What 35% Tariffs Mean for U.S. Warehousing and Supply Chains

Starting August 1, 2025, the U.S. will impose a 35% tariff on Canadian imports. A sweeping policy shift that will send ripples across North American supply chains. While much of the immediate conversation focuses on manufacturers and importers, one critical link in the chain faces big changes: warehousing and distribution operations in the U.S.

Why It Matters for Warehousing

This cost increase on Canadian goods will force businesses to reevaluate their entire supply chain strategy, from sourcing and procurement to stocking policies and distribution networks.

Many companies will accelerate orders ahead of the tariff deadline, reconsider supplier diversification, and build larger domestic inventories to buffer cost pressures and mitigate potential disruptions.

Expectations Rise as Canadian Exporters and U.S. Firms Brace for Tariffs

According to KPMG’s June 2025 report on the U.S.-Canada tariff impacts:

✅ 71% of Canadian exporters expect to scale back U.S. shipments or renegotiate pricing by Q4.

✅ Over 60% of U.S. businesses plan to increase domestic inventory levels to hedge risk.

✅ Nearly half of Canadian firms are exploring new markets, signaling long-term sourcing shifts.

Here’s how this impacts U.S. warehousing:

Inventory Rebalancing: With the tariff deadline looming, many importers will expedite shipments from Canada to avoid additional costs. This will create a short-term surge in storage demand as businesses front-load inventory into U.S. facilities. Warehouses near key trade corridors and ports will see heightened activity, requiring rapid space allocation and efficient throughput management.

Domestic Buffer Stock: After August 1, companies are expected to hold higher levels of inventory in U.S. warehouses to buffer against increased costs and potential cross-border delays. This shift toward inventory-heavy strategies means businesses will rely on 3PLs with robust capacity and compliance standards to maintain operational continuity without sacrificing cost control.

Flexible Space Needs: Fluctuating demand patterns and unpredictable trade flows will make flexible warehousing models, like multi-client facilities, critical for success. These shared environments allow businesses to scale space and labor quickly without the long-term commitments of dedicated sites. For companies managing seasonal peaks or diversified SKUs, this flexibility can significantly reduce risk and overhead.

The Supply Chain Shift

Canadian raw materials and finished goods play a major role in U.S. manufacturing sectors like food & beverage, consumer goods, and industrial products. Tariffs could:

• Increase production costs, pushing brands to seek alternative suppliers in the U.S. or Mexico.

• Trigger longer transit times if companies reroute through other trade channels, creating pressure on distribution hubs near ports and rail.

• Drive higher working capital requirements as firms hold more inventory stateside to offset uncertainty.

Strategic Role of Inland Star Distribution Centers

At Inland Star Distribution, we see this as an opportunity for businesses to adapt with agility. Our bi-coastal network, from California’s Central Valley and Los Angeles (Carson) to Harrisburg, PA, provides:

• Flexible Multi-Client Solutions to handle inventory spikes without long-term commitments.

• Dedicated Warehousing Options for brands seeking secure, controlled environments.

• AIB-Certified Facilities to ensure compliance with regulated goods.

• Tech-Enabled Visibility (real-time inventory tracking, full EDI integration) to keep supply chains transparent amid policy shifts.

The upcoming tariff will test supply chain resilience. Companies that respond with strategic warehousing, scalable capacity, and compliance-driven operations will come out ahead. Inland Star Distribution Centers is ready to help businesses with Do It Right®, navigating uncertainty with flexible, certified, and efficient logistics solutions.