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As a newly re-elected President Trump prepares to reshape US economic policy, the US pallet market faces a blend of opportunity and uncertainty. Here’s how key policies and proposed shifts in trade, immigration, housing and economic regulation could impact the industry over the coming term.
Trump has signaled a willingness to re-engage with aggressive tariff strategies, potentially imposing tariffs of 10%–20% on all imports and 60-100% on Chinese goods. Drawing from his previous term, where nearly a year passed between initiating a case against China and enforcing tariffs, manufacturers in industries that are likely to be affected should have plenty of time to ready their supply chains, even if this intermittent period is shortened this time round due to a more organized and coherent political apparatus surrounding Trump for his second term.
As all economists like to point out, tariffs have historically pressured trade costs upward, causing international shipping rates to surge as US businesses frontload imports in anticipation of increased fees. Higher shipping rates will also be exacerbated at the start of 2025 with the Lunar New Year and the deadline for the ILA strike on January 15th where both sides are no closer to reaching an agreement.
Although Trump has previously stated that “American workers should be able to negotiate for better wages, especially since the shipping companies are mostly foreign flag vessels,” if the strikes go on for too long then it would come at odds with his staunch stance of high economic growth, so industry players should remain alert to signals on what his position is on these strikes now that he’s been elected.
For the pallet industry, a frontloading period – due to impending tariffs and an unresolved dockworkers’ negotiation – could mean an early-year boost in pallet demand as importers rush to stock up before tariffs take effect. However, any prolonged tariff imposition would likely lead to a decline in pallet demand as the cost of imports deters volume. That being said, once Trump has signaled which products will be tariffed coming into the US, the pallet manufacturers that supply to industries benefitting from this protectionism stand to see a rise in demand for their pallets.
Increased tariffs on China and other trade adversaries may accelerate the trend of supply chain nearshoring, with a significant shift toward Mexican manufacturing already evident in recent years. Mexico now ranks as the leading supplier of US imports, thanks to proximity and the relative trade benefits under the USMCA agreement. As Trump seeks to renegotiate the USMCA, US pallet producers could see mixed impacts: on one hand, reduced reliance on overseas suppliers could spur US manufacturing, but on the other, it may disrupt cost structures as tariffs reshape supply chain decisions.
Trump’s housing policies, aimed at opening federal lands and reducing regulatory barriers, reflect an ambitious plan to spur construction and housing availability. However, the availability of federal land often doesn’t match regional housing needs – as the areas where most of the federally owned land is situated are not where people typically want to live. While loosening regulations could potentially reduce construction costs, the effect on pallet demand may be constrained by geographic limitations and the feasibility of mass housing expansion in desired areas.
Meanwhile, the president’s stance on immigration could indirectly affect the pallet sector. A significant reduction in immigration, and potential deportations, could tighten the labor market and raise wage pressures. Given that wages in the pallet sector have recently cooled after a prolonged increase since 2020, we’ll likely see another reacceleration in wage growth and difficulty sourcing labor should Trump implement his immigration policies touted on the campaign trail. Nevertheless, mass deportations will likely face opposition from business leaders wary of labor shortages and cost increases, suggesting that any policy changes in this area may be moderated.
Higher tariffs, coupled with Trump’s proposed tax cuts, are expected to put upward pressure on inflation. The resulting increase in consumer prices may be manageable if the Fed continues with rate adjustments, though mortgage rates have already climbed in anticipation of deficit-driven inflationary effects. The combination of inflation risks and higher interest rates could affect sectors tied to residential construction, particularly in high-cost regions, potentially softening pallet demand from the construction industry.
However, there is reason to believe that tariffs could be used as a negotiating tool rather than implemented in full force. Trump’s previous administration demonstrated a pattern of using tariffs strategically, suggesting that trade concessions from partner countries may ultimately alleviate some inflationary concerns.
With all this being said, where interest rates land is the main gauge that those in the pallet industry should keep an eye on. Many economists, including JPMorgan chief US economist Michael Feroli, suggest that the broader economic outlook for 2025 may not be significantly altered by a Trump presidency. While potential drawbacks from renewed tariffs could impact trade costs and demand, these may be counterbalanced by positive market sentiment and economic activity spurred by anticipated deregulation efforts. The net effect will depend on how these policies interact with prevailing economic conditions, particularly inflation and consumer spending, which influence both demand and operational costs for the pallet sector.
In conclusion, a Trump presidency is likely to bring mixed effects to the pallet industry. While some aspects may create temporary boosts in demand, such as frontloaded imports, the longer-term outlook hinges on whether tariffs and domestic policy measures stabilize.
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