If Wall Street has recently had a mild tariff headache, the shipping industry is confronting a looming supply chain migraine.
In late April, Port of Los Angeles Executive Director Gene Seroka told the Los Angeles Board of Harbor Commissioners that shipping container traffic would drop 35% by early May at one of the busiest ports in the US. About 17% of all US imports and exports pass through LA, and another 14% goes through the nearby Port of Long Beach.
“Essentially all shipments out of China for major retailers and manufacturers have ceased,” Seroka said in the board meeting on April 24. Shipments from China make up about 45% of the Port of LA’s business. Mario Cordero, CEO of the Port of Long Beach, echoed Seroka’s sentiment, telling LAist that “there’s been a pause on shipping orders from China.”
Without that cargo, Cordero said “the port is expecting an estimated 30% drop in cargo volume in the second quarter. For the second half of the year, as much as a 20% reduction.” In the last week of April, 38% fewer vessels arrived at The Port of Long Beach compared to the week before.
There was a “tariff-motivated surge in imports” in Q1, as CFO Brew previously reported. Many US companies and consumers seemed to be trying to get ahead of the anticipated tariffs after President Trump’s inauguration.
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Day late, dollar short. Both consumers and workers will see impacts due to the decrease in shipments. An entire industry has popped up over the last few decades to support the constant influx of goods from overseas: dockhands to load and unload, truck drivers to move the inventory around the US, and warehouse workers to store the items. Fewer shipments means less work, and could lead to layoffs across logistics and retail, Torsten Slok, chief economist at Apollo Global Management, an investment firm, told the New York Times.
In early to mid June, consumers will start to see emptying shelves. That’s how long it takes for boats to cross from China to the US, for the goods to get shipped across the nation, and for stores to run out of inventory.
“If you’re out looking for a blue shirt, you might find 11 purple ones and one blue in a size that’s not yours[…] And for that one blue shirt that’s still left, you’ll see a price hike,” Seroka told CNBC.