Tariffs could hit L.A., Long Beach ports hard, analysis and experts say
If the latest salvos in an escalating trade war between the United States and China take effect, the resulting economic shock waves would likely hit Los Angeles and Long Beach ports the hardest, local officials fear.
The latest round of tariffs, threatening $200 billion worth of Chinese products the U.S. imports each year, stands to affect tens of billions of dollars worth of consumer goods – such as food, paper and handbags – coming into the L.A. area’s sprawling trade network, according to a Southern California News Group analysis of trade data.
Related: U.S. ports fear tariffs could reduce ship traffic and jobs
President Donald Trump’s Administration defends the tariffs as a difficult but necessary step to level the trade imbalance between the U.S. and many of its trading partners, particularly China.
When these tariffs would go into effect, and the extent to which they could harm trade, is still unknown. But officials in Washington, who have held several hearings in recent weeks, will allow public comment until Thursday, Sept. 6, so nothing can happen before then.
The president has said a tough trade stance will bring back jobs, inspire new, more balanced trade deals and create stronger protections for America’s intellectual property. This week, the administration reached a preliminary deal with Mexico to replace the North American Free Trade Agreement and was working to include Canada in the deal.
Trump said in a recent tweet, “Tariffs are working big time.”
As part of the strategy, U.S. Trade Representative Robert Lighthizer was tasked with identifying the $200 billion worth of Chinese goods to set tariffs on.
“The Trump Administration continues to urge China to stop its unfair practices, open its market, and engage in true market competition,” Lighthizer said in a statement earlier this month.
Still, experts say, the negative consequences of further tariffs could be wide-ranging – hitting everything from the ports themselves to the trucking industry, American manufacturing and consumers.
Los Angeles ports, with the highest value of imports last year, would be among the hardest hit by new tariffs on Chinese goods
Source: Census U.S. Trade Online database via AP (Graphic by Ian Wheeler, SCNG)
“We’ve seen standoffs in international commerce before, and there’s still time to resolve differences,” said Mario Cordero, the executive director of the Port of Long Beach, who this week called the trade dispute unfortunate. “But recent tit-for-tat measures aimed at imports and exports could cause long-term damage and harm American consumers and businesses.”
At the Port of Los Angeles, Executive Director Gene Seroka has said the new tariffs could impact up to a quarter of the cargo traveling through the docks, enough to fill more than a million 20-foot cargo containers. Los Angeles Mayor Eric Garcetti added that the port could suffer a 20 percent drop in volume.
“That equals 1.4 million (units), about $43 billion of trade value,” port spokesman Phillip Sanfield said this week. “That roughly equals containers lined up from L.A. to New York and back again to L.A.”
The proposed tariffs are set to burden some of the L.A. port’s top imported commodities, including auto parts, computer parts and accessories, machinery, and appliances, according to port data; top exported commodities that could be hit by Chinese retaliation include cotton, waste paper, plastics and scrap aluminum.
Still, experts and industry insiders disagree on how quickly the tariffs will land on the backs of consumers and whether it will hamper spending.
“The demand for some goods could outweigh any increases in price resulting from tariffs,” said Noel Hacegaba, the deputy executive director for the Long Beach port. “And that’s assuming the shipper passes on 100 percent of the tariff to the end consumer.”
But Clayton Dube, executive director of USC’s U.S.-China Institute, said, as an example, consumers can expect to see increases in the prices of goods manufactured from steel, since the tariffs have raised the price of the imported metal from China and elsewhere.
“Business customers will see higher prices for engine parts, for some kinds of construction equipment, for scales, for imaging equipment, for parts for printers and other electronic equipment,” Dube said. “Some types of farm equipment have been targeted.”
And, Dube noted, the likelihood of retaliatory tariffs from China could hit a number of American exporters, including California’s sizable agriculture industry.
That’s why officials for both the L.A. and Long Beach ports have gone on the offensive against the tariffs, even sending out tweets blasting the proposal.
“Tariffs could bring a significant reduction in cargo economic activity and ultimately jobs,” read one tweet the Port of L.A. sent this week. “Manufacturing and associated U.S. jobs could be at risk with current tariffs.”
Global trade through the #PortofLA and San Pedro Bay Port complex is tied to 2.7 million jobs nationwide and about 1 million jobs in Southern California. Tariffs could bring a significant reduction in cargo economic activity and ultimately jobs.
— Port of Los Angeles (@PortofLA) August 27, 2018
Meanwhile, at the adjoining Port of Long Beach, internal data show that 10 percent of all loaded containers coming through the port have been impacted by the tariffs implemented last week.
The $200 billion of additional proposed tariffs – and a proposed $60 billion worth of U.S. exports to China – would raise that to 28 percent of all loaded containers moving through Long Beach, port figures show.
A wide spectrum of goods and materials moving through the port would be hit: aluminum, chemicals, machinery and parts, appliances, and electronics, said port spokesman Lee Peterson.
But it’s not just the ports that are worried about the tariffs – businesses are too.
On Monday, in fact, the Office of the U.S. Trade Representative held its final public hearing on the proposed tariffs, during which officials from hundreds of companies spoke about the effect the levies could have on their businesses.
Among those criticizing the tariffs were representatives from several Southern California businesses, including Ultra Wheel Company, a Fullerton manufacturer.
“The proposed tariffs would cause a severe harm to us, our distributors, and U.S. consumers,” Ultra Wheel president Fred Dobler said at the hearing, noting he would likely have to cut jobs. “The tariff would force us to increase the price of our products to our customers.”
The tariffs could also hurt one of the most volatile group of port-related workers, truck drivers. Many of the truckers are independent contractors who, if trade volume decreases, may lose work, said Weston LaBar, CEO of the Harbor Trucking Association in Long Beach.
“It’s hard to retain drivers,” he said. “If we don’t have work for those drivers, we’re worried they will leave for some other segment of the trucking business or go into another business, like construction.”
The tariffs’ impacts could also extend far beyond the L.A.-Long Beach port complex – reaching into every trading hub in the Southland.
The Southern California News Group analyzed trade figures collected by the Census’ U.S. Trade Online database and prepared by the Associated Press.
The Census groups the nation’s ports of entry by land, air and sea into customs districts. Last year, the Los Angeles district, which includes LAX and Las Vegas’ McCarran International Airport, handled the highest-valued volume of goods in the U.S., worth $303 billion.
If passed, the new levies would affect at least 14 percent of that volume. With the tariffs on foreign steel and aluminum already in place, 18 percent of the district’s total imports would be subject to taxes.
The districts of New York City and Laredo, Texas, were second and third in import worth behind Los Angeles last year, valued at $228 billion and $117 billion, respectively. Adding proposed tariffs to those already in place, 8 percent of goods headed to New York would be affected, as would 2 percent of goods headed to Laredo.
The difference is the huge volume of Chinese goods Los Angeles receives compared with other shipping centers; the proposed round would hit $43 billion worth of goods headed to the Los Angeles area compared with $13 billion for New York and $2 billion for Laredo.
These nine import categories face tariffs targeting over $1 billion worth of goods bound for Los Angeles
Source: Census U.S. Trade Online database via AP (Graphic by Ian Wheeler, SCNG)
Locally, the looming tolls stand to hit the most valuable category of imports hard: electric machinery, equipment and parts – such as vacuum cleaners, electric razors, and various components for cars and home appliances.
In 2017, $55 billion worth of these products were shipped to Los Angeles, and the district is on track to bring in at least that amount by the end of this year. (By comparison, Apple has about $1.6 billion worth of iPhones, Macbooks and other merchandise on hand in its inventories.)
Tariffs imposed earlier this year already affect $4 billion of that total; if the Trump administration makes good on its latest threat, another $12 billion would be added, totaling $16 billion – a little under a third of the annual value.
The tariffs come at a bad time for the L.A.-Long Beach port complex, the busiest in North America. Last year, L.A. moved 9.3 million containers, an all-time record. Long Beach also set its own record, moving 7.5 million cargo containers – and it’s on pace for 4 percent more cargo this year.
“Modern supply chains are very complicated and by messing with their components, follow-on consequences are very likely,” said marketing professor Terrence Witkowski, director of Cal State Long Beach’s international business program at Cal State Long Beach and a harsh critic of President Trump’s trade policies. “I strongly suspect that the Trump administration’s crackpot trade policies will harm the ports of L.A. and LB.”
The Associated Press contributed to this report.