- The Washington Times - Monday, June 17, 2019

The tariff war raging between China and the U.S. is wreaking logistical havoc on America’s gateway for trans-Pacific trade, the twin ports of Los Angeles and Long Beach.

For the past year, as the world’s two largest economies have locked horns imposing duties on billions of dollars of each other’s goods, retailers have responded by front-loading cargo in anticipation of higher tariffs.

The result — a months-long, record-setting surge of imports to the docks that already handle almost 50% of U.S. cargo trade with China. May was the busiest month for imports in Los Angeles’ 112-year history.

The tariff-driven crush of activity has strained Southern California’s massive supply chain network, which includes shipping, trucking, warehousing, railroads, construction, manufacturing and farming, said top officials at Los Angeles and Long Beach ports.

“Containers are stacked high. Truck lines are long. And warehouses are bursting at the seams,” said Eugene Seroka, executive director of the Port of Los Angeles. “We’ve got a lot of cargo coming in that just sits.”

The L.A. area boasts the most warehouse space in the U.S., 1.8 billion square feet. But the vacancy rate at the end of May was just 1%, according to the port.

“Global trade tariffs have created uncertainty. The global supply chain does not do well with uncertainty,” said Port of Los Angeles spokesman Phillip Sanfield.

Outgoing traffic from California also has been affected.

In May, Los Angeles and Long Beach reported that exports were down significantly for the seventh month in a row. Economists say this has added more anxiety to the more than 1 million jobs tied to international trade in the five counties nearest L.A.’s ports.

U.S. ports in the Gulf of Mexico are feeling similar strains, according to PIERS global. The shipping data service says imports from Asia are up 4.4% on the year but exports to China from ports in Texas, Louisiana, Mississippi, Alabama, and Florid are down 13.8%.

The clouds hovering over the supply chain are particularly threatening to U.S. manufacturing firms that rely upon unfinished Chinese good to make their products. Roughly 50% of Chinese imports fit into this category, officials say.

“American workers are waiting for these products,” Mr. Sanfield said.

Long-term corporate decision-making is also at stake, Mr. Seroka said, adding that “few companies want to invest at this point in time in the supply chain, not knowing where it is going in the future.”

Last week retail giants Walmart, Target, Macy’s and The Gap sent a letter to President Trump expressing their fears that the tariff war will hurt the U.S. economy, workers and consumers. More than 600 companies and trade associations signed the letter, which also went to Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur L. Ross Jr.

The debate will be front and center again later this month in Osaka, Japan, when Mr. Trump and Chinese leader Xi Jinping are expected to discuss the tariffs on the sidelines of the Group of 20 summit.

Last week White House economic adviser Larry Kudlow reiterated that Washington sees the tariffs as “a negotiating tool” and that the U.S. is determined to make China adhere to the rules of international trade.

The public is divided on the issue, according to the latest Quinnipiac poll, which last month found that 39% of all Americans approve of the president’s handling of trade and 53% disapprove.

More supply chain volatility is on the horizon, said Daniel Hackett, partner at the cargo port forecasting firm Hackett Associates.

Hackett Associates publishes the Global Port Tracker in cooperation with the Bremen Institute of Shipping Economics and Logistics.

Mr. Hackett said that despite receiving far less China-related cargo than the West Coast, ports in New York, Virginia, South Carolina and Georgia have seen imports rise. But the next obstacle to planning has less to do with China, he said.

The U.N.’s International Maritime Organization has required all ships use lower-sulfur fuels than they currently burn by Jan. 1 — a massive transition in transport costs that is rippling across the entire world’s manufacturers, wholesalers, retailers and transporters.

“Supply chains are designed to navigate around obstacles and tariffs make that all the more difficult,” Mr. Hackett said. “From a logistics point of view, uncertainty is something that you just don’t want to deal with.”

• Dan Boylan can be reached at dboylan@washingtontimes.com.

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