Trade War And Tariffs Already Causing Serious Delays, Cost Overruns At Ports
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The neighboring Port of Los Angeles and Port of Long Beach, which combine to handle about 47% of all shipping containers coming from China, are suffering cascading effects from the tariffs Trump imposed on China and China's retaliations, the Los Angeles Times reports.
“[Tariff issues have] really gummed up the operations of the supply chain,” Port of Los Angeles Executive Director Eugene Seroka told the Times. “We’ve got a lot of cargo coming in that just sits. Containers are stacked high. Truck lines are long. And warehouses are bursting at the seams.”
Much of the distribution and warehousing industry anticipated Trump raising tariffs on $200B worth of Chinese goods to 25%, which led to a mad rush to secure imports ahead of the higher rates. Beyond causing a bottleneck at the ports, the ensuing glut of imports strained the capacity of the Southern California market. Industrial vacancy within 50 miles of the ports has plunged below 1%, Seroka told the Times.
The explosion of shipping in the two ports didn't just strain timelines, it also had immediate financial impact. Several distribution companies told the Times that their overseas partners raised previously agreed-upon rates by as much as 100% in response to the increased demand. If a container sits in a port for more than the standard three days, its owner is charged "demurrage" fees every subsequent day that must be paid before the container is released, the Times reports.
Now that the tariffs are in effect, incoming and outgoing shipments have dramatically trailed off, according to the Times. While that may ease some of the pressure on the supply chain, Trump's threats of further tariffs on as-yet-unaffected Chinese goods (and potential tariffs on Mexico, which apparently aren't entirely off the table despite Friday's deal heading them off for now) make even the immediate future impossible to predict.