Tariffs and freight rates are two of the most volatile cost factors in global shipping. For shippers, these fluctuating expenses can’t simply be absorbed or passed along to customers without consequences. Staying competitive in today’s global supply chain requires shippers to actively manage these variables, understanding how they intersect and developing strategies to mitigate their financial impact.
The relationship between tariffs and freight rates
Tariffs not only directly influence the landed cost of imported goods but also exert indirect pressure on freight rates. When tariffs rise on specific trade lanes — such as the ongoing U.S.-China tariff adjustments — shippers often shift to alternative suppliers or routes, disrupting established freight flows. This sudden shift creates capacity imbalances, with some lanes experiencing sharp demand spikes while others see reduced volumes. Carriers respond to these shifts by adjusting rates, particularly in spot markets.
The result is a twofold challenge for shippers: they must manage the direct impact of higher duties while also navigating unpredictable freight costs caused by tariff-driven capacity shifts. Shippers who lack visibility into both components risk making decisions based on incomplete data, ultimately eroding margins through reactionary pricing and inefficient routing.
Cost modeling beyond basic freight rates
Standard freight rate monitoring isn’t enough to protect against tariff volatility. Experienced shippers build advanced cost models that incorporate dynamic tariff rates, surcharges, and secondary costs such as customs brokerage fees. These models allow shippers to calculate true landed costs for every shipment — not just the transportation expense — enabling more accurate profitability analysis.
For example, if a company sourcing electronics from Southeast Asia is subject to changing U.S. Section 301 tariffs, its cost model must account for the fluctuating duty rates alongside variable fuel surcharges, carrier General Rate Increases (GRIs), and port congestion fees. Without this holistic approach, shippers might underprice products or miscalculate the financial benefits of supplier diversification.
Leveraging trade agreements and tariff engineering
Experienced shippers don’t passively accept tariff increases but actively explore strategies to legally reduce exposure. This may involve leveraging free trade agreements (FTAs) or re-evaluating product classification under the Harmonized Tariff Schedule (HTS). Known as tariff engineering, this process includes adjusting product designs or packaging to qualify for lower duty rates under existing trade rules.
For instance, minor changes in assembly locations or component sourcing can alter a product’s country of origin, potentially shifting it into a lower-tariff classification. Shippers who work closely with customs compliance experts gain a competitive edge by finding legally sound ways to reduce tariff exposure.
Dynamic routing to balance cost and transit time
Tariff increases often push shippers to rethink established lanes and carrier relationships. In some cases, shifting from direct shipping routes to transshipment through tariff-friendly countries can yield significant savings. However, these changes may come with trade-offs in transit time, compliance risk, and potential added handling costs.
Shippers who utilize an advanced transportation management system (TMS) like nVision Global’s Impact TMS can model these trade-offs in real time. By comparing the fully burdened cost of alternate routes — including duties, transit times, and accessorial fees — they can make informed routing decisions that balance cost control with service reliability. This type of dynamic routing isn’t possible without deep visibility into both carrier performance and tariff schedules.
Data-driven carrier negotiations
Tariff-driven cost pressures also highlight the need for stronger carrier relationships. Carriers facing demand surges on high-tariff lanes have more pricing leverage, but shippers armed with data can negotiate from a position of strength. Historical shipment data, carrier performance analytics, and competitive rate benchmarking allow shippers to negotiate more effectively, securing long-term contracts that hedge against short-term rate spikes.
Additionally, shippers who can demonstrate operational efficiency — such as high trailer utilization, consistent lead times, and accurate forecasting — are more likely to secure favorable rates, even during periods of volatility. This requires more than transactional carrier relationships; it demands collaborative partnerships where both sides benefit from data sharing and process alignment.
Adaptation is a competitive advantage
Tariffs and freight rates will continue to fluctuate in response to global trade dynamics, regulatory changes, and economic shifts. Shippers who embrace proactive cost modeling, dynamic routing, tariff engineering, and data-driven negotiations won’t just survive these changes but will outperform their competitors who react after the fact.