As of now, a recession does not appear imminent, but it is clear that U.S. business momentum is slowing, and economic uncertainty continues to rise heading into the fourth quarter, according to a monthly report from ITS Logistics.
The assessment comes as industry professionals prepare for the start of the domestic logistics peak season, further evaluate strategies related to customs arbitrage, evaluate bottom-line opportunities, search for new warehouse locations across the United States, and evaluate the trucking sector’s capacity gains, the Reno, Nevada-based company said in its “Supply Chain Report.” For the month of September for Intelligent Transportation Systems.
A clear sign of this volatility is the end of the de minimis exemption, which before August 29 allowed packages worth less than $800 to enter the country free of customs duties and taxes. Its recent cancellation leaves many direct-to-consumer markets scrambling to adjust their peak season strategies ahead of the fourth-quarter holiday shopping rush, ITS said.
To deal with these rising shipping rates, many retailers have turned to a “tariff hacking” strategy known as business-to-business-to-consumer (B2B2C), ITS said. In a move to stave off the Trump administration’s import tax hike, retailers are routing customers’ e-commerce orders to a third-party wholesale platform that acts as an intermediary, allowing shippers to save 30% to 60% by paying tariffs on wholesale prices instead of retail margins.
“We are now seeing e-commerce companies implementing a tariff arbitrage strategy in response to ongoing changes in global trade,” Josh Allen, chief commercial officer of ITS Logistics, said in a statement. “These companies include everything from the luxury sector to those offering what are considered low-value goods. This strategy is being leveraged to mitigate the effects of changing tariffs and keep overall costs low for their customers. It is an ingenious development in how companies are adapting to the economic impacts of tariffs and global supply chain management in general.”
The report also tracks the country’s high inflation rate, which stood at 3.1% for August, well above the Fed’s target of 2%. This statistic indicates a small but noticeable upward movement in costs or prices within the warehousing and warehousing industry, ITS said.
“As a result, companies that rely on warehousing and warehousing services should expect costs to rise slightly going forward, especially those with contracts that have variable labor or utility components. As for the trucking sector, spot and contract prices are still seeing slight shifts at the beginning of the peak season,” Allen said. Peak, indicates a continuous truckload environment.”
