Leaders at big U.S. seaports say escalating global trade tensions could drive down cargo volumes at the gateways and hit jobs and businesses that depend on the flow of goods across supply chains.
Gene Seroka, executive director of the Port of Los Angeles, said the tariffs recently enacted or proposed by the U.S. and its trading partners would affect 15% of all cargo that moves through Los Angeles, the nation’s largest container port.
Last year, Chinese trading partners accounted for $145 billion in import and export trade at the port, more than half of the port’s total of $284 billion. Based on a staff analysis, Mr. Seroka said 59% of that trade could be subject to new tariffs.
“It’s not that we’re pushing the panic button, but we’re watching this very closely because it does have an impact on a number of things, from consumer prices to jobs,” Mr. Seroka said.
Economists say the impact could spread beyond the specific categories of imports and exports that may be subject to tariffs.
“In a global supply chain, it’s not just trade in finished products, but components and materials make up part of what’s traded,” said Paul Bingham, an economist with Economic Development Research Group. “If you continue to purchase those imports, you’re going to pay higher tariffs. That’s a higher cost of production.”
As those higher costs are passed along to consumers, rising prices could reduce demand for many products, driving down volumes and cutting into business at the ports and the $1.5 trillion U.S. logistics sector.
“From air transport to marine, trucking and rail, they’ll all be losers,” Mr. Bingham said.
Jim Newsome, chief executive of the South Carolina State Ports Authority, said it is too early to know for certain what impact the tariffs may have on port operations.
The Port of Charleston, S.C., is closely tied to the automobile industry, handling imported automobile parts and materials as well as finished-vehicle exports made at several factories in the U.S. Southeast, including BMW AG’s largest U.S. plant in Spartanburg, S.C. Swedish auto maker Volvo is starting production this year at its new $1 billion factory 30 miles from Charleston.
In the short term, Mr. Newsome said it doesn’t seem likely that auto manufacturers would relocate those operations, although they may raise their prices if tariffs drive up costs. He said he believes the current tit-for-tat responses on levies are more of a negotiating tactic than a long-term regime.
“I’m having a hard time believing that out of all of this is going to come to a world where we increase tariffs everywhere,” he said.
Still, the prospect of those tariffs is raising uncertainty in the maritime industry, which handles 90% of the world’s trade. Mr. Bingham said it is difficult for businesses to make decisions in the current environment, such as where they might build a factory or invest in distribution networks.
“It’s throwing business processes into disruption,” Mr. Bingham said. “Uncertainty alone has a cost.”
Source: Wall Street Journal