Imports may fall sharply in second half
Port of Los Angeles Executive Director Gene Seroka said he expects at least a 10% year-over-year drop in container volume at the port in the second half. I found that to be especially noteworthy because his comments seemed to be a departure from his more bullish remarks in previous months.
Seroka expects a drop in import volume to be driven by the aftermath of a pull-forward as shippers worked to get ahead of tariffs the past several months – an option primarily available only to large shippers. That pull-forward led to port volumes that were about 15% higher in recent months than what is normal. Now, inventories appear to be getting bloated, particularly in upstream locations such as California’s Inland Empire. An executive at Flexport recently said the warehouses it operates went from being about 50% full to about 75% full. As the year progresses, shippers will look to reduce inventory of 2025 model-year items in preparation for the rollout of 2026 merchandise.
Daily ocean bookings for U.S. imports have started to trend down in recent days. While April is typically a slow month, the drop in the coming weeks may be unusually severe. (Chart: SONAR)
The SONAR chart above, which measures ocean shipments at the point of overseas origin, shows how much more difficult the year-over-year comp becomes starting in June and July. The implication for the domestic freight markets is that carriers may see a commensurate drop in rail intermodal and truckload demand originating from port cities, particularly those that are heavily dependent on imports, such as Savannah, Georgia. Along similar lines, some analysts also expect a lackluster peak season for container shipping.
Ocean spot rates for China-to-U.S. lanes are around their lowest levels since the start of the Red Sea attacks. (Chart: SONAR)
De minimis exemption revoked for Chinese e-commerce shipments
I found this FreightWaves article to be a helpful and detailed update on the removal of the de minimis exemption, which promises to have major impacts on the apparel, airfreight and parcel industries. The latest is that President Donald Trump ordered an end to the duty-free treatment of small-dollar shipments from China and Hong Kong, effective May 2. At that time, low-value goods will be subject to all duties imposed on Chinese goods, including all the newly unveiled tariffs. In addition, items sent through the international postal system will no longer qualify for the de minimis exemption.
The large Chinese e-commerce companies, such as Shein and Temu, don’t use postal channels in bulk because of slow delivery times and reliability issues. For now, the de minimis exemption remains in place for other countries, but that may change once officials are confident Customs and Border Protection is set up to process and collect tariffs globally for low-value items.
The Stockout show
(Image: FWTV)
On Monday’s The Stockout show, I discussed the reactions to “Liberation Day” by the consumer packaged goods and retail industries. The CPG industry, through the Consumer Brands Association (CBA), argues that most of its products are already manufactured domestically and the industry already sources inputs and ingredients from domestic sources when possible. However, numerous ingredients can only be sourced internationally because they are reliant on specific growing conditions. So, the CBA wants the administration to fine-tune its approach to exempt certain ingredients.
Meanwhile, the National Retail Federation expects sales growth in 2025 to be no better, and likely worse, than last year. It argues that the retail industry has faced high tariffs for many years that disproportionately impact the apparel industry. Despite those fees, less than 3% of apparel is made in the U.S., providing evidence that even higher tariffs won’t bring back manufacturing. Monday’s show is available on The Stockout YouTube channel.
