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Tariff hikes cast U.S. ports into murky waters

“The livelihoods of all these people are at risk,” says international trade adviser.

    While many U.S. ports are reporting record cargo volumes, port executives also are expressing concern about what impact increased tariffs — both tariffs imposed by the Trump administration on imports into the United States as well as retaliatory tariffs by its trading partners — may have on future traffic.
   Gene Seroka, the executive director of the Port of Los Angeles, said “back-of-the-envelope calculations” indicate as much as 15 percent of the cargo moving through the port could be subject to higher tariffs as a result of actions planned by the U.S. or its trading partners. Seroka said about 60 percent of the Port of Los Angeles’ traffic is with China. The port handled more than 9.3 million TEUs last year, a record amount of cargo.
    “This is very, very serious,” he told members of the port’s Board of Harbor Commissioners last month.
    Phillip Sanfield, a spokesman for the Port of the Los Angeles, said it does not know to what degree cargo hit with higher tariffs will be diminished, but that the worst-case scenario would be if some shipments cease.
   Many port executives and their association representatives have expressed concerns about tariff increases:
   • Writing in the Virginian-Pilot last month, Kurt Nagle, president of the American Association of Port Authorities, and Edward Hamberger, president of the Association of American Railroads, said, “Federal policymakers must recognize that an unnecessary trade war, one characterized by imposing trade sanctions on select imports, would do far more harm than good.” They said cargo moving through U.S. seaports supports more than 23 million U.S. jobs, and for every $1 billion worth of export goods shipped through these ports, 15,000 jobs are created. In total, U.S. seaports handle a combined 2 billion tons of export and import cargo annually. They added freight railroads “rely on sensible trade policy. International trade, which includes commerce across North America and trade connected to Asia and Europe, accounts for more than 40 percent of rail traffic.”
   • President Trump and his administration “are right to improve trade deals for the United States,” wrote Paul Aucoin, executive director of the Port of South Louisiana, and Caitlin Cain, CEO of the World Trade Center of New Orleans, in an op-ed on the website Real Clear Policy last week, but they urged “leaders in Washington to remember the importance of international commerce and seek common ground with our trading partners.” They said Louisiana exported $56.5 billion in goods in 2017, including $21 billion in agricultural exports and $1.8 billion in petroleum and coal products shipped through Louisiana ports.
   • Brandy Christian, president of the Port of New Orleans, said in a statement that her port is particularly sensitive to tariffs on steel and aluminum, noting that in 2002, when President Bush imposed steel tariffs on a variety of imported steel products in “the ensuing year, Port NOLA suffered a 46 percent decline in steel imports. The law on which the Trump administration is relying is far broader than the law used in 2002 and could result in far steeper tariffs on a wider variety of steel products from a longer list of foreign countries.” She added Port NOLA imported 2.48 million tons of steel in fiscal year 2017, which represents 83 percent of its breakbulk tonnage and 30 percent of the its total general cargo tonnage. The port also imported 665,154 tons of aluminum.
   • Steel volumes in Port Tampa Bay are smaller — 300,000 to 400,000 tons annually — but Paul Anderson, the president of Port Tampa Bay, told the Commerce Department in a letter it supports construction and manufacturing industries in central Florida, particularly along the I-4 corridor. “Our region relies significantly on foreign steel shipments to augment steel from distant U.S. steel mills,” he said.
   • In Oregon’s Capital Press, Curtis Robinhold, executive director of the Port of Portland, and Alexis Taylor, director of the state’s Department of Agriculture, wrote, “Talk of a trade war or tariff increases represent an additional obstacle for agricultural producers and the long-term effects are unknown.” In 2017, they noted, “Oregon exported more than $5 billion in agricultural products, making it the top economic driver in the state.”
   On May 29 Trump said he would increase the tariffs on $50 billion of Chinese goods by 25 percent after the U.S. Trade Representative (USTR) found “China’s acts, policies and practices related to technology transfer, intellectual property and innovation are unreasonable and discriminatory and burden U.S. commerce.”
   In addition to the 818 products with approximate value of $34 billion, USTR has recommended imposing a 25 percent tariff increase on other Chinese products valued at $16 billion. The Section 301 committee will hold a hearing on that plan July 24.
   On June 18, after China said it would retaliate by raising tariffs on $50 billion worth of U.S. exports, President Trump said he had “directed the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent. After the legal process is complete, these tariffs will go into effect if China refuses to change its practices and also if it insists on going forward with the new tariffs that it has recently announced. If China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $200 billion of goods. The trade relationship between the United States and China must be much more equitable.”
   Sanfield said the Port of Los Angeles prepared its estimates by looking at the higher Section 232 tariffs that have been announced on steel and aluminum as well as the product codes for the $34 billion worth of Chinese goods on which higher Section 301 tariffs will be imposed starting Friday.
    The port then extrapolated from those figures to see what might happen if tariffs were increased on $250 billion of imports from the U.S. and China imposed retaliatory tariffs. (The estimate does not include the effect of increased tariffs on the second $200 billion in goods the president has threatened.)
    Sanfield noted Seroka has stated the Port of Los Angeles supports a “fair and level playing field” for U.S. businesses competing in the global economy and improve a “rules-based international trade and investment system.”
   But the port says the government needs to make sure U.S. manufacturers are not hurt by the higher tariffs, noting many imports are not finished products but capital goods or products that are used by U.S. manufacturers so that higher tariffs could hurt businesses and workers the tariffs seek to protect.
   Sanfield said that there are nearly 1 million jobs in the five counties around the Ports of Los Angeles and Long Beach that are directly or indirectly linked to the port and 2 million around the nation.
   Jock O’Connell, an international trade adviser with Beacon Economics, had a similar analysis on how the higher tariffs might affect the Ports of Los Angeles and Long Beach.
   “With respect to China, close to 50 percent of the value of containerized goods that move through the Ports of Los Angeles and Long Beach involve the China trade,” he said, combining both imports and exports. “So they are sort of disproportionately at risk for any interruption in trade.”
    Furthermore, he said about half of the U.S. maritime trade with China moves through those two ports.
   Anything that affects those ports will have a widespread effect in southern California, impacting not only dockworkers but drayage drivers moving cargo in and out of the port and logistics workers who work in warehouses, distribution centers and transloading facilities — not only those close to the port but in the “Inland Empire” and beyond.
   “The livelihoods of all these people are at risk,” he said. Many warehouses do not directly hire staff, but contract with temporary agencies to supply worker, so if a manager of a warehouse sees a decline in the volume of business they have to process, he is “going to tell them not to send as many people over. They are among the most vulnerable persons in southern California with jobs, and they are very much at risk.”
    Chris Lytle, the executive director of the Port of Oakland, said he is concerned about the effect retaliatory tariffs may have on exports of agricultural products from California, which include fruits, nuts and wine.
   “Agricultural exports moving through the Port of Oakland have grown significantly in recent years and many of the growers we talk to are concerned that trade protectionism will limit their access to foreign markets. We would hate to see anything dampen their progress,” he said.
    “There is a strong likelihood we are going to see a decline in exports through the Port of Oakland and the same situation applies to the ports of the Northwest Seaport Alliance (Seattle and Tacoma), which are major conduits for grain exports from the upper Midwest,” said O’Connell.
   Grain ports along the Columbia River such as Kalama and Longview, which are not as diversified as, say, Seattle and Tacoma, are particularly vulnerable.
   O’Connell also noted that the retaliatory tariffs imposed by China follow a ban by the country on many types of some types of waste exports, which have traditionally been among the largest westbound transpacific commodities.

Chris Dupin

Chris Dupin has written about trade and transportation and other business subjects for a variety of publications before joining American Shipper and Freightwaves.