There is much uncertainty with respect to global trade. While geopolitical factors, war, weather, and demographic shifts have an impact, the factor with the largest near-term and possibly long-term impact is the uncertainty caused by unilateral trade conditions imposed by the US since April 2025. Since then, trade policy has shifted rapidly. Most recently – on February 20, 2206 – the U.S. Supreme Court struck down most of the Trump administration’s tariffs. The administration swiftly announced a new set of tariffs under a new law provision and set it at 10% across the board with all countries. A day or so later, the administration raised it from 10% to 15%.
For global supply chains to operate in a stable manner, there needs to be a reasonable level of certainty. Rules of the road must be set and cannot be changed at whim.
A week after the U.S. Supreme Court decision, the US and Israel launched attacks against Iran. This has caused even more uncertainty and instability for the global supply chains.
In this op-ed, we will examine the effects of both actions and discuss how parcel shippers, logistics providers, and supply chain leaders must adapt to the ever and fast-changing environment.
The Immediate Shock to Trade Flows due to the U.S. Supreme Court decision
Parcel shippers were already scrambling to determine the tariffs set by the US for each country they receive products from. Because of the numerous bilateral agreements, parcel shippers must be sure the correct amount of tariffs are being levied and paid. A complicating factor is that some agreements have been agreed upon and signed by bother parties, some others are being negotiated, and many are at a standstill. Suppliers will want to renegotiate contracts causing additional delay and uncertainty.With the Supreme Court decision, the parcel shippers are in a quandary. Do they collect or pay tariffs according to the rates that existed before April 2025, at the mutually negotiated rate, at a rate of 10% or 15%? What happens to the goods in transit?
When tariffs are invalidated and then reinstated within days, the market reacts quickly. Depending upon the difference between the tariffs that existed when the contract was signed and before the good are dispatched, some importers may accelerate shipments to avoid further increases. Others may want to slow down the shipments if the new tariffs are favorable. Likewise, exporters may pause activity while awaiting clarity or hasten shipments. Carriers and freight forwarders may experience sudden booking spikes followed by abrupt slowdowns.
Impact of the attack on Iran and counterattack on countries in the Middle East
One quarter of the world’s oil, 15% of the global trade, and 30% of the container ships flow through the Strait of Hormuz. With the ongoing war, that traffic will be reduced significantly, leading to higher oil and gas prices. Shipping companies have already increased the risk premium costing parcel shippers more. The price of oil gas already gone up by 16% since February 27th. Some analysts believe that it could reach $100 in the very near future. Countries in Asia such as China, India, Vietnam and others which manufacture many of the goods consumed worldwide will have to import oil at these higher prices. This will cause an increase in the cost of goods manufactured due to the energy cost spike for these countries. Inflation in the US – which hit a peak of 9.1% in June 2022 – has come gradually since then. In the past ten months, it is between 2.5 and 3%, above the 2% rate preferred by the US Federal Reserve. The spike in oil prices is likely to contribute to even higher levels of inflation. If it persists for an extended period, that could lead to a significant downturn in economic activity and possibly a recession. This will immediately and directly impact parcel shippers.
How can Parcel Shippers Adapt?
There are severe headwinds facing the shipping industry. The world order that existed prior to early 2025 is changing and changing fast. Macro-level realignment of supply chains and trade pacts are occurring and will continue for the foreseeable future. Countries are now forming alliances with others that are farther away and do not have a common border. This will cause shipping costs to increase. With rising oil prices, the conflict resulting from the Russian invasion of Ukraine is likely to escalate, rather than deescalate. More revenue from oil exports will want the Putin regime to become more aggressive. Unilateral decisions by countries such as the US, Russia, and Israel to attack others may spark similar behavior in other parts of the world.
In addition, the crackdown on immigration has left the farms, factories, and warehouses with fewer hands. This has caused states with fewer hands in the construction, farming, and hospitality industries. Warehouse managers and parcel shippers will have to find ways to deal with a reduced workforce in these areas. While having to deal with all this uncertainty, energy costs are also going up.
In the near term, most parcel shipping companies will experience a slowdown in shipping activity. Many businesses will be in a holding pattern and not be willing to make large investments on inventory or capital. Parcel shippers will have to make more short-term planning and less long-term planning. They will also have to do much contingency planning, always having a Plan B, Plan C or even a Plan D. They will have to diversify their sources of procurement to manage the uncertainty. Costs will go up and thus the diversification can occur only to the extent that it is still profitable for shippers. Labor will have to be managed carefully. There will be spikes of activity at times and severe slowdown at others. Some warehousing companies adopt strategies to entice part-time workers to come to work when needed by paying for health and childcare benefits while paying competitive wages to part-time workers. The bottom line is that parcel shippers will have to be agile and be able to respond quickly and effectively to change.
Sunderesh S. Heragu is Regents Professor and John Hendrix Chair, Oklahoma State University.
