NJ Supply Chain Disruption Returns as Diesel and Tariffs Bite

Back to 2021, with a new cause

In December 2021, New Jersey was dealing with pandemic-era supply problems: high demand, thin supply and rising costs. That month, then-Sen. Bob Menendez proposed a national database of manufacturers so local companies could see who makes what and avoid future bottlenecks.1 Almost five years later, the state's businesses are again under supply chain strain. This time the cause is not a virus. It is a mix of fuel shocks, trade policy and logistics friction that some executives describe as worse than the pandemic.2738

The comparison helps explain the current situation. In 2021, the problems at least had a direction: demand ran ahead of a broken production system, and experts expected things to normalize as demand cooled and ports cleared.5 In 2026, conditions keep reversing. Shipping starts and stops, gets better, then gets worse again, and prices move the same way.27 For New Jersey, which runs much of its economy through the largest container port on the East Coast, that volatility may cost more than any single shortage.19

The diesel shock is the main driver

Fuel is the biggest new pressure. The AAA national average for diesel reached $6.53 a gallon on Sept. 22. That is about 77% higher than a year earlier, when it was roughly $3.69.3436 Reports trace the run-up to the U.S.-Israeli war with Iran that began in late February, Ukrainian drone strikes on Russian refineries, and tighter fuel export rules elsewhere.35 One analysis says flows through the Strait of Hormuz fell by as much as 14 million barrels a day at one point, and diesel's refining margin rose to about $100 a barrel.33

The sources mostly agree on the numbers and the causes. They differ on how long the pain will last. One view is that diesel and crude prices have come apart, so even if crude falls, pump prices will lag because refining capacity is the bottleneck.33 Another analysis notes that U.S. refiners are running flat out and earning large profits, which suggests the shortage is partly being priced for margin rather than only reflecting scarcity.37 Others point to problems that would outlast a ceasefire. Russia's diesel export ban has removed about 12% of global seaborne diesel supply, and Houthi attacks in the Red Sea are picking up again.38

Diesel matters so much because nearly every retail product travels by truck at some stage, so higher fuel costs gradually raise consumer prices.37 The Institute for Supply Management's September services survey showed this clearly. Fuel costs came up twice as often as any other issue. The survey's prices-paid index rose to 74.0, its highest since July 2022, and order backlogs reached their highest level since mid-2022.39 Respondents reported shortages of steel, fuel and memory components, and some retailers said shipping containers from overseas now cost twice as much.39

Tariffs: costly, struck down and still unsettled

Tariffs are the second pressure, and the legal situation has become complicated. In February the U.S. Supreme Court struck down the tariffs imposed under the International Emergency Economic Powers Act (IEEPA). The administration then announced a temporary 10% tariff under Section 122 of the Trade Act.12 On May 7, the U.S. Court of International Trade ruled for a coalition of 24 states, including New Jersey, and threw out those Section 122 tariffs as well.19 But other tariffs remain, and the trade-policy uncertainty that importers keep warning about has not gone away.12

The cost in New Jersey appears to be high. A Center for American Progress analysis estimates that small-business importers nationwide paid an average of $426,000 more in tariffs from March 2025 through August 2026 than in the previous 18 months. New Jersey is one of three states, with Texas and Kentucky, where the average extra cost topped $300,000.21 New Jersey's estimated average refund is above $100,000. That leaves a large gap, because only the IEEPA duties are being refunded.21 The same analysis cites a 50% year-over-year rise in small-business bankruptcy filings in the first half of 2026.21

The damage started early. In April 2025, a Princeton toy store owner described buying inventory ahead of tariff deadlines. He said he was charged $1,400 in tariffs on an $1,100 order, and that three manufacturers whose products he carried had stopped shipping to the United States.2 A Jersey City custom builder described rushing to buy materials imported from Spain, Italy, Canada and Austria before duties took effect.2 Those were the early signs of the costs the CAP data now puts in dollar terms.

Not everyone thinks tariffs are the main problem. At an April panel in Newark, one logistics executive called tariffs "just a tax" and said his employees felt fuel and energy costs much more directly.19 A national retail survey supports part of that view, finding that small retailers are absorbing some cost increases but have limited room to keep doing so.26 Weighing the evidence, both sides have a point but describe different phases of the problem. Tariffs did the early damage to small importers' finances. Diesel is now the sharper, broader shock reaching consumers.

What the port data shows

The Port of New York and New Jersey handled about 8.9 million TEUs (twenty-foot equivalent units, the standard container measure) in 2025.18 Through May 2026, volume was down 1.9% from a year earlier, ending a growth streak of nearly two years.15 Reports disagree about what that means. One analysis sees the drop as a sign that importers are reshuffling order timing around tariff schedules and that trade may be shifting away from the port.15 Another points out that a historic February blizzard closed port facilities for three days, and the March rebound was largely delayed ships finally arriving. That account also notes the 2025 comparison was inflated by cargo diverted after the Francis Scott Key Bridge collapse in Baltimore.18

The weather explanation holds up better for February and March. April does not fit it: loaded imports fell 12% while exports held roughly flat.18 Through May, loaded imports were down 2.4% and loaded exports were up 0.8%. That pattern points to importers ordering less, not exporters losing customers.15 Auto imports fell more sharply, and the port's director linked an expected 12% full-year drop in vehicles to tariffs.18 Nationally, the June Descartes data showed New York/New Jersey imports down 18.4% from May, a sign that the instability continued into the summer.16

There is some offsetting good news. Panelists in Newark said companies' long move away from China, toward Southeast Asian suppliers shipping via the Suez Canal, has helped East Coast gateways like New York/New Jersey.19 Logistics firms also describe a longer-term shift of cargo from the West Coast to Gulf and East Coast ports.11 The same panelists warned that without stable policy, trade flows will stay unpredictable, and capital is waiting on the sidelines.19

Problems closer to home

New Jersey also faces logistics costs of its own making. The state has adopted the "ABC test" for classifying workers. Up to 77% of port truck drivers are independent contractors, and the drayage industry worries that reclassifying them as employees will raise costs and deepen driver shortages, as happened under similar rules in California.14 The Port Authority is also revising its fee on excess empty containers as truckers complain about off-dock depots.13 Electricity adds to the burden: commercial rates in New Jersey run about 30% above the national average.28

The 2021 coverage also shows who feels shortages first. That fall, North Jersey food pantries reported turkey prices nearly doubling and supplies falling far short of demand.4 With diesel now pushing up grocery transportation costs,33 food banks are likely to be under pressure again, though current figures for them are not yet available.

The outlook

TD Economics expects New Jersey's growth to slow from 1.8% in 2026 to 1.7% in 2027. It names trade uncertainty and affordability as drags, along with falling real wages caused by higher energy prices.24 That forecast looks mild compared with what businesses are reporting.

Our reading is that New Jersey's current supply chain problem is mainly about cost, not empty shelves. In 2021, the question was whether goods would arrive. In 2026, they mostly do, but more slowly and at higher prices, with costs that shift too often for owners to plan around. Small importers took the tariff losses. Truckers and consumers are now paying for diesel. Some of the state's own policies are adding further costs on top. Menendez's 2021 database proposal was meant to prevent bottlenecks.1 It would do little about the current problems, which are driven by energy prices and trade policy.