IN THE NEWS: US ports brace for perfect storm as tariff threats scramble supply chains
Yahoo Finance
December 17, 2024
Akiko Fujita
FROM THE ARTICLE: US ports brace for perfect storm as tariff threats scramble supply chains. The last time President-elect Donald Trump used tariffs to wage the US-China trade war, it upended US ports. Suppliers rushed to frontload inventory ahead of implementation dates, straining infrastructure ill-equipped to handle the volume surge.
The COVID pandemic only accelerated the untangling of global supply chains.
Logistics firms say the lessons from those experiences and the changes implemented since may help cushion the blow if Trump makes good on promises to hike tariffs on US imports.
"What I think people learned was not to make huge volume rash decisions," said Paul Brashier, Vice President of Global Supply Chain for ITS Logistics, referring to the 2018 trade war. "[There was] a lot of knowledge and infrastructure that was put in place to be able to handle situations like this that still exists so it mutes the overall effect when there are these changes in booking behavior."
To be clear, some businesses are rushing to get ahead of any tariff hikes. At the country's largest port, cargo volume was up 16% year on year in November, according to Port of Los Angeles director Gene Seroka, although he attributed much of that spike to geopolitical issues and a strong economy.
But as firms dust off their 2018 tariff playbooks, many are confronting a very different global trade landscape that is more diversified to withstand potential shocks.
For example, while China's share of US imports amounted to 20% in 2017, today that share has declined to a 20-year low of 13.5%, according to research by Goldman Sachs. That shift has been especially pronounced in sectors like technology, where firms have increasingly distributed manufacturing outside of China to regional hubs like Southeast Asia and Mexico. Earlier this year, Mexico overtook China as America's largest trading partner for the first time in decades.
Brashier has witnessed these supply chain changes firsthand at ITS Logistics. Since 2018, the firm has opened new distribution facilities in Indianapolis, Reno, Nev., and Fort Worth, Texas. It expanded operations to 4 million square feet and added 3,500 additional transportation assets, including tractors, trailers, and chassis.
"There's a lot more infrastructure now that allows folks to ebb and flow and respond to what's going on with these kinds of headwinds that we see almost, it seems like, regularly," he said. "I think that's the biggest thing that came out of 2018 and post-COVID."
Brashier has already begun mapping out contingency plans with importers for additional disruptions that are likely to emerge. That includes finding alternative points of entry into the US and monitoring the traffic flow. The ability to track freight the minute it hits water overseas gives imports a four- to six-week buffer, he said.
Brashier said other firms have begun seeking out additional warehouse space to store inventory. "There [are] certain commodities that the infrastructure of China cannot be beat on, whether it's the raw material, access to ports, access to ships, access to transportation, access to a labor force," he said. "We're not selling products at a loss. We're a for-profit entity."