California ports on the front lines of the trade war with China

The Port of Los Angeles — the busiest port in the nation — is on the front lines of the trade war between the United States and China. The executive director is urging both countries to strike a deal before things get worse.

“You’re having the world’s two largest economies go head to head in a very combative[1] way,” said Gene Seroka, executive director of the Port of Los Angeles.

Once President Trump’s promised tariffs go into effect, nearly all of the Chinese imports coming into the United States will face tariffs ranging from 15% to 30%[2] — and many of those goods pass through the Port of Los Angeles.

Port officials say trade with China makes up 60% of the traffic at the Port of Los Angeles. The American Apparel & Footwear Association told Yahoo Finance about half of the apparel and footwear sold in the United States moves through the twin Ports of Los Angeles and Long Beach.

The trade war “increased imports to the United States and dramatically decreased exports — and that, I think, is an unintended consequence of this ongoing trade debate between Washington and Beijing,” said Seroka.

‘More cargo than we could handle’

Last year, many importers rushed to get their goods into the United States before Trump announced another round of tariffs. (The first round of tariffs were announced[3] in March 2018.) Seroka said in the fourth quarter of 2018 and beginning of 2019, the port was especially crowded.

“We had more cargo than we could handle simply because the cargo was sitting [for] longer times than normal,” said Seroka. “Folks were bringing in more inventory just to get away from the taxation of the tariffs and not necessarily bringing cargo in that would enter in the domestic supply chain.”

The Port of Los Angeles is the busiest port in the U.S. In 2018, it facilitated nearly £300 billion worth of trade. In recent years, the next two busiest ports – the Port of Long Beach and the New York and New Jersey – have each handled about £200 billion in trade annually.

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Courtesy of the Port of Los Angeles
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Over the past few years, the Port of Los Angeles has been digitizing its operations, through a partnership with General Electric. The new program allows port officials to see what cargo is coming into the port more than a month in advance, instead of a few days.

“I think that is one of the main reasons we were able to avoid a complete level of congestion near the port in the fourth and first quarters,” said Seroka.

Seroka told Yahoo Finance that importers are still trying to figure out how to respond to the newest tariffs scheduled to go into effect on Sept.

1 and Dec.

15.

“The singular definition of what this environment looks like is uncertainty — and we may have some folks that want to import real fast, we may have others that will delay,” said Seroka.

The National Retail Federation says it constantly works with ports around the country to map out how to deal with the constantly evolving trade environment.

The NRF’s supply chain expert, Jonathan Gold, told Yahoo Finance retailers didn’t have much time to adjust their shipments before the Sept.

1 tariff deadline, but they may decide to advance orders to beat the December tariffs.

“There wasn’t even a lot of excess capacity in the warehouse anyways,” said Gold of the NRF. “Retailers are stocking up on holiday merchandise.

We haven’t heard yet that there had been any [storage] issues, but again, folks haven’t ramped up just yet. That could happen down the road, depends on how quickly and how much folks want to bring in in advance.”

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Cargo containers at the Port of Los Angeles. (Courtesy of the Port of Los Angeles)
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Right now, Seroka doesn’t see a rush of orders on the horizon, but that could change if Trump does, indeed, hold off on some tariffs until December.

I could see folks advancing inventory again.

Maybe not to the level that they did in the fourth and first quarter,” said Seroka. “Our warehousing space is still pretty full.”

Southern California is home to one of the world’s largest warehousing complexes, serving both the Port of Los Angeles and Long Beach. Seroka said the 1.8-billion-square-foot warehouse and distribution center is already packed – with just 1%-2% vacancy left.

Last week via tweet, Trump “ordered” American companies[5] to look for alternatives to China.

The NRF stressed it’s difficult, if not impossible, for businesses to move supply chains out of China. Not only does it take time to develop a new sourcing base that can make a product and meet quality assurance and safety standards — but importers must make sure their new partners have the necessary infrastructure and shipping capabilities.

Jessica Smith is a reporter for Yahoo Finance based in Washington, D.C.

Follow her on Twitter at @JessicaASmith8.[6]

CBO warns tariffs could hurt economic growth[7]

Amazon, Google, Facebook testify against France’s digital sales tax[8]

Democratic senator to Powell: Get moving on faster payments[9]

Senator proposes ‘worker dividend’ of £1 for every £1 million spent on buybacks[10]

Read the latest financial and business news from Yahoo Finance[11]

References

  1. ^ combative (finance.yahoo.com)
  2. ^ face tariffs ranging from 15% to 30% (finance.yahoo.com)
  3. ^ first round of tariffs were announced (www.nytimes.com)
  4. ^ July imports (www.portoflosangeles.org)
  5. ^ “ordered” American companies (finance.yahoo.com)
  6. ^ @JessicaASmith8 (twitter.com)
  7. ^ CBO warns tariffs could hurt economic growth (finance.yahoo.com)
  8. ^ Amazon, Google, Facebook testify against France’s digital sales tax (finance.yahoo.com)
  9. ^ Democratic senator to Powell: Get moving on faster payments (finance.yahoo.com)
  10. ^ Senator proposes ‘worker dividend’ of £1 for every £1 million spent on buybacks (finance.yahoo.com)
  11. ^ Read the latest financial and business news from Yahoo Finance (finance.yahoo.com)

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