Imports into U.S. seaports are higher than seasonal patterns as retailers and manufacturers try to increase imported goods before the new round of trade tariffs goes into effect in January 2019. Amid the trade war between the U.S. and China, retailers and manufacturers have been setting monthly records in the amounts of goods that they have been importing during the fall months. The larger than expected volume of trade imports not only displays the effects of the underlying trade tensions between the U.S. and China on businesses but also make it hard to understand the underlying normal economic trends during this time of the year. The trade gap is expected to be the widest on record this year. However, due to the underlying trade tensions, we cannot determine whether the gap is due to the current goods stockpiling, a weaker yuan, strong demand due to the strong American economy, or a mix of factors that are not clear at this time to the current deviation from normal economic trends this year.
Ports in Los Angeles and Long Beach, the main destination for China’s imports, handled a combined 849,908 20-foot equivalent units (TEU) of imports in October. While ports in these two regions are the normally top hub for container imports, this year’s number represented a rise of 17.7% in imports from the same month last year and 10.2% from September.
For example, Yusen Terminal in Los Angles has opened an additional entry gate for the significant increase in container imports. As an effect of the trade war, containers in the Yusen Terminals that used to average four-boxes high, now measure an average of five- or six-boxes high.
On the East coast, ports in Norfolk, Virginia, and Savannah, Georgia have experienced a similar rise in imports from September to October. In Norfolk, Virginia, The Port of Virginia reported that imports rose 17% to 127,677 TEUs from September to October. In Georgia, ports reported imported cargo reached 205,836 TEUs, a rise of 18.5% from September to October.
Imports into these ports have been driven primarily by apparel, furniture, and manufacturing companies hoping to pull their import volume before the trade tariffs hit in January. Panjiva research group reported that apparel imports rose 19.7% year-over-year in October, furniture imports were up 14.7%, and auto-parts imports rose 9.9% last month compared to a year ago.
Additionally, companies such as Costco Wholesale Corporation, Floor & Décor Holdings Inc., Lumber Liquidators Holdings Inc., and Eaton Corporation are all planning on increasing their imports this year before the tariffs go into effect in January.
While many of these companies hope to escape trade tariff by pulling their imports forward, they face a certain indirect costs risk. By acquiring their inventories earlier, and holding their inventories longer retailers risk being stuck with large quantities of products that they might not sell. In addition, shipping companies face a potential drop-off in demand after experiencing this surge when the tariffs finally go into effect in January. They also face a significant decline in business if the U.S. and China potentially resolve their difference and companies start destocking and scaling back new orders for inventory.