How Is the Trade War Affecting U.S. Ports?

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With the Trump administration implementing tariffs on approximately $160 billion of Chinese products on December 15, the U.S.-China trade war is showing few signs of de-escalating. An interim phase one deal that would freeze the conflict would require Chinese concessions in terms of intellectual property rules, financial market access, and agricultural purchases is tentatively scheduled for January 15.

While the trade war rolls on, commentators are typically divided on its effect on the U.S. economy and specifically its impact on U.S. ports. Nearly half of all containers moving through U.S. ports are Chinese imports.

How Are Global Tensions Impacting Ports and the Global Supply Chain?

Mercator International’s Derik Andreoli plays down potential impacts of the tariffs, writing that although it’s excusable to jump to the conclusion that port volumes and associated supply chain jobs are at risk, there’s little evidence that ports will be negatively impacted. Andreoli argues that the impact of the latest round of tariffs is minimal, at only two-tenths of a percentage point of real GDP, and points out that historically, port volumes have been remarkably consistent despite shocks such as the Global Financial Crisis, the tech bubble burst, commodity price boom and busts, U.S. wars, and more.

Writing for Forbes, policy expert Ken Roberts unearthed a different story in his analysis of the nation’s top 10 ports. He writes that seaports are being hit the hardest due to their dependency on China trade. For example:

• Chinese imports from the Port of Los Angeles are down 10.68% in 2019 while exports to China are down 16.28%. The port’s slice of all U.S. trade has subsequently fallen from 7.1% to 6.7% over the past year.
• The Port of Houston’s growth rate has slowed as China’s share of oil purchased from this port dropped from 10% in 2018 to 2.4% in 2019.
• Trade at JFK International Airport is down 5.9% in 2019, with Switzerland overtaking China as the port’s top trading partner.
• Chicago O’Hare International Airport’s trade volume with China was down by nearly 5% this year.

Supply Chain Impacts Reaching Beyond Our Ports of Entry

Falling volumes do not just affect the ports themselves, but can also impact manufacturers, farmers, and transportation providers across the whole country.

A report from The Port of Los Angeles found that the impacts of tariffs are threatening 1.47 million jobs nationwide and $186 billion in economic activity. The port marked a decline in the overall volume of 19.1% year-on-year to October 2019. Rufus Yerxa, president of the National Foreign Trade Council, said that tariffs “cause untold damage to our most competitive manufacturers and farmers, rendering them less competitive at home and abroad as production costs increase and foreign retaliation shrinks their exports.” 

Similarly, Port of Los Angeles Executive Director Gene Seroka said, “Every urban, suburban, and rural community across our nation benefits from imports and exports moving through the San Pedro Bay ports, and ongoing tariffs are putting those benefits at risk. Some regions and industries are already feeling the pain, and the damage to jobs, income, and tax revenue could be crippling down the road.”

How Can These Effects Be Mitigated?

Reshoring

One of the primary aims of the U.S.-China trade war is to “bring jobs home,” or accelerate the reshoring of factories on American soil. 

Shifting from China to Other Low-cost Countries

Last year, Vietnam picked up approximately $36 billion in import value lost by China due to U.S. trade policies. Mexico has also benefited from China’s losses, with Port Laredo’s trade with Mexico on the rise (up 0.14%) and accounting for nearly 6% of U.S. trade with the world.

Seeking Certainty

As reported in Supply Chain Dive, Jonathon Gold, vice president of the National Retail Federation, called for certainty in long-term trade policy. “How do you plan for next year without knowing if you’ll have a market?" Gold said. "[Businesses] don’t want to plan day by day, tweet by tweet; they want to plan years out.” 

Image Credit: Sergey Novikov / Shutterstock