Tariffs help ports reach records but slowdown looms

The Port of Charleston is expecting an unusually late slack season as a result of retailers front-loading cargoes ahead of increases in tariffs.    Recently imposed U.S. tariffs on goods imported from China have ports handling record container volumes, but a slowdown is on the near-term horizon, according to Jim Newsome, CEO of the South Carolina Ports Authority.
   SCPA handled an all-time high 217,035 TEUs in October, an 18.7 percent increase from the same month a year ago, and Newsome says strong import growth has continued into November and the early part of December.
   “We’re seeing record volumes right now because where a retailer could advance shipments, they have to try to get ahead of the tariffs,” he said in an interview with CNBC. “So we had a busy November, we had our busiest week ever last week.
   “We think post-Chinese New Year though, that’s going to slow down because a lot of the shipments have been advanced. Normally, you’d be in a slack season right now and it’s busy.”
   Newsome noted, however, that because of uncertainty surrounding ongoing U.S.-China trade negotiations, it’s much more difficult to predict exactly when the slowdown will occur and how severe it will be.
   “What we’re hearing from people sourcing in Asia is that they shipped as much ahead of time as they could,” he said. “Typically, this would be a slow season right now; we think we’ll see that slow season in the February to April time frame. We don’t know exactly what that means because we’ve never dealt with this before.”
   As a result, Newsome said it’s almost impossible for ports to plan for what could be a sudden downturn in import volumes, and ports are being forced to take a “wait-and-see” approach when it comes to international trade relations.
   “If you look at our investments, we build long-cycle assets,” he said. “You can’t really time anything based on [the current tariff situation], so we’re curious about what it will be. We think it will have a short-term impact, and we have to hope the trade uncertainty is removed in time.”
   On the export side, retaliatory tariffs put in place by several U.S. trading partners in addition to China could have an impact on automotive volumes. German automaker BMW manufactures its X5 model SUV in Greenville, S.C., and then exports through the Port of Charleston all over the world.
   “People have to remember that BMW exports 70 percent of what they make, so it’s truly a global manufacturing story,” said Newsome. “That will continue, but I think long term, one has to watch automotive because you can make expensive cars anywhere in the world and ship them relatively cheaply. I think the major impact could be with uncertainty from automotive manufacturing. They’re going to be busy right now [because] they just launched a new X5, but we’ll see if trade slows down in cars. We just don’t know yet.”
   But it’s not just the Port of Charleston that could see significantly slower growth in the new year.
   According to the latest Global Port Tracker report from the National Retail Federation and Hackett Associates, container imports at major U.S. retail ports — including Charleston — set yet another record in October, handling more than 2 million TEUs in a single month for the first time ever, “as retailers continued to bring merchandise into the country ahead of a now-postponed increase in tariffs on goods from China.”
   The 2.04 million TEUs handled by major U.S. ports represented a 9 percent increase from September and a 13.6 percent year-over-year jump.
   The heightened growth in imports is likely to continue through the end of the year, but the NRF expects both year-over-year growth and total volumes to slow “considerably” in January.
   A 10 percent tariff on $200 billion worth of Chinese products that took effect in September had been scheduled to increase to 25 percent automatically on Jan. 1, but President Trump and Chinese President Xi Jinping earlier this month agreed to a 90-day moratorium on all tariff actions. Trump previously had threatened to slap tariffs on all imports of Chinese goods if the two sides are unable to reach an agreement that adequately addresses U.S. concerns about Chinese forced technology transfer, intellectual property protection, non-tariff barriers, agriculture, services and cyber practices.
   The NRF has been a consistent and vocal opponent of the Trump administration’s use of tariffs as a negotiating tactic, arguing that tariffs are essentially a tax on U.S. importers and consumers.
   “President Trump has declared a temporary truce in the trade war, but these imports came in before that announcement was made,” Jonathan Gold, vice president for supply chain and customs policy, said of the record October volumes. “We hope that the temporary stand-down becomes permanent, but in the meantime, there has been a rush to bring merchandise in before existing tariffs go up or new ones can be imposed. China’s abuses of trade policy need to be addressed, but tariffs that drive up prices for American families and costs for U.S. businesses are not the answer.”