Letter from the Editor
Breakbulk & Project Cargo
“ It ’ s plan for the worst , hope for the best .”
War footing
By Carly Fields
The uncertainty around the Trump administration ’ s tariff policy is playing havoc with the project cargo sector , with shippers warning of disruption down the line for projects already committed .
Engineering , procurement and construction ( EPC ) companies speaking to the Journal of Commerce say that tariffs that are enforced after project costs are finalized impact the bottom line and , in some cases , destroy the viability of a project , hitting volumes in the breakbulk trade .
On his first day in office , President Donald Trump gave numerous directives to the heads of government agencies charged with shaping US trade policy . While new tariffs were not announced , a Presidential Memorandum defining an “ America First Trade Policy ” published Jan . 20 laid the groundwork for wide-ranging tariffs that will impact the global trade landscape .
EPCs work many years in advance and lock in prices for products and provisions well ahead of project delivery .
“ We have suppliers in Mexico , Canada and all over , so it is definitely affecting our choices and our selection ,” Geanean Ordonez , project logistics manager / procurement at EPC Technip Energies , said during a Journal of Commerce webcast Jan 23 . The enforcement of tariffs will “ definitely affect how we purchase in the future ,” she added .
The real difficulty comes for projects that are ongoing with purchase orders already in place . “ Then , all of a sudden , there are additional tariffs for the countries that we ’ ve selected ,” Ordonez said .
The initial focus for the Trump administration ’ s tariff interest are Mexico , Canada and China . Trump has threatened 25 % tariffs on Canada and Mexico from Feb . 1 , with higher amounts on imports from China . But that could just be the start of issues from the project cargo sector .
“ We have to think about retaliatory tariffs ,” John Hark , director of Bertling Logistics and adjunct professor at Texas A & M Galveston , said during the webcast . “ We need to be prepared now in case these tariffs are enacted and start thinking about what the ramifications are .”
Hark also pointed to the threat associated with the renegotiation of trade agreements , such as the US-Mexico-Canada Agreement ( USMCA ), passed in Trump ’ s first term to replace the longstanding North American Free Trade Agreement ( NAFTA ). During his campaign last year , Trump said he would invoke the renegotiation clause of USMCA if elected .
Notwithstanding the outcome of United States ’ trade policy investigation , Hark said that projects would not switch to being USbuilt overnight . Likewise , “ tariffs are probably coming , but it ’ s not as sudden and immediate as we expected .”
“ It ’ s plan for the worst , hope for the best ,” Andrew Young , corporate logistics manager at EPC Bechtel , said on the webcast .
While he acknowledged some of the tariff talk is “ bluster ,” from a project perspective , Young said shippers need to “ chase down everything ” to see how it affects their supply chains .
“ We know tariffs are complex , depending on your market , your equipment and where your suppliers are based ,” he said . “ But 25 % for products from Mexico and Canada from Feb . 1 , 10 % rest of the world ? That ’ s something we ’ ve really got to scrutinize .”
email : carly . fields @ spglobal . com
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