Letter from the Editor

By Mark Szakonyi

In his second term , it ’ s less a question of “ if ” and more “ when ” Trump will implement harsher tariffs .

US importers are better prepared for the tariffs President-elect Donald Trump has promised to slap on goods from China , yet the majority don ’ t seem to be significantly rushing orders to get those goods across the docks ahead of his inauguration . Rather , tariff fears are just one of several factors pushing US importers to book more than usual during this extended peak season .

In Trump ’ s first term , US importers were at first unsure how serious the president was about following through with his tariff threats ; indeed , he was very serious . In his second term , it ’ s less a question of “ if ” and more “ when ” Trump will implement harsher tariffs on China , which he says will be higher than 60 %.

The extent to which US importers frontload ocean cargoes has implications for shipping price and service . Trump ’ s first term was marked by three waves of escalating US tariffs on Chinese goods and two postponements of implementations . That created five periods in which US importers moved goods earlier , artificially creating demand that fueled differing degrees of spot rate volatility and pulled down ocean reliability . And , to a lesser degree , slowed cargo flow through ports .

This time , however , knowing that more tariffs will be a reality rather than a possibility gives shippers a firmer base to scope out potential responses and make plans , said Chris Rogers , head of supply chain research at S & P Global Market Intelligence . S & P Global is the parent company of the Journal of Commerce .

There ’ s also some degree of knowing what types of goods are first in the firing line for higher US tariffs , given the first Trump administration in December 2019 suspended tariffs targeting imports of mobile phones and laptops from China . Such high-value items could easily be moved via faster air transport rather than ocean shipping to narrowly avoid any tariff deadline .

Multiple drivers

Based on discussions with three cargo owners and various forwarders , a degree of frontloading to avoid imminent Chinese tariffs is occurring and will continue . The logistics directors at three midsize importers said they had an internal goal to get more goods from China into US ports by Jan . 1 .

“ We are experiencing an overwhelming surge in booking demands , with available space becoming increasingly constrained for both the USWC and the USEC ,” Marc Meier , global head of ocean freight at Toll Global Forwarding , told the Journal of Commerce .

The stronger-than-normal booking demand , Meier said , was due to a litany of factors : Chinese tariff fears , strong blank sailings and the looming Jan . 15 deadline for longshore workers and employers to reach a deal or risk another strike along the US East and Gulf coasts .

Beyond knowing tariffs are coming , US importers have higher carrying costs than they did during Trump ’ s first term , thanks to higher interest rates . The more elevated prices to store goods will prompt some importers to be more conservative with just how much they frontload . How much of that frontloading is fueled by importers moving goods to avoid the strike threat and earlier Lunar New Year celebrations is unclear . Chinese factories stall or slow production during the roughly two-week holiday period that next year begins on Jan . 29 .

US import bookings out of China haven ’ t jumped despite the tariff threat , according to logistics software provider e2open .

“ While November has seen a slight uptick compared to October , this is likely due to the lower order volume during China ’ s Golden Week holiday in October ,” e2open said in a statement to the Journal of Commerce .

US imports from Asia grew 10.5 % year over year in October , according to PIERS , a sister product of the Journal of Commerce within S & P Global .

Stephen Nothdurft , vice president of North America sales at forwarder MOL Consolidation Service , said tariffs were playing just “ a bit of a role ” in extending peak season volumes . He also expected importers dependent on the East and Gulf coasts to wait out the Jan . 15 deadline .

“ Nobody is looking to rush to get crazily ahead of this East Coast situation ,” he said , adding that “ nobody is charging forward on the tariff [ risk ].”

That seems to be the sentiment of the roughly 100 shippers polled by Ravi Shanker , Morgan Stanley ’ s managing director and lead analyst for North American freight transportation . More than 70 % of those polled said they didn ’ t plan to restock differently due to Trump winning a second term .

Of those shippers , a little more than one-third said they ’ re considering “ moderating or significantly ” increasing inventories ahead of tariffs , while an amazing 42 % don ’ t expect to change behavior in the face of impending tariffs .

email : mark . szakonyi @ spglobal . com

4 Journal of Commerce | December 2 , 2024 www . joc . com