It Would Take ‘7 Vietnams’ to Replace Chinese Cargo Lost Through Tariffs, Port of LA Says

A new Port of Los Angeles report bears out predictions the port made when the first Section 301 tariffs on Chinese goods were announced 20 months ago that the duties would raise consumer prices and cause other economic harm, Gene Seroka, the port’s executive director, told a media briefing on Nov. 12. The study found that “on an annual basis, on the goods moving through our port complex, an additional $31 billion to $35 billion U.S. dollars is attached to what you and I spend at the store,” Seroka said.

The report also blamed the tariffs for a harmful “shifting in trade patterns,” validating another early port forecast, Seroka said. “Cargo emanating from Southeast and South Asia has grown by about 10 percent over the last 20 months,” he said. “But for every container we earn from a newly sourced origin, we’re losing two and a half containers from China.

It would take “about seven Vietnams” to make up for the business the port has lost from China, “and that simply won’t happen overnight,” Seroka said. “There are decades worth of relationships that have taken place in order to provide for great sourcing, quality, environmental responsibility and so many other business requirements that you simply can’t shift supply chains overnight, and the report bears that out.”

The port closest to Los Angeles -- Long Beach, California -- has also seen shifts, though exports have been affected more strongly than imports. Ken Uriu, business development manager for import cargo from the Port of Long Beach, told attendees at a United States Fashion Industry Association conference last week that comparing the first half of 2019 with the first half of 2018, the number of containers headed for China fell by 41 percent. The number of containers coming from China during the first half the year compared with the first half of 2018 fell by 19 percent, while containers from other countries rose by 14 percent.

The Los Angeles port estimates that nearly half the goods that move through its complex “have tariffs attached to them,” Seroka said. “That simply puts at risk the more than 3 million jobs we have in the nation that are attached to the port.” Seroka doesn’t infer that a tariff “leads directly to a layoff, but it does lead to underemployment,” he said. Less cargo means fewer jobs, he said. “The cargo that traverses our port reaches each and every one of our 435 congressional districts,” Seroka said. Tariffs are not “a regional or local issue,” he said. “This truly is a conversation of national and international significance.” The port estimates that 42 districts in 22 states have suffered through “retaliatory tariffs” from China on 90 percent of their export cargo, he said.

Seroka estimates that “we are now hitting a cliff of what these tariffs have done and the impact they’ve had on the Port of Los Angeles,” he said. Cargo volume through the port declined by “an amazing” 19 points in October sequentially from September, he said. October also marked “the unfortunate precedent” of 12 straight months of export declines “through the Port of Los Angeles, our nation’s largest gateway,” he said. The port urges the Trump administration to “cease all tariffs” and “give certainty back to business,” Seroka said.

The report shows “how harmful a high-tariff policy” can be to American producers and consumers and all industries that depend on trade, National Foreign Trade Council President Rufus Yerxa said. Since the administration began imposing the Section 301 tariffs in 2018, “we’ve raised tariffs on nearly 20 percent of U.S. imports, and average U.S. tariffs are at the highest levels that they have been in decades,” Yerxa said.

U.S. trading partners have shifted their commercial practices to the detriment of American interests, Yerxa said. “China has actually lowered tariffs on imports from other countries while it has raised tariffs on the United States.” Yerxa thinks tariffs are “now the biggest threat facing America’s global businesses,” in terms of their worldwide “competitiveness,” he said.

The tariffs are harming the intended target, as well. Cao Jia Chang, chairman of China's Chamber of Commerce for the Import and Export of Textiles and Apparel, told USFIA conference-goers how the taxes are hurting his sector's sales. He said that textiles and apparel account for 11 percent of all of China's exports, and the sector's exports are projected to fall by 3 percent this year. The drop is because of lower sales in both Japan and the U.S., he said, with the U.S. accounting for 18 percent of Chinese apparel and textile exports. In the sector, 73 percent of the exports are clothing and 27 percent are textiles.

Even though apparel and textiles make up a relatively small amount of exported goods by value, the sector is the second-largest source of employment in China, with 21 million jobs, he said. He projected that over the next five years, top Chinese apparel manufacturing companies will transfer 25 percent to 30 percent of their production to other Asian apparel exporting countries.