“Logistics Pulse” is your cheat sheet and to-do list for everything about trade, the supply chain and logistics. We dive deep into the latest news headlines and industry trends and equip you only with actionable insights you can use to improve your business—no matter your industry or role in the supply chain. Presented by Mothership.

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President Trump's tariffs on Chinese goods have forced U.S. importers to rethink and reconfigure their supply chains, especially with no clear end in sight for the elevated tariff rates. We explore the strategies major shippers are using to avoid higher costs and consider whether they are sustainable as the summer shipping peak approaches.

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Mothership founder and CEO Aaron Peck shares insights on how Chinese manufacturers and exporters have reacted to the U.S.-China trade war and what steps they might take to protect their businesses.

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How U.S. importers have adapted to U.S. tariffs on China

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Host 2  00:00

Today, we're really digging into this major shakeup in U.S. supply chains.

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Host 1  00:04

Yeah, it's all about those recent tariff hikes, especially the ones hitting goods from China. So, our mission today is to pull out the key insights. How are businesses actually changing their logistics game in response?

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Host 2  00:32

First, the changes are right at the source. You know, where the goods actually come from.

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Host 1  00:36

Makes sense. Start at the beginning.

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Host 2  00:37

Second, how those goods are transported, the en route part, getting them from there to here.

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Host 1  00:42

Okay.

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Host 2  00:43

And third, what happens upon arrival—warehousing, storage, which is becoming much more strategic than it used to be.

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Host 1  00:50

Got it: Source, transport, arrival. Let's start at the source, then. What is the initial reaction?

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Host 2  00:56

Well, it points back to March. When those tariffs were looming, U.S. companies basically went into overdrive.

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Host 1  01:02

The front-loading, trying to beat the clock.

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Host 2  01:05

Exactly. They imported a ton of stuff from China before the higher costs kicked in. Just get it in under the wire.

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U.S.-China trade war: How U.S. importers have reacted to tariffs

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Host 1  01:11

Aaron Peck, he's the CEO of Mothership. He talked about this on KCBS Radio.

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Aaron Peck  01:15

If you have a warehouse filled with goods right now, and the tariffs are in place, but you need to essentially move those goods to get ready for summer peak—and the goods that are going to come in around that time, which seasonally might be completely different—then, you have no choice but to move what you have in the warehouses right now. China manufacturers are already operating on a very, very thin margin, and that comes from them. If you've been to China, you'd understand that they're—you know, anyone that's been there knows—that they're highly competitive with one another, and so that drives margins down to a super thin level to begin with.

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Host 2  01:47

Yeah, Peck explained how that big March surge actually led to a bit of a slowdown in Q2.

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Host 1  01:53

Stands to reason. Everyone's stocked up.

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Host 2  01:55

Right. But things didn't just stop. Freight is still moving now, but the reasons and the pressures, they've shifted. 

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Host 1  02:02

How so?

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Host 2  02:03

Peck made a good point. Chinese manufacturers are often operating on really thin margins. It's super competitive over there.

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Host 1  02:10

So, they can't just absorb huge cost increases easily.

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Host 2  02:13

Not easily, no. Plus, you've still got demand for certain things—seasonal goods, think furniture for the patio, summer clothes—retailers need that stuff now for the upcoming season.

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Host 1  02:23

Oh right. Summer collections, people aren't gonna wait.

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Host 2  02:26

Exactly, so that keeps some freight moving, tariffs or no tariffs, which creates this central tension for the shippers.

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Host 1  02:33

What's the tension?

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Host 2  02:34

It's basically, do we eat the tariff cost, try to pass it on to consumers, or maybe delay the shipment, but delaying risks missing the sales window.

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Host 1  02:44

Tricky spot. So, what are most of them doing?

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Host 2  02:47

Seems like many are choosing to keep the goods moving, but they're scrutinizing every single step, trying to optimize—you know, shave costs wherever possible—to offset those tariffs.

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Host 1  02:57

Okay, that makes sense. Intense focus on efficiency, even if the motive is cost avoidance.

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Host 2  03:02

Which leads us nicely into that second phase: How goods are actually moving en route.

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Host 1  03:06

Right. If the direct route is more expensive.

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How U.S. importers are avoiding tariffs on Chinese goods 

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Host 2  03:08

Companies start looking for alternatives. MSNBC says that's exactly what's happening—a real trend towards finding ways around, or at least delaying the U.S. tariffs.

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Host 1  03:17

So, less direct shipping. What kind of alternatives are we talking about?

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Host 2  03:20

Well, there's growing interest in re-routing cargo through Canada and Mexico, our neighbors.

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Host 1  03:25

Interesting. How does that help?

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Host 2  03:26

It often involves using free-trade zones, or FTZs, and bonded warehouses in those countries.

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Host 1  03:32

Okay, explain FTZs and bonded warehouses a bit. How does that work practically?

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Host 2  03:34

Sure. So, imagine a shipment, say, electronics, from China; instead of sailing straight to LA, maybe it goes to a bonded warehouse in Vancouver or Monterrey down in Mexico.

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Host 1  03:45

And bonded, it's basically a secure area where goods can be stored before clearing customs and paying duties, so the shipment sits there, maybe for a while.

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Host 2  03:57

So, the tariff clock hasn't started ticking yet.

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Host 1  03:59

Exactly. Then, when the time is right, maybe demand picks up, or they want to manage cash flow, they can bring it across the U.S. border via truck or rail. That's when the duties typically become payable.

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Host 2  04:10

Clever, delaying the hit. The report also mentioned tariff engineering. Sounds fancy.

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Host 1  04:15

It does. Yeah, it's basically about making, sometimes quite minor changes to the product while it's in that intermediate stage, like in Mexico or Canada.

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Host 2  04:22

The light assembly or even just repackaging, the goal is potentially to change the product's classification, or, crucially, its country of origin for customs purposes.

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Host 1  04:31

To qualify for a lower tariff rate.

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Host 2  04:33

That's the idea. If you can legally change the origin away from, say, China, you might avoid the highest tariffs. It's complex legally, but companies are exploring it.

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Host 1  04:44

Wow. So, these alternative routes, they add steps, maybe some costs, but the payoff is flexibility.

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Host 2  04:50

Definitely. The report highlights key advantages: You can better match inventory to actual demand, rather than just bringing everything in at once.

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Host 1  04:58

Less guesswork.

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Host 2  04:59

Right. There's also the element of maybe waiting to see if the political winds shift, if tariffs change again, and, fundamentally, it helps protect profit margins, while they maybe look for alternative suppliers long term.

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Host 1  05:10

Okay, so we've got changes at the source, smarter routing. What about phase three, arrival in the U.S.? You said warehousing is becoming more strategic.

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Host 2  05:18

Hugely strategic! This is where maybe the biggest shifts are happening right now, onshore warehousing.

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Host 1  05:24

Because of the tariffs?

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Host 2  05:25

Absolutely, the tariffs put serious pressure on cash flow—paying a hefty duty the moment goods land, that's tough. So, there's been a massive surge in using those foreign trade zones, FTZs, within the U.S. and similar bonded facilities.

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What is a foreign trade zone?

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Host 1  05:39

Right. FTZs again. Remind us of the main benefit there inside the U.S. 

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Host 2  05:43

The big one is indefinite storage without paying duties. Goods can sit in an FTZ, technically outside U.S. commerce, duty-free, until the company decides to formally enter them into the market.

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Host 1  05:55

And if they don't sell them in the U.S.?

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Host 2  05:56

They can re-export them again without paying U.S. tariffs. It gives tremendous flexibility. It's not just storage. It's a cash-flow tool, an option strategy.

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Host 1  06:05

And demand for these zones is up.

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Host 2  06:06

Way up. Demand has doubled or even quadrupled since the tariffs first hit hard back in Q1. It's across industries too—consumer electronics, cosmetics, you name it.

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Host 1  06:16

So, companies are bringing goods close, but keeping them in this sort of tariff limbo.

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Host 2  06:20

Pretty much. They're staging inventory near key markets. The report mentions LA, Dallas, New Jersey—ready to go, but holding off on the tariff payment until they have a confirmed sale or need the stock. It lets them monitor tariff levels too.

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Host 1  06:36

Makes sense. Is this mainly big companies?

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Host 2  06:38

Well, it's especially valuable for startups and mid-market brands; they might not have the deep pockets of the multi-nationals, so that flexibility an FTZ offers is crucial for them.

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Host 1  06:48

But the big players are using them more, too.

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Host 2  06:49

Oh yeah, multi-nationals are definitely expanding their FTZ footprint. But for them, it's also becoming part of a broader hedging strategy.

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Host 1  06:57

Hedging against what? More than just U.S.-China tariffs?

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Host 2  07:00

Exactly. They're looking at potential future global friction, maybe potential EU tariffs down the line, or currency control somewhere else. Using FTZs provides a buffer against all sorts of potential global trade uncertainties.

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Host 1  07:13

So FTZs aren't just warehouses. They're a tax strategy, a timing strategy, even geopolitical forecasting tools rolled into one.

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Host 2  07:20

You got it! Companies can use them to adjust when they pay duties based on sales, or if goods need reprocessing, or even based on their read of future trade policy. It's really sophisticated stuff.

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Host 1  07:31

This all paints a picture of, well, a pretty fundamental shift in thinking, doesn't it? Moving from one priority to another.

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Host 2  07:38

Yeah, that's a key insight. Think back to the early 2020s with the pandemic chaos. The buzzword then was resilience: Build supply chains that could withstand shocks. But now, the focus has pivoted. The new priority is agility: The ability to react, adapt, change course quickly. That's valued, sometimes even more than pure rock-bottom cost efficiency. It's a big mindset change from before the tariffs. At the origin, the old thinking was ship when the container is full for efficiency. The new thinking is to ship when necessary, even if the load isn't perfect.

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Host 1  08:10

Do what you need when you need it.

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Host 2  08:11

Exactly. Then, en route, the old way was to go direct. Simple. The new way? Re-route via neutral or adjacent zones—Canada, Mexico, FTZs. Be flexible.

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Host 1  08:22

More complex, but more options.

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Host 2  08:24

And on arrival, it used to be store as needed—pretty basic warehousing. Now, it's stored to defer duties, maybe reprocess, maybe re-export. Warehousing as a strategic weapon.

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U.S.-China trade war: What is the new normal for U.S. importers?

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Host 1  08:37

It really drives home that Aaron Peck quote again, doesn't it? That companies are compelled to move freight under pressure. They're adapting on the fly.

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Host 2  08:44

Absolutely. They have to, which brings us to a kind of sobering conclusion from the data.

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Host 1  08:49

What's that?

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Host 2  08:50

These changes, this volatility, it doesn't look temporary. It strongly suggests this is becoming the new normal for international trade.

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Host 1  08:57

So, what does this new normal look like, summarized?

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Host 2  09:00

Well, one, freight keeps moving, but probably with squeezed profit margins for many. Two, warehousing isn't just storage anymore. It's a strategic function, deeply integrated. Three, those foreign trade zones, they've gone from being kind of obscure tools for specific situations to being pretty essential pieces of the puzzle for lots of companies. It's not if companies will adapt, they clearly are. We see it everywhere. The real question is, how many of these simultaneous adaptations can they actually afford to manage at the same time? There's a cost to all this agility.

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Host 1  09:32

So, for you listening, the key things to take away: U.S. supply chains are changing fast because of these tariffs. Big time.

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Host 2  09:41

Major shifts in how goods are shipped, where they go, and especially how they're stored, using things like FTZs.

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Host 1  09:47

And that idea of agility, being nimble, that's king right now, maybe even more than just being the most efficient.

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Host 2  09:53

Absolutely, and the role of FTZs has just exploded in importance. It's central to strategy now.

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Host 1  09:58

Which leaves us with something to chew on. How does all this maneuvering, all these complex global trade adaptations, how might that eventually ripple down to affect the stuff we buy every day—the availability, the price?

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Host 2  10:10

Yeah, definitely something worth thinking about.

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For more insights like these, don't forget to subscribe to Logistics Pulse on YouTube, Spotify, or wherever you get your podcasts.