The president-elect (and former president) has made no secret about introducing new trade policies and increasing tariffs, especially for Chinese products. However, analysts believe these may be counterproductive to the current economy, impacting manufacturing and leaving consumers clutching the wrong end of the stick. Negotiations between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) have broken down again, leading to an import surge bound to extend deep into Q4.
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Analysts predict President-elect Donald Trump’s proposed trade policies will significantly shift U.S. import and export activities. Tariffs will be at the center of these changes, increasing uncertainty and disruption for supply chain managers, manufacturers, and international trade partners. In a new development, the president-elect has threatened a 25% tariff on all products entering the U.S. from its North American partners Canada and Mexico, besides a 10% additional tariff on China. This has prompted Mexican President Claudia Sheinbaum to suggest retaliatory tariffs if Trump goes ahead with the tariffs.
The broader impact is an economy that will likely slow down, leaving the consumers to bear the brunt of these policy shifts. Trade experts emphasize that these policies could hinder investments in new manufacturing facilities due to unpredictable tariff schedules. Meanwhile, congressional pushback might emerge as regional economic effects take hold.
Following the breakdown of negotiations between the USMX and ILA dockworkers, there have been rising concerns over potential East and Gulf Coast port worker strikes and the issue with incoming tariffs under the new U.S. administration. Both of these pressing concerns are forcing importers to front-load shipments deep into Q4.
Despite a month-over-month drop of 5% in containerized imports for October, volumes were 8% higher year over year, nearing pandemic-era peaks. This preemptive action highlights significant apprehension in the shipping and supply chain industries. Los Angeles and Long Beach have seen a 26.4% year-over-year increase following the surge. East Coast ports saw a 9% annual volume increase, while the Gulf Coast experienced a 6% decline due to decreases in Houston and Mobile, Alabama. Rising imports boosted outbound truckload volumes in Los Angeles (up 7%) and nearby Ontario, California (up 5%).
President Joe Biden and his administration have urged Congress to approve nearly $100 billion in emergency funding. The funding package will address recent natural disasters and critical infrastructure needs. It will also include $8 billion to repair transportation networks damaged by severe weather and specific projects like rebuilding Baltimore’s Francis Scott Key Bridge, which collapsed in March after a container ship collision.
Other aspects of the emergency fund will support disaster recovery efforts following Hurricanes Helene and Milton. This will assist the impacted communities in rebuilding homes, reopening schools, repairing roads, and providing resources for healthcare. Transportation Secretary Pete Buttigieg and FEMA Administrator Deanne Criswell emphasized the urgency, warning that the lack of funds could delay infrastructure rebuilding efforts nationwide.
Container spot rates for Asia-Europe trades have remained largely stable despite repeated attempts by carriers to impose general rate increases (GRIs). Major carriers like CMA CGM, MSC, and Hapag-Lloyd have announced FAK rates for Asia-Europe routes, but achieving these targets would require a substantial 50% increase, making success unlikely.
Drewry’s World Container Index (WCI) showed minor adjustments, with Shanghai-Rotterdam rates increasing by 1% to $4,071 per forty-foot equivalent unit (FEU) and Shanghai-Genoa rates rising 3% to $4,520 per FEU. Despite these gains, forwarders remain skeptical about the effectiveness of planned freight all kinds (FAK) rate hikes set for Dec. 1. This is because shippers and carriers are delaying Asia-Europe contract negotiations to early 2025, particularly after the Chinese New Year on Jan. 27, signaling a shift from the traditional January-December cycle.
Labor disputes and potential tariff hikes on Chinese imports under the incoming administration have created a complex landscape. During Q3 earnings calls, U.S. retailers such as Ralph Lauren, Williams Sonoma, and Target highlighted proactive measures, such as rerouting shipments to West Coast ports during the East and Gulf Coast strikes and then increased inventories relative to sales in anticipation of prolonged peak seasons.
Williams Sonoma has reduced its reliance on Chinese sourcing from 50% to 25% in recent years, with plans to front-load goods and utilize domestic manufacturing facilities if needed. At this juncture, it looks like most retailers are prepared to take on the potential disruptions in the coming months.
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