The Supply Chain Daily provides a curated overview of Panjiva's research and insights covering global trade policy, the logistics sector and industrial supply chains.
Downturn predictions defied as US imports spring in April
U.S. seaborne imports grew 3.5% year over year in April — arguably the first normalized month following the lunar new year period in February and tariff volatility. It may be the last for a while given U.S. increase in tariffs on Chinese imports applied from May 10. Imports from China increased 2.0% year over year. Those from Vietnam surged 29.3%, in part due to it benefitting from manufacturing business arriving from elsewhere.
The impact of different tariff levels can be seen in furniture imports — which is subject to 10% duties and fell 2.2% — and chemicals, mostly at a 25% rate, which dropped 11.9%. Year-to-date imports are up 2.9% year over year, defying earlier predictions of reduced activity. The revised tariffs on Chinese exports do not apply to shipments already in transit — only 9.9% of exports to the U.S. arrive by air — so the knock-on effect of tariffs will not be evident until June.
Trump partly right about who pays as tariff burden sharing emerges
The Trump administration’s decision to raise tariffs on “list 3” Chinese exports, worth $201.3 billion in the 12 months to March 31, could add $30.2 billion to the past 12 months’ $59.4 billion of customs duties collected.
While it is U.S. importers not Chinese exporters who pay duties, there is evidence of burden sharing in the form of lower U.S. import prices from China. Overall import prices from China fell 1.1% in April from a year earlier.
The most marked decrease was in chemicals, whose prices declined 5.8% on average after 44.5% of the sector’s imports were hit by tariffs in September 2018. Other sectors seeing significant declines in import price include communications equipment and computers, even though smartphones and laptops have yet to face tariffs.
GoPro on track to shutter capacity in China, open in Mexico
GoPro Inc. is on track to shift much of its production to Mexico from China in response to U.S. tariffs by the second half of this year. The aim is to protect the company from possible tariffs, according to CFO Brian McGee. It is a well-timed move following the Trump administration’s decision May 10 to increase tariffs on Chinese exports, including most cameras, to 25% from 10%.
GoPro is not the first manufacturer to follow the strategy. Total U.S. imports of cameras from China fell 17% year over year in the first quarter, offset by a 57.7% surge in imports from Mexico. In the meantime, GoPro’s seaborne imports of cameras fell 6.1% year over year in the first quarter and were unchanged in April.
Cosco, Maersk pay the China price as California's port activity slows
Container handling through the Californian ports of Long Beach, Los Angeles and Oakland rose 3.4% year over year in April. That masked a weak performance from exports, which dropped 6.7%, the sixth straight monthly decline. The decline likely reflects China’s retaliatory tariffs — China represented 30.9% of outbound containers in the past 12 months — and may worsen given the tariff war's May 10 escalation.
Imports from China are already in decline with China-to-California shipments down 13.2% year over year. That hit COSCO SHIPPING Holdings Co. Ltd. and A.P. Møller - Mærsk A/S hardest with 24.8% and 27.0% drops respectively while Ocean Network Express Holdings, Ltd. saw an improvement of 1.0% after a weak April in 2018.
Maersk bolsters Suez as canal competition set to heat up
Maersk’s APM Terminals is set to expand at the Suez Canal Container Terminal. While the Suez Canal saw a 5.6% year-over-year increase in traffic in the 12 months to April 30, transits by container ships fell 0.8%. Activity through Suez has continued to outpace that through the Panama Canal with a 6.5% year-over-year expansion in April compared with a 0.8% decline for Panama.
Competition between the two canalas will intensify as the U.S.-China trade war worsens, particularly for U.S. East Coast-bound traffic. Imports from eight Asian countries to the East Coast climbed 15.9% year over year in April compared with a 4.9% slide in shipments to the West Coast.
2 trade wars, a rates war and 4 tariff reactions
Last week saw a tumult of trade policy activity, including: a worsening of the U.S.-China trade war, with little sign of renewed talks; the U.S.'s declaration that car imports are a security threat, souring relations with the EU; the ratification of the agreement between the U.S, Mexico and Canada, or USMCA became more likely following a resolution to U.S. steel and aluminum duties; while Brexit made no progress.
In logistics, container-shipping rates may be entering a downturn while activity in the Persian Gulf highlights a "black swan" risk. In industrial supply chains, Walmart Inc. has chosen to tackle tariffs with price hikes, Ricoh Co. Ltd. and Stanley Black & Decker Inc. with relocations and Quanta Computer Inc. will stand pat.
Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence.
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