New York
CNN
—
US ports are facing a dramatic slowdown in cargo – but they could see the exact opposite in a matter of weeks.
Starting Wednesday, cargo leaving China bound for the US will carry a 30% tariff rate – a reduction from the higher 145% tariff that was in place for six weeks. The US and China announced a dramatic de-escalation in tariffs on Monday, lowering cripplingly high rates for 90 days. Experts say retailers will likely frontload more cargo during the pause, working against the clock to bring in inventory before things change again.
“You’re right kind of smack dab in the middle of when all that holiday merchandise is supposed to be coming in. So, there might be some retailers who decide to bring more product in early to get ahead of that potential expiration if they’re able to,” said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation
That’s exactly what retailers did before the first wave of tariffs took effect on April 9, stockpiling imports in March. China is one of America’s most important trading partners, where we get most of our clothes, footwear, toys, electronics and microchips. For many businesses, the higher tariffs make it too expensive to do business with China.
Flexport, a logistics and freight forwarding broker, said Monday it was too early to predict the exact scale of the surge following the US-China announcement, but that they were anticipating a “boom” in bookings.
Peter Boockvar, an economist at The Boock Report, says that while it’s still unclear how much a 30% tariff rate on China will make a difference, some retailers will take advantage of the lower rate.
“You are going to see a rush of ordering over the next 90 days the likes we’ve never seen before. You are going to see the cost of transportation skyrocket too in the coming weeks/months,” Boockvar wrote.
Despite experts predicting goods will soon surge into American harbors, West Coast ports are still projecting the number of ships, and the volume of cargo, to fall significantly this month. That because it takes ships 3 to 4 weeks to arrive on the West Coast from China.
“By the end of this month, we’ll be down 20% the number of ship calls and probably about 25% in the volume of cargo,” Gene Seroka, the executive director of the Port of Los Angeles, told CNN’s Erin Burnett on Monday.
The Port of Long Beach also saw a 35-40% reduction in cargo last week and noted that for a 12-hour period on Friday, no ships left China bound for the San Pedro Bay Complex, which encompasses both Long Beach and the Port of Long Angeles. It was an occurrence officials hadn’t seen since the pandemic.
Currently, there are seventeen fewer ships than usual bound for the two ports through May 16, according to the Marine Exchange of Southern California & Vessel Traffic Service Los Angeles Long Beach.
The Port of Seattle also reported empty docks last week, another anomaly that hasn’t happened since the pandemic. The Northwest Seaport Alliance, which represents the ports of Seattle and Tacoma, expects volume to drop anywhere from 8% to 15% compared to normal times. Vessels from China that are set to arrive this week are carrying 17% less cargo than usual, the alliance said.
“These (tariff) reductions don’t undo the consequences of their implementation. The uncertainty, market disruption, cargo fluctuation, and lost business caused by the initial and remaining tariffs is still a significant concern. Both reductions in cargo and surges have consequences that impact the supply chain. Consistency is a requirement of a fluid supply chain and the jobs that depend on it,” the Northwest Seaport Alliance said in a statement.
It’s not just the West Coast – it also takes 4 to 6 weeks for ships to reach East Coast ports from Asia, which would push back any cargo surge till next month.
“If they (retailers) start placing orders now, mid to late June is when that cargo might start to arrive. So you’ll probably see a slowdown for the next few weeks and then an uptick up until July,” said Gold.
But a 30% tariff on Chinese imports, while significantly lower than 145%, is still unworkable for many businesses, especially smaller ones. The US Chamber of Commerce said Monday that “tariffs are much higher overall than they were at the beginning of the year,” and reaffirmed their request for the Trump administration to exempt small businesses from tariffs.
“The larger retailers are in a better position than some of the smaller retailers to be able mitigate” the costs of tariffs, Gold said. “I think there are a lot of ongoing discussions right now about how this is all going to work out.”