KANSAS CITY, MO. — Transportation, key to the success of the agricultural and food industries, has been thrown a curveball by the unsettled status of US and retaliatory tariffs.

Railroads, truckers and ocean freight companies must navigate the current tariff uncertainty — along with producers, millers, food manufacturers and others — and most expect the final impact will be higher prices passed along to consumers.

As White House officials scramble to negotiate new trade deals before a self-imposed July deadline, tariffs have begun to disrupt transportation and supply lines. The uncertain tariff situation already has begun to slow imports of key food industry inputs for US food companies, from ingredients to packaging.

Most imports currently face added levies of 10% after the Trump administration paused higher individualized tariff rates in early April. A positive development in US-China trade announced May 12 was the scaling back to 30% new duties on Chinese imports for 90 days, down from as high as 145% since US President Donald Trump began his second term, while US exports to China now face an added 10% “retaliatory” tariff.

“Oils, sweeteners, grains and packaging will be among the toughest to replace and reformulate,” said Arlin Wasserman, founder and managing director of Changing Tastes, a US-based food industry consultancy that advises on supply chain disruptions and ingredient substitutions.

New regulations from the Office of the US Trade Representative (USTR) have added to tariff pains felt at US ports and caused anxiety among industry groups.

In April, the USTR announced a new $50-per-tonne levy per US voyage on Chinese vessel owners and operators, beginning in October. Those levies were scaled down from an initial proposal of up to $1.5 million per vessel after substantial industry pushback. Of the roughly 21,000 vessels in the world’s bulk shipping fleet, almost 50% were built in China and only five ships now operating in the global fleet were built in the United States.

The volume of incoming shipments at US ports, especially from Asia, has fallen by as much as 60% — as businesses cancel orders instead of taking delivery — since the port fees were proposed and tariffs went into effect in April, according to industry estimates and statements from port officials.

“It’s not just inbound shipments — it messes up the whole supply chain,” one shipping source explained. “If we’re expecting, say, three container vessels but those TEUs (twenty-foot equivalent units) get consolidated and only one vessel arrives, where do we put the outbound cargo that was supposed to leave on those three ships? Now there’s rescheduling, or cancellations, and that reverberates to trucking, to railroads and back to customers.”

Other companies, meanwhile, have been forced to take delivery of needed inputs while absorbing the costs.

“We ordered some specialized milling equipment from a European Union country back in October 2024, before the election, and it arrived in April with a five-figure tariff bill,” a Midwest miller said. “Did that country pay the bill? No, we did. These tariffs are nothing more than an indirect tax on US companies and, eventually, consumers.”

Major retailers continue to signal that tariffs will lead them to raise prices at some point this year, with Walmart among the latest to do so.

Food companies will be particularly hard hit by any prolonged transportation issues the tariffs cause, Wasserman explained, as inputs of certain ingredients become either too cost-prohibitive or too cumbersome to source.

“In the food sector, we’re not able to respond like other industries because a lot of the ingredients that we use in certain packaged foods are not produced largely in the United States,” he said. “While you could say it will take a tech company a year or two to build a new factory, if you’re talking about something like cashews, which don’t grow here at all, it can take many years to establish an orchard for perennial crops. So we can’t do domestic substitution easily unless we reformulate our products.”

Packaging shortages and ballooning costs also are likely in a short-term or long-term trade war, with aluminum cans now facing a separate 25% tariff rate and supplies of plastic packaging drying up.

“The US food industry is absolutely not prepared for a disruption in our supply of packaging, because the United States is not equipped to supply low-cost packaging over the near term,” Wasserman said. “For companies that rely on specific branded packaging made in other countries, it’s going to be a really challenging time.”

At the same time, “there’s likely to be a glut of a few key ingredients in the United States as other countries stop buying them from us,” he said. “If you have flexibility in labeling and packaging, for example something like in-store bakery, you might be able to navigate this.”

 Pluses for wheat, beets

“If you’re talking about baking, the No. 1 opportunity buy that I see is wheat,” Wasserman said. “We may suddenly find domestically that wheat is very inexpensive, and that can be a purchase that you hold for 12 to 18 months easily. And if you’re talking about imported sweeteners — in addition to cane sugar, there’s monk fruit, and we also import a lot of honey. So in the sweetener category, we might have to start substituting in more beet sugar, which we produce a lot of domestically.”

The hoards of tariffs and newly imposed trade policies have kept waters stormy in ocean freight. And while the Trump administration has issued temporary pauses and modifications on most tariffs, the constant flux of policy continues to rile most in the trade.

“The uncertainty is the single biggest concern,” said Jay O’Neil, owner of HJ O’Neil Commodity Consulting. “If we had some certainty, if we knew what the picture was going to look like going out 12 months, then we could plan.”

One of the biggest issues is a series of new levies and restrictions proposed by the USTR as a result of the Section 301 investigation “China’s Targeting the Maritime, Logistics and Shipbuilding Sectors for Dominance,” an inquiry that began during the Biden administration.

“The underlying need to improve US shipbuilding and US ship flag vessels is necessary,” O’Neil said.

Yet expanding an American-made fleet in a timely and cost-efficient manner appears insurmountable due to the current US shipbuilding capacity, he noted.

“I estimate that China has something close to 190 shipyards, but in the United States, we have about five,” O’Neil said. “China can spit out a vessel in one year, but it tends to take the United States four-plus years to build a single ship.”

The delay was due not only to the US deficit in shipbuilding capacity but also to lack of labor, he said.

After a two-day public hearing and receiving nearly 600 public comments, the USTR revised its original port fee proposal of up to $1.5 million per vessel in fees to three levels of port service fees, based on the net tonnage of the vessel. While many market participants breathed a sigh of relief after the initial proposal was revised, some remained concerned.

“I severely question the effectiveness of the current proposal,” O’Neil said, explaining that most shippers operated under cooperative alliances, transferring containers between vessels to maximize logistical efficiencies. “By the time these alliances do their rebalancing on what containers they put on whose ship, we’re not going to collect much in the way of service fees.”

He continued, “All this has been very disruptive, and it’s also sent a message. The United States for many years has been a reliable buyer from an importer of consumer goods as well as a reliable exporter of grain and other products, but we’ve now planted a seed in the minds of our foreign suppliers and our foreign buyers that things are no longer steady and dependable in the United States.”

Truck freight tops demand

“The biggest fear right now is you can’t predict what’s going to happen with the tariffs and trade wars, and so those external factors have huge impacts on demand and what’s available,” said transportation analyst Jim Ritchie, chief executive officer of Redstone Logistics.

A multi-year recession has been weighing on the trucking industry. Beginning in 2022, the “Great Freight Recession” was the result of consumer demand rapidly transitioning away from goods shortly after carriers had maximized their transit capacities to meet frenzied demand that erupted during the COVID-19 pandemic months. Ritchie said this current down cycle has been the longest he’s witnessed so far in his 42-year career.

“When COVID hit, all the trucking companies had so much demand that it outstripped their actual asset capability, and when every piece of equipment is running at max capacity, you add additional equipment,” Ritchie said. “And as we came out of COVID, new trucks arrived and demand took a quick sharp turn downward. And now all of a sudden, they’ve got excess equipment that they’ve got to pay for. You want to get as much utilization out of that machine that you can. The key driver of utilization is moving in a negative direction.”

The situation has led many carriers to begin operating below costs, which has been a boon to shippers. But the outlook for consumer demand continues to be muddled by uncertainty, leaving some carriers and shippers to also consider downsizing.

“It’s the uncertainty piece that we don’t know,” Ritchie said. “Things change so quickly that we’re sitting on the sidelines saying, ‘Gosh, do I have a tariff that I’m going to have to pay for, or is it suspended, or is it going to be suspended? Or if I wait four weeks, will something happen and will it be better or worse? Or if I wait until tomorrow, then will it be better or worse?’ I think that’s the hardest part.”

Railroad performance steady

Contrasting the uncertainty and high costs in ocean freight and trucking, grain transportation aboard US Class 1 railroads has been mostly smooth and relatively inexpensive through the marketing year to date. Agricultural shippers, millers, bakers and food manufacturers that rely on rail, directly or indirectly, will find the freight mode is poised for a smooth opening chapter for the 2025-2026 marketing year.

Rail performance typically shifts into a lower gear at the height of cold winter temperatures, but a relatively mild winter limited slowdowns caused by the need to keep crews out of the cold and run locomotives at slower speeds. Those factors briefly slowed deliveries of hard red spring wheat, durum wheat and other crops in the Northern Plains.

In the case of spring wheat, deliveries against contracts fell about six weeks behind. But a few weeks into the delays, traders said that millers largely had adjusted to a “new normal” thanks to consistent — albeit late — shipments. By the second week of May, delays remained “at a minimum, two weeks behind in that area,” a miller said.

In the Southern Plains, transportation of hard red winter wheat and other crops was good to excellent throughout the 2024-2025 season. Contracts were mostly cleaned up within a week of the delivery period’s expiration. By April, obligations on wheat and most other commodities were met five to seven days before the month’s end, a pattern on pace to repeat in May. Deliveries were timely to the degree that some mills begged for relief on lack of storage space. Shippers in some cases were able to load other commodities, apply loads elsewhere or sell them in the spot market. Most had no choice but to load something in rail cars placed consistently and frequently.

Global trade patterns continue to shift following the enactment last month of tariffs on goods imported into the United States from most major trading partners. But most wheat milled in the United States is grown here, so direct effects would be minimal — even if the duties applied to imports of commodities from our North American trading partners.

Trade with Canada and Mexico is protected under the US-Mexico-Canada Agreement. Canada supplied about a quarter of durum ground at US mills for human use in 2024 and a smaller percentage of spring wheat for US food use, much of it via the CPKC Railway (formerly the Canadian Pacific and Kansas City Southern), which is the only single-line transnational railway.

Millers in soft wheat country echoed the Southern Plains assessment of rail performance.

“Rail service has been good on the grain side from elevators, and we send 10 to 15 rail cars of flour a week,” one miller said. “And rail has been relatively smooth.”

In 2024-2025, rail prices in the secondary market hewed closely to tariff levels, versus prices as high as $2,000 per car over tariff in recent years. Railroads typically adjust rates higher near the start of an agricultural commodity’s marketing year: June 1 for barley, oats and wheat; Aug. 1 for rice; Sept. 1 for corn, sorghum and soybeans; and Oct. 1 for soybean meal and oil. Railroads are still making decisions about rate increases, those in the trade said.

“In spring wheat territory, rates are still to be determined,” a miller said. “And quite honestly, I don’t think — between the CP and the BNSF — we’ll have rates figured out before new crop. It’ll be sometime later in the fall or the winter before anything changes.”

In the Eastern and Central states, “we always anticipate a freight rate increase in June for one railroad and around November for the other,” a soft wheat miller said.

Rates have fallen in southerly routes as BNSF looks to recapture market share. That could smooth passage of wheat to the Gulf of Mexico for export.

Earlier this year, BNSF announced a route redesign to speed service for inland point intermodal traffic from the Pacific Northwest to the Chicago gateway and beyond. The plan hinges on the completion of a multi-year intermodal facility expansion at BNSF’s Cicero Intermodal Facility in Chicago.

Labor issues that sometimes delay or halt delivery of agricultural products and finished goods aren’t threatening grain transportation in the near term, after railroad agreements with labor unions. BNSF railroad on May 16 announced the ratification of a five-year collective bargaining agreement with the union representing 320 yardmasters. Other rail worker groups and rail lines have inked multi-year deals as well.

Read the latest updates on tariff issues impacting the pet food industry.