U.S. companies rushed in imports at Port of Los Angeles to avoid tariff deadline, now pushed back
The frontloading of Chinese goods ahead of the tariff deadline pushed container volumes the Port of Los Angeles to levels it has never seen in its 117-year history. The port processed 1,019,837 twenty-foot equivalent units, or TEUs, in July. Imports came in at 543,728,000 TEUs, also a record.
"Shippers have been frontloading their cargo for months to get ahead of tariffs and recent activity at America's top port really tells that story," said Port of Los Angeles Executive Director Gene Seroka. "Port terminals in July were jam-packed with ships loaded with cargo — processed without any delay, much to the credit of our dedicated longshore workers, terminal and rail operators, truckers and supply chain partners."
But the level of tariff, at a minimum of 30%, didn't allow companies to import in full orders, according to Mike Short, president of global forwarding at C.H. Robinson.
"This year's peak season started about two to three months earlier than normal," said Short. "We started to see it slow down a month or two before it would normally end, which just started."
He added: "We have been in peak season for at least three to four months at this point. It's not as strong as we would normally see."
The Trump administration announced its initial tariffs on April 2, but then extended deadlines to allow time for further negotiations, first to July 9 and then to Aug. 1. Another reprieve for high tariffs on Chinese goods was granted on Monday, and will expire in mid-November.
According to Short, retail is the No. 1 area experiencing a pullback. Lower-cost items are another area, while the sectors that have continued to be healthier were the higher-value tech and health-care items, Short said.
Trucking and rail companies make their money moving the containers. Less volume means less projected revenue.
In an advisory note to clients, HLS Group wrote, the average spot freight rates from Shanghai to the U.S. have dropped almost 60% from the peak in early June.
"However, the dramatic spot rate decline has slowed in August due to stronger capacity management by carriers, although it seems limited and not enough to stop the downward market. September might be the busiest time for the rest of the year, with increasing demand for the holiday season, which will push up spot rates," said the advisory.
Alan Baer, CEO of OL USA, told CNBC the lack of any real peak season provides clear insight into the overall impact of tariffs.
"Ocean spot rates follow volume, up or down, and volume follows consumer behavior coupled with risk-averse behavior by importers," said Baer. "Small- to medium-sized importers are being hurt as tariff levels remove some, if not all, of their gross margins."
Using trade data from Panjiva, CNBC saw July exports included refrigerators from Samsung, housewares from Walmart, numerous containers filled with Christmas and Halloween items for Home Depot, backpacks from Capri's Michael Kors, and furniture from IKEA and Bob's Discount Furniture.
The surge of containers has since dropped off, according to Marine Exchange, which monitors the incoming vessels into the ports of Los Angeles and Long Beach. Container ships on the way have started to dip, and the forecast anticipates the drop-off will continue over the next one to two weeks.
"In the very short term, only 10 container ships are scheduled to arrive in LA or LB next 3 days, a big 7 fewer than the 'normal,'" wrote J. Kipling "Kip" Louttit, executive director of Marine Exchange of Southern California and Vessel Traffic Service.
For the week ended Aug. 7, 37 container ships arrived, which is three fewer than the typical pace, according to Marine Exchange. The Port Optimizer for the Port of Los Angeles shows 16 scheduled vessels for the week of Aug. 24-30, a 16% decrease from the previous week.
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