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MaritimeNewsTrade and Compliance

Tariffs endanger $186 billion in US economic activity, study finds

Tariffs the U.S. imposed over the past two years – and retaliatory tariffs that followed – threaten more than $186 billion in U.S. economic activity and could add $31 billion to $35 billion in additional costs to manufacturers and consumers, according to a study released today (Nov. 12) by the Port of Los Angeles.

The study, “By the Numbers: Jeopardizing the National Benefits of Trade through America’s Busiest Port Complex,” is based on international trade moving through the adjacent San Pedro ports of Los Angeles and Long Beach, the country’s largest container port complex. Imports through the two ports flow to every state in the nation, the study points out, and goods grown or manufactured in every state are exported through Los Angeles and Long Beach to global markets, mostly Asia.

“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,” said Port of Los Angeles Executive Director Gene Seroka. “Some regions and industries are already feeling the pain, and the damage to jobs, income and tax revenue could be crippling down the road.”

The study shows the number of jobs and how much sales, income and taxes are at risk for every state due to tariffs. The study also shows the economic benefits of these imports and exports to each congressional district and the percentage in each hit by tariffs.

The study notes that most of the U.S. import tariffs that have been imposed or proposed are directed at China, which accounts for most of the imports moving through the San Pedro Bay ports. That includes 57% of containerized imports (by value) and 54% of total waterborne imports. The share of import value that may be impacted by tariffs is estimated to be 56.1% of containerized cargo, 16.7% of non-containerized cargo and 52.7% of total cargo.

Tariff effect on trade at ports of L.A. and Long Beach. Source: Port of L.A.

Tariffs tend to make foreign products cheaper to manufacture, putting U.S. manufacturers at a cost disadvantage. Retaliatory tariffs reduce the demand for U.S. exports, the study asserts, which leads to foreign consumer markets looking elsewhere for products. The trends were reflected in the latest cargo volumes at the Port of Los Angeles, which saw the biggest October drop in volumes in over two decades. The port’s October volumes also marked 12 consecutive months of declining U.S. exports, 25% fewer ship calls, and a 19.1% decrease in volume compared with October 2018.

Seroka said the outlook for the fourth quarter is “extremely soft,” with the port forecasting November to be down an additional 10% from the same period last year, with a weak December despite the looming December 15 deadline on another $160 billion worth of Chinese imports.

Tariffs and the trade wars have hit the U.S. agricultural sector particularly hard, according to the study, with 26% to 51% of agricultural exports from all 50 states hit by tariffs, based on trade through San Pedro Bay.

“If cargo traffic out of the San Pedro Bay ports is declining because of tariffs it means American farmers and ranchers are hurting,” said Angela Hofmann, Co-Executive Director of Farmers for Free Trade. “When tariffs cut off access to markets that are hungry for American livestock, grains, vegetables and other farm products, the economic pain reverberates from ports, to farms to Main Street businesses.”

Looking ahead to early 2020, Seroka said that with only a 3% vacancy rate at warehouses and distribution centers in the Southern California region, there’s still a lot of inventory to work through – which means the outlook for domestic truckload and LTL capacity should be “ok.”

“But we don’t want to be just ‘ok,’” he said. “Realistically speaking, is [the capacity outlook] going to mean just a pure head-haul run, where we’re displacing the driver, the cab, and the unit, so that the roundtrip doesn’t take place? That’s more concerning to me at this point.”

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John Gallagher, Washington Correspondent

Based in Washington, D.C., John specializes in regulation and legislation affecting all sectors of freight transportation. He has covered rail, trucking and maritime issues since 1993 for a variety of publications based in the U.S. and the U.K. John began business reporting in 1993 at Broadcasting & Cable Magazine. He graduated from Florida State University majoring in English and business.

6 Comments

  1. It seems odd that the trade war is having such a negative impact according to the authors of the study. I say this because other indicators such as unemployment and the stock markets seem to be fine. I’m guessing there might be a partisan lean.

    1. Apparently the LA Port put out the study…so a little biased. Seems that trade is growing with Mexico and South America.

    2. Naw man, Chinacs and our economy’s are heavily intertwined more than Americans realize! If your not in the transportation industry or you haven’t been paying attention, the bulk our import and export goods are with China. Google the number of trucking companies that have closed this year alone! We’re in a different kind of recession and most Americans don’t realize it yet! But wait until the surplus of goods runs down and the shelves start to empty alittle more faster than usual. You wait and see how the Christmas sales look this year. Its gonna get pricey this year my friend. Enough with partisan, it’s gonna be Americans that are gonna pay for it and its gonna hurt! But y’all keep on following #45!

  2. Agree with Heavy Wreckoning. When no ‘tariff war’ existed LA/LB ports were losing market to other ports because cost and service via California ports are poor for importers versus alternatives; that is not mentioned in the article but clearly an impact even during the trade spat. Funny, no mention in the article by about the hundreds of billions (trillions over decades) in damage to US companies due to Chinese companies stealing intellectual property and making knock-off products (QUOTE: “The U.S. Trade Representative has estimated the annual loss to China at between $225 billion and $600 billion, according to CNN.” – Forbes 3/1/2019 article entitled “One in Five U.S. Companies Say China Has Stolen Their Intellectual Property”). Let’s have a fair playing field for US businesses – that is the message the tariffs are conveying.

  3. I find it hard to understand how these tariffs have much of an impact on our economy at all. For simplicity, let’s say the tariffs impact $1 trillion in goods being imported from China, and the tariffs are 25%, that results in $250 billion in tariffs. So far 2019 U.S. GDP is estimated at $21.482 trillion. Thus the $250 billion in tariffs are around 1 percent of our GDP, yet news reporting and financial pundits would have us believe that these tariffs will lead to the collapse of our economy.

    I believe that the downward trend, actually slowing of growth, of our current economy is simply part of the natural business cycle, and all the reporting is merely hype to distract us from what our real fundamental economic problems are — out of control government spending and fiscal mismanagement of our wealth in favor of a small group of elites.

  4. These comments are quite-interesting

    If you would look at other port ranges
    You might find despite pockets of growth
    Resin booms outbound . That overall
    With the us consumer job recovery perhaps the
    Growth for imports might have been greater for overseas
    Consumer products washing machines .Electronics etc

    Had the import tariffs not been as severe or long
    In duration time wise in 2019 and as 2020 ahead

    No
    Question that steel and Aluminum imported components have been increased for us manufacturers and automobile
    Buyers and manufacturers
    and importers.See AIIS ASSOCIATION DATA

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