Shipping docks are ground zero for Trump tariffs
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Shoshana Gordon/Axios
West Coast ports are ground zero for the trade war. They are warning of plunging cargo volume, with likely far-reaching economic effects in the weeks and months ahead.
Why it matters: The tariff shock is likely to ripple through the economy, eventually hitting domestic transportation and warehousing, employment, and the price and availability of goods on store shelves.
- But to map how those effects are likely to cascade across the U.S. economy, you have to start on the docks and among the longshoremen who staff them.
What they're saying: "The recession will start on the docks of Los Angeles," Joe Brusuelas, an economist at accounting firm RSM, wrote in a note Monday.
- President Trump's trade war risks higher joblessness and inflation that would cut into real incomes.
- "The price of those policies will be first paid at the ports and then spread to the rest of the economy," Brusuelas added, noting similar indicators from recent trade shocks in the 2018 trade war and the COVID-19 pandemic.
Plunging container volume, especially from China — on which 145% tariffs are in place — translates into fewer hours for dockworkers, which could quickly spread to less demand for the trucks and rails that transport the cargo.
- That might crimp demand for warehouses that store goods on behalf of small and large companies.
State of play: The ports see signs of a rapid unwinding of the massive volume spike of recent months, as companies tried to import as much as possible ahead of tariffs.
- The Port of Los Angeles — the country's busiest — estimates that container volume will be down by more than one-third this week relative to this time last year, as high tariffs bring trade with China to a halt.
- The ports of Seattle and Tacoma in Washington said they expect container imports to decline by 40% in May.
Zoom in: "If we've got a 40% drop in vessel calls or container traffic, we're going to have roughly an equivalent drop in the number of longshore hours, the number of truck trips," Port of Seattle commissioner Ryan Calkins told reporters last week.
- "Shipping lines have already canceled 34 sailings that would have called at the Port of Long Beach over the next two months," Mario Cordero, the port's top executive, told reporters.
- "The concern here is we don't want that metric to keep going the wrong way," Cordero said.
What to watch: "That line continues to the immediate drop in the earnings of dockworkers, truckers and warehouse employees, all with negative ripple effects on local businesses serving Los Angeles," Brusuelas wrote.
- Brusuelas noted that roughly 7% of workers are tied to sectors like transportation that deal with the movement of goods, while 15% are employed by other supply chain-related industries, like warehouses.
The bottom line: Ports are in the line of fire in the trade war, but the tariff impact could soon spread to consumers before boomeranging back to American businesses.
- Even if the U.S. and China de-escalate, the goods not currently on container ships crossing the Pacific will also not be in American warehouses or on store shelves anytime soon.
Journalists at Bloomberg went deep on how the new tariff regime affected the economics of one container ship full of goods that recently arrived at the Port of Long Beach.
- The OOCL Violet began loading in Dalian, China, just before the April 2 reciprocal tariffs were announced, and the rapid escalation to 145% tariffs on Chinese imports occurred just before it departed Shanghai. It arrived in California on April 24.
- The ship contained goods that represent "a microcosm of consumer goods and industrial supplies: fish, sneakers, forklifts, latex medical gloves, car windshields, pasta, wheelchairs and bras," wrote Bloomberg's Andre Tartar, Denise Lu, Raeedah Wahid and Aaron Gordon.
By the numbers: Their calculations show that on a ship containing $564 million worth of merchandise, the tariffs amounted to $417 million over preexisting import costs.
"We don't know if this is permanent [or] temporary ... so we're all in kind of a fog, if you will, and exploring other options," Tino Muratore, general manager of Worldlawn Power Equipment in Beatrice, Nebraska, told Bloomberg. The firm had lawnmowers and parts on the ship.
- "Our margin is slim," said Michael Kotok, president of Arctic Fisheries, a Buffalo-based seafood distributor that had 103,000 pounds of frozen cod on the ship. "We have to pass that cost along."
