the use of tariffs to protect jobs but not to achieve noneconomic policy goals. (New York Times) Beijing is readying an opening bid to try to head off greater U.S. tariff increases and technology restrictions-a sign that China is eager to get trade talks going. Quotable CONTENT FROM: PENSKE Gain Intel. Gain Ground with Penske.

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Economy & Trade

U.S. importers have been putting to work the flexibility they honed during the pandemic. A strong increase in shipments into West Coast ports in 2024 accelerated late in the year, the latest steep swing in container trade that shows importers adjusting their supply chains ahead of potential disruptions. The WSJ Logistics Report's Paul Berger writes the shifts in shipping volumes show how retailers and manufacturers may turn to their battle-tested playbooks as the Trump administration slaps new tariffs on the U.S.'s biggest trading partners.

The ports of Los Angeles and Long Beach, which lost a big share of business following big backups during the Covid pandemic, say inbound volumes surge 22% last year to more than 10 million boxes. That almost equaled the record volumes of 2021, but this time ships and containers moved mostly without backups except for an uptick in rail congestion in the fall. Transportation

Concerns over United Parcel Service's performance are growing, and the worries aren't coming from customers. Instead, the parcel giant's own retirees are raising alarms over the company and the long slump in the company's stock price. The WSJ's Esther Fung reports that UPS alumni collectively have seen billions of dollars of their wealth evaporate as shares have tumbled roughly 40% over three years. That includes the biggest single-day dive ever for the company last week, when UPS said it would shrink its business with Amazon and reset its delivery network.

UPSers take special pride in the business, with many of them putting together decadeslong careers before retiring with special share packages. They're putting CEO Carol Tomé, the first outsider to lead UPS, under pressure to reverse a slide that has come as UPS recasts its delivery under an expensive new labor contract and rapidly changing parcel-sector dynamics.

Italian authorities seized $48.4 million from FedEx's local unit following an investigation into alleged tax fraud. (Reuters) Quotable Number of the Day In Other News

U.S. consumer spending rose a sharp 0.7% in December. (MarketWatch)

South Korea's exports declined 10.3% in January, including a 9.4% drop in shipments to the U.S. (WSJ)

Canada's economy rebounded to grow 0.2% in December after declining 0.2% in November. (WSJ)

Consumer-goods supplier Colgate-Palmolive is projecting net sales will be roughly flat this year. (MarketWatch)

Chemicals giant Dow is cutting 1,500 jobs as part of a $1 billion cost-reduction program. (MarketWatch)

Japan's Mitsubishi Chemical is scrapping plans for a plant in the U.S. (Nikkei Asia)

AstraZeneca dropped plans to build a $557 million vaccine manufacturing plant in the U.K. (Financial Times)

International Longshoremen's Association officials this week start a month-long process of selling members on a new contract agreement. (Journal of Commerce)

Global container shipping alliances reshuffled as Maersk Line and Hapag-Lloyd launched their Gemini joint operation. (Splash 247)

A Swiss court convicted commodities trader Trafigura and its former operating chief on bribery charges linked to shipping deals in Angola. (TradeWinds)

Fourth-quarter profit at ArcBest fell 40.6% to $29 million as daily revenue in the ABF Freight less-than-truckload unit fell 7.6%. (Dow Jones Newswires)

Canadian National's net profit fell 46% as revenue declined 3% and labor disruptions hit operations. (Progressive Railroading)

Japan approved the All Nippon Airways takeover of freighter operator Nippon Cargo Airlines. (Air Cargo News)

CBRE says leases of "mega" distribution centers in the U.S. increased last year. (DC Velocity)

Home Depot bought the 1.4 million-square-foot distribution center it operates near the Port of Savannah. (Atlanta Journal-Constitution)

Whole Foods set new standards for working conditions in its global seafood supply chain. (Supply Chain Brain)

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About Us

Paul Page is editor of WSJ Logistics Report. Reach him at [paul.page@wsj.com].

Follow the WSJ Logistics Report team: @PaulPage , @bylizyoung and @pdberger . Follow the WSJ Logistics Report on X at @WSJLogistics .

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

February 03, 2025 07:03 ET (12:03 GMT)

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