In this 1. 1 million square-foot warehouse in Fort Worth, Texas, millions of dollars worth of goods are stockpiled ahead of potentially sweeping tariffs expected to be levied against China, Mexico, and Canada. This is an import heavy economy. Most of what we consume comes in from Southeast Asia and China. A lot of those goods might be coming in, and have a tariff slapped on them. Front loading is a tool companies use to buy and store their goods in advance. In this case, to avoid pricey tariffs, big brands like Walmart and Columbia Sportswear are executing this strategy. Walmart's imports from China rose 33% from 2023 to 2024. Columbia Sportswear imports went up 50% during the same time, and jumped over 80% during the March to December period. At the same time, container imports from China to the United States have surged. I think 2024 have really seen a lot of front loading happening. At first, shippers needed to react to the Red Sea disruption and now, it's Trump tariffs coming into force. But for some companies, front loading is not an option. Just from the execution standpoint, I'm just curious on how it will happen, how how folks are going to navigate. The point you're making is any business manager's worst nightmare, which is planning for the unknown. The uncertainty of this situation keeps me up at night. I'm often asked, what are you doing? How are you planning for it? And my answer is, I don't know. President Trump said he expects to put a 25% tariff on Mexico and Canada beginning on February 1st, and discussed a 10% tariff on China. A tariff is a government imposed tax on imported goods and services. And if tariffs are enacted, it's not only companies who will see higher prices, consumers will as well. Prices will definitely go up on everyday items. So from the cars we buy and the gas we put in them to the iPhones, laptops and tablets that were so dependent on, to the clothes we wear, and the food we eat like avocados, corn, tomatoes. All the prices are going to go up. So, how are companies preparing for potential tariffs and what impact will they have on shippers and consumers? CNBC traveled to Fort Worth, Texas, a major hub for logistics companies located a few hundred miles from the Mexican border, to find out. Paul Brashier is the head of global supply chain for ITS Logistics, a leading U.S. shipper with annual revenues of about $1 billion. So, tell us a little bit about this facility. Well, we're in the heart of one of the most important distribution center areas in the United States. Dallas, Fort Worth services pretty much 75% of the United States, within about two days. Everything comes through here. So, you've got electronics, you have infrastructure goods, you have food. The warehouse is also filled with Chinese and Mexican goods and components to avoid potentially expensive tariffs. Many of ITS clients have frontloaded their products. Starting in November of 2024, shippers of all sizes started bringing in their product to avoid the Trump tariff. Lenovo imports from China rose 22% from 2023 to 2024. How many of these products that we're surrounded by with are sourced from China? I'd say well over half. It comes in in large quantities. It comes in ocean containers and trucks. The biggest category of product here being front loaded, components used in infrastructure projects. So right now you're looking at 500,000 square feet of product that is used for domestic consumption. These are components that go into the things that are building our bridges, our roads, and electrical equipment here in the States. Especially on the infrastructure side, there's a ton of Chinese made goods that are being shipped forward right now and have since November. And what's the reason behind the front loading, particularly when it comes to the components for infrastructure? Well, those budgets are made 2 or 3 years in advance. And if you have a 20% increase in the cost of goods, that blows most of those budgets out of the water. Data from ImportGenius backs that up. Imports of solar panels, AI server racks, backup power supplies, and lithium batteries that are used to power data centers surged in the second half of 2024. Consumer goods like, sweatshirts and smokeless fire pits are also sitting on these warehouse shelves. Walmart and Columbia Sportswear, they're front loading in a lot of product ahead of these tariffs to try to mitigate those increase in costs. Warehouse is not cheap. The medium size and the small importers are the ones that are probably the most adversely affected by these kinds of decisions. The larger players in the market, they have a huge distribution center network. They have the infrastructure in place to be able to navigate these fairly easily. In the U.S., the top products being pulled forward include sneakers, housewares, appliances and auto parts. And that spells big business for companies like ITS Logistics. ITS Logistics makes money on several different fronts. They make money not only by moving each piece of product, they also make money by storing the items. And so those extra costs are they also passed on to the consumer? Yes, all costs, like anything in commerce, usually get passed on to the consumer. Rick Muskat is the president of Deer Stags, a family business that makes $50 men's shoes sold at Macy's, Kohl's, JCPenney, and Amazon. The business imports about 2 million shoes annually, and about 98% of those are made in China. So we're in your showroom, who exactly comes here? This is where we work with most of our retail buyers. They come usually every December and June for a major trade show. Footwear at the center of the last trade war is back at the forefront of the dispute with China. But unlike its larger competitors, Deer Stags doesn't have the ability to front load. Walmart has the size and the capabilities that companies like Deer Stags doesn't have. They have warehousing, they've got trucking networks. Walmart sells an enormous amount of shoes in this price point, moderate priced shoes. They have more levers to pull than we do. So during Covid, when container rates skyrocketed, they chartered vessels. They could buy a whole vessel, which will have hundreds and hundreds of containers. We couldn't do that. Footwear companies already pay hefty tariffs. There are over 430 duty classifications on imported shoes. Some of those tariffs were established in the 1930s. The shoe has a leather upper, and men's shoes with a leather upper pay an additional 7.5% duty on top of the preexisting duty, which was 8.5%. So we now pay 16% duty on this shoe. Muskat fears additional tariffs will impact not only future orders, but those already in place. How many shoes that could, in theory, be out on the water that you have ordered right now, that could be subjected to a possible tarif,f and it's not priced in yet, at the Macy's of the world? It could be 200,000 pairs that are made and heading towards us that might have a tariff when they arrive, that we didn't know when we bought those shoes. This is the kind of thing that causes importers, shippers, customs-brokers nightmares, because you're essentially changing the price after it's been imported, and who is going to have to pay that difference? It becomes a logistical nightmare. To prove he's on the hook for the tariffs, Muskat showed us his invoice from U.S . customs. Can you explain to us what exactly this is, and show us in terms of who is paying the tariff? When we import the shoes into the United States, U.S . Customs and Border Control sends us an invoice, and takes the money out of our account. Once the importer pays that tariff, it's part of our cost of goods and it affects our selling price, accordingly. It lists the product we brought in, and what the duty rate is. And in this particular group we had 3 or 4 different products. Some were at 6% duty, some were at 12.5% duty. And the aggregate of all of this came to a total duty of $6,133.90 for this shipment. We were billed that amount, and U.S. Customs pulled that amount from our checking account at Chase Bank. So not China's bank account, for your bank account? For it–yes. Muskat says higher tariffs will translate into higher prices for his consumers. The increase in the tariff will ultimately show up at the price tag, when the consumer goes into a store, and the consumer will pay more. Prices are definitely going to increase, and I think that's a big message that consumers need to be aware, of is tariffs are paid for by the consumer. There's no capacity in the United States, to make these shoes. We would have to open up factories in the United States, which is capital intensive. We'd have to build factories. The machinery used to make shoes is no longer made in the United States. Shoe making is very labor intensive by its nature, which is why production has moved over my career around the globe to low labor countries. I believe that the chip industry got an enormous subsidy from the federal government to build manufacturing plants in Arizona with billions of dollars. But I haven't heard anything about government funding coming to the footwear industry for us to build shoe making factories. ITS Fort Worth warehouse is located about 400 miles from Laredo, Texas, the largest land port in the U.S., accounting for 35% of all U.S.-Mexico trade that crosses the border. And what about Mexico? How much of Mexican trade comes here? More and more, there's a one whole side of this warehouse, that's probably 50% Mexican goods. But higher tariffs on Mexican goods could disrupt that pipeline. The expansion of tariffs on Mexico and Canada. How is that going to impact the flow of trade? Mexico is our largest trading partner. It's going to adversely affect it, in a myriad of ways. It's going to increase the cost to move goods, there's not going to be enough equipment to load either northbound or southbound. If there are additional fees added to just the movement of goods, it's going to impact the consumer both here and in Mexico. We could get to a place where that flow just stops. In 2024, Mexico was the largest importer of goods to the U.S., ahead of China, accounting for $466 billion in imports. Mexico also produces 3.5 million vehicles annually. 76% of those are destined for the U.S. market. Distribution facilities just like this one also handle exports. And the big threat with the trade war is retaliatory tariffs. Mexican President Claudia Sheinbaum said her country would hit back if tariffs were imposed. The nation's economy minister said 25% tariffs on Mexican exports would impact U.S. companies operating in Mexico, particularly automakers, costing 400,000 jobs. The other item that we may not want to forget here, of course, is that the other countries will retaliate, China will retaliate. Mexico will retaliate, European countries will retaliate if we become more hostile for them. 25% tariffs could reduce Mexico's GDP by 1.7% over the next five years, while increasing the country's inflation rate by 2.3%. U.S.-Canada trade may also be thrown into turmoil. Canada, the largest source of U.S. petroleum and crude oil, a top mineral provider for EV production, is also a major supplier of chlorine, used to disinfect drinking water. Almost all of Canada's chlorine exports go to the U.S. How regressive is a tariff when it comes to the impact on the supply chain? Well, it's a pass through cost. Everything that we do gets passed to the consumer somehow. And this is another additional cost and supply chain that needs to be accounted for somehow. And in most cases, that gets passed on to the consumer as well.