Tariffs Lead to 20% Reduction in Chinese Imports by Flexport Clients

The volume of imports from China fell about 20 percent across the fourth quarter, Flexport executives noted during a webinar Jan. 21 -- which represents both shifting to other categories of goods and re-orienting supply chains. Ryan Petersen, CEO of the freight forwarder, said 64 percent of its clients are paying additional tariffs because of the Trump administration policies.

The increased tariffs do have a silver lining -- “you can suddenly ship freight for much cheaper than in the past,” Petersen said. But, he said, he worries about the possibility of a shipping company going bankrupt, which would lead to a spike in rates, as happened a few years ago. Petersen said companies can try to avoid the tariffs by applying for exclusions, and said winning an exclusion that Flexport helped apply for “saved one company $25 million.”

Petersen said the forwarder's also seen an increase in companies donating surplus inventory to international refunds, and getting duty drawback on the 25 percent tariffs they paid under Section 301.

Phil Levy, chief economist at Flexport, said that although the promised purchases of U.S. goods by China “don't look achievable,” the U.S. pledged to wait a year to evaluate -- which will be after the elections, and, if Trump is no longer president, under a new administration.

While he thinks there's a cold peace with China, he's not sure if the supposed détente with France on the Digital Services Tax is an indication that tensions are dropping between Trump and the European Union. Levy said Trump's advisers tell him not to start a trade war with Europe, but, Levy said, “it irritates him that Europe has barriers, and he wants to attack them.”