Here’s how Southern California’s giant logistics industry has been upended by Trump’s trade war with China.
The container ship Ever Lovely is loaded with containers at the Port of Los Angeles. Tariffs on Chinese imports and China's retaliatory tariffs on U.S. exports have"gummed up" operations throughout the logistics supply chain, port officials say.
“There’s no space inside,” she said. “We don’t have anywhere to put the materials.” Meanwhile, despite the bottlenecks, “We’re having to bring in more because there’s so much uncertainty about what country is being hit next.” Southern California’s warehousing and distribution complex, the largest in the world with 1.8 billion square feet within 50 miles of the ports, has less than 1% vacancy, down from the usual 5% to 7%, he added.“A lot of money is sitting on the sidelines,” he said. “Do you buy more trucks? Do you hire more people? Do you build another warehouse? Do you invest in digital technology? Few companies want to invest at this point in time in the supply chain, not knowing where it is going in the future.
At the twin ports, containerized imports from China surged in the summer and fall, and then fell by 11.9% in the first four months of this year compared with the first four months of 2018.Now Trump’s threat to tariff an additional $300 billion in Chinese imports is creating even more uncertainty. It would mean a tax on nearly everything that the U.S. buys from China and would probably trigger more Chinese retaliation.
Although they have set records for growth, largely thanks to imports from China, the Southern California ports have lost market share in recent decades to competitors on the East and Gulf coasts and in Canada and Mexico. The trend accelerated after a 2014-15 labor conflict that led to massive congestion.
“So, for instance, China imports scrap metal from the U.S. and recycles it into slab steel. A steel company in Los Angeles imports it back from China and turns it into rolled steel for the aerospace industry,” he said. When the containers were finally found, Hughes added, the terminal, owned by a global shipping company, charged the importer tens of thousands of dollars for exceeding the usual three-day storage window. Under the controversial practice known as “demurrage,” Hughes said, “you have to pay before you can pick them up. You are blackmailed.”
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