US importers will pay higher prices for merchandise from China this fall after US President Donald Trump said Thursday his administration will levy a 10 percent tariff on the remaining $300 billion of Chinese imports from Sept. 1. Cargo volumes in the eastbound Pacific unlikely be greatly affected beyond that date, however.
Because vessels leaving Asia are already filling up, as evidenced by recent increases in spot rates, retailers and importers have no choice now but to take space that is available or risk paying higher spot freight rates later in the fall — rates normally peak in September-October. Capacity to the West Coast that will arrive prior to Sept. 1 will likely now fill be absorbed quickly and spots rates will reflect that. Air freight is not an option for most cargo to beat the Sept. 1 deadline because the margin is not great enough to absorb the much higher air freight costs.
Retailers and consumers responded to Trump’ tariff announcement — made via Twitter — by saying there are no options available for avoiding the “tax.”
“It’s another tax on consumers,” Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, told JOC.com.
Trump tweeted Thursday he is, “putting a small additional tariff of 10 percent on the remaining $300 billion of goods and products coming from China into our country. This does not include the $250 billion already tariffed at 25 percent …”
Over the past 15 months, beneficial cargo owners (BCOs) have discovered that despite their attempts to work around the trade war by front-loading imports to get ahead of tariffs, there is no effective short-term strategy, especially when there is only a 30-day notice. “Holiday merchandise has already been ordered,” Gold said.
Price of footwear will rise
“President Trump’s new tariffs should concern every American ... 70 percent of every pair of shoes sold in the US comes from China,” the Footwear Distributors & Retailers of America (FDRA) said in a statement.
“Tariffs are taxes, and this move will noticeably raise the cost of shoes at retail and will have a chilling effect on hiring in the footwear industry,” said Matt Priest, president and CEO of FDRA.
As the tariffs and counter-tariffs between the two countries unfolded since the summer of 2018, retailers were able to shift some of their production from China to other countries, especially in Southeast Asia. Alan Murphy, partner and CEO at SeaIntelligence Maritime Consulting, told a JOC webinar last month that year-to-date through June, United States imports from Vietnam increased 36.7 percent compared with the same period last year. Imports from Taiwan increased 22.4 percent and total US imports from the Philippines were up 3.7 percent.
“Ships leaving Vietnam are full,” a non-vessel operating common carrier (NVO) told JOC.com Wednesday.
While some retailers this past year have been able to find new sources of production in Southeast Asia, Murphy said many lower-value imports are simply “lost” during a trade war because the margin is too slim for manufacturers to shift production elsewhere. Some merchandise that had already been ordered for delivery this summer and fall will move during the current peak shipping season, but the production of those goods will most likely leave China by peak season 2020, he said.
Another short-term measure is to store products in foreign trade zones temporarily in order to delay imposition of the tariffs. However, the tariffs will take effect as soon as the merchandise is entered into the commerce of the US.
Contact Bill Mongelluzzo at firstname.lastname@example.org and follow him on Twitter: @billmongelluzzo.