US ports prepare for trade war

US ports prepare for trade war
PHOTO CREDIT: SCMP

Some seaports on the West Coast of the United States are braced to bear the brunt of the US-China trade war.

Rising tensions between the world’s two largest economies continue to create uncertainty, disrupt the global supply chain and dampen job opportunities.

Hopes for a potential trade deal have been dampened after the two countries failed to reach an agreement after months of negotiations.

On 10 May, the US raised tariffs on $200bn of Chinese imports from 10 per cent to 25 per cent. It has also threatened to place tariffs on a group of products worth $300bn.

China retaliated on 13 May by announcing tariffs on $60bn of imports from the US.

Eric Schinfeld, senior manager of federal and international government relations at the Port of Seattle, said: “For most businesses, including ours, the worst thing is the lack of predictability. So all of these changes – new tariffs, uncertainty about whether or not there will be negotiations or a settlement between the US and China – it just makes it hard for us to plan.”

Jock O’Connell, international trade adviser for independent research and consulting company Beacons Economics, said nearly 50 per cent of trade at the ports of Los Angeles and Long Beach last year involved China.

“If you look at the amount of trade that goes through these ports, it’s off by over 14 per cent since last year, and it’s particularly down with respect to exports,” he said.

“The volume of US exports going through the ports of Los Angeles and Long Beach to China is down by nearly 35 per cent from last year. Imports are down by 12.6 per cent from last year,” he added.

But for O’Connell, the most worrying aspect is that the trade war will result in the loss of blue-collar jobs at the ports.

“A lot of these people are what are generally called occasional or temporary workers. They work in warehouses and distribution centres, they drive trucks, their work is dependent upon whether there’s a box to be moved… when there are no boxes to be moved, these people get sent home,” he said.

Phillip Sanfield, director of media relations for the Port of Los Angeles, said one in nine jobs in Southern California is tied to the twin ports of Los Angeles and Long Beach.

Mario Cordero, Port of Long Beach executive director, said its operations generate 555,000 jobs in southern California, along with 2.6 million directly and indirectly in the supply chain throughout the US.

He said more than 70 per cent of the imports handled at the Port of Long Beach are from China, the most common commodities being household goods, furniture, electronics, machinery, textiles and footwear.

Tariffs put in place before those imposed this year had not necessarily had a significant impact on jobs, Cordero said. But the scenario has since changed.

“What we are talking about now is a different level – a level of 25 per cent on application, a level of tariffs on an escalating number of products. That scenario does present potential job losses.”

In Seattle, the impact on jobs and the economy is twofold, because items are traded with China through both Seattle-Tacoma international airport and the Port of Seattle.

Schinfeld said: “We really rely on two-way trade with China through our seaport and airport gateways. It’s the core of our business, but even more important than our business as a port it’s important to the customers we serve.”

He said a diverse mix of people – retailers, manufacturers and farmers, all of whom use the two gateways to trade with China – could be affected by the tariffs.

China is the top trading partner for the Port of Seattle in terms of imports and exports. It is the No 1 export destination for goods transported from the airport, Schinfeld said.

The Northwest Seaport Alliance, which covers the ports of Seattle and Tacoma in Washington state, generated 20,100 jobs and $1.9bn in income through all maritime cargo activities in 2017, data from the organisation shows.

While most imports from China do not remain in the local market, the port and airport serve as transit points for shipping products such as manufactured goods, retail and consumer items to the rest of the US.

Freight transported from the airport and seaport to China includes manufactured goods, aerospace components, seafood and agricultural products.

Schinfeld said he was particularly concerned about farmers from eastern Washington, some of whom grow cherries for a living.

“This is their livelihood, and many of these crops don’t have a long shelf life. For example, you can’t put cherries in a refrigerator and keep them for six months until the tariffs are gone. These are crops that will perish.

“You really worry that they [the farmers] will not be able to make it through. They won’t be able to survive the tariffs even if they are removed in six months. They make all of their money for the year in the few months when crops are grown and harvested,” Schinfeld added.

There is also the long-term effect on future business opportunities for farmers and producers.

“If people can’t buy US cherries because they are too expensive, they will buy cherries from Europe instead. When the tariffs have gone, long-term contracts will have been signed with Europe instead of the US, and those customers don’t necessarily come back right away,” Schinfeld said.

China, the US’s third largest trading partner, represents 13.1 per cent of its total foreign trade so far this year, the US Census Bureau reported.

According to the United States Trade Representative Office, China is the US’s largest goods trading partner, with total two-way trade last year reaching $659.8bn.

Some port executives fear the trade war will further exacerbate a continuing trade imbalance between the US and China and pose additional challenges to supply chains at ports around the US.

Sanfield said: “These tariffs have created uncertainty in the global market. What we saw last year at the Port of Los Angeles was an increase in imports, and a decrease in exports. In terms of trade with China, imports were up 9 per cent last year, while exports were down by nearly 20 per cent, and that’s also the case for the first quarter as well.”

The top five imports at the Port of Los Angeles are furniture, auto parts, clothing, footwear and electronics. The top five US exports are waste paper, pet food, scrap metal, fabrics and soya beans.

According to the US-China Economic and Security Review Commission, US exports to China fell by 18.8 per cent year-on-year in the first quarter. The country’s exports to China reached $25.99bn in value in the first quarter, a $6bn drop compared with the same period last year.

Schinfeld said the impact of the fall in exports had also spilled over to income and employment opportunities for domestic shippers and farmers.

While imports continue to rise at the Port of Seattle, in part due to a strong US economy and demand from consumers, which have compensated for rising import costs, exports have fallen significantly.

Schinfeld said: “Whether you are talking about soya beans, seafood, dairy products, apples or cherries… the numbers are down. We are definitely concerned that the impact of the retaliatory tariffs – those that China has placed on US exports – are having a strong effect on some of our local producers, manufacturers and exporters.”

As the threat of a US-China trade war loomed last year, producers rushed to get their items shipped before the tariffs took effect, contributing to the surge in imports.

But this year, O’Connell fears that producers will have a shorter window in which to move their products, compared with last year, because the US is becoming impatient.

He said there are two considerations regarding the decision to impose tariffs. One is the trade conflict with China, the second is the plan to increase manufacturing jobs in the US.

By imposing tariffs, which makes it economically difficult for companies to import goods to the US, the country’s authorities hope to attract more businesses to manufacture their goods, O’Connell said.

As a result, he said the trade war will probably last for a while, at least until the election next year.

“There is every indication that Beijing is digging its heels in, and is not going to be bullied into an agreement. Right now, there doesn’t seem to be much immediate hope for a resolution,” he said.

But despite the escalation in tension and the pessimistic views of some observers, some port executives are still hopeful about the prospects for US-China trade.

Cordero said: “I remain optimistic that the two countries will resolve their differences, because no one wins in a trade war, and everybody wins with a resolution of the issues that the two countries have reported.”

Source: China Daily