To get a sense of how the trade war – the one between China and the United States – is having an impact beyond the headlines, look to the high seas.
Container volumes, as measured across shipping lanes, may presage a rough holiday season, and a ripple effect that could last well beyond Christmas.
Reuters reported on Thursday (Nov. 14) that the Port of Los Angeles, a key port for trade between the two nations, processed fewer imported and exported containers last month.
In terms of headline stats, imports were down 19 percent in the month and exports were down 18 percent, as measured year over year. The data has been measured in what are known as 20-foot equivalent units, tied to cargo containers, and came in at 392,768.6 TEU for imports and 140,331.5 for exports.
“With 25 percent fewer ship calls, 12 consecutive months of declining exports and now decreasing imports, we’re beginning to feel the far-reaching effects of the U.S.-China trade war on American exporters and manufacturers,” Port of Los Angeles Executive Director Gene Seroka said, as quoted by the newswire. He added that “we expect soft volumes in the months ahead, and with the holiday season upon us, less cargo means fewer jobs for American workers.”
The comments shed at least some light on what trade wars can do, beyond whipsaw stock markets. At this writing, there looms another round of tariffs on Chinese goods in December, in the tens of billions of dollars, mostly impacting consumer goods such as electronics and toys. The Trump administration has threatened to raise already extant tariffs.
And tariffs, of course, have a habit of spiraling across both sides, escalating as ever-higher taxes on the cost of doing business. Eventually, that high operating cost eats into margins, which can hamper investment – in plant and physical property, yes, but also in hiring.
The ripple effect is seemingly at odds with record-low employment levels, and the fact that consumers are generally optimistic about economic prospects.
It’s important to note, however, that firms have been taking steps to insulate themselves from the impacts of the trade war. In part, that means shifting supply chains away from China – but, of course, that cannot be done in an instant.
The “low-hanging fruit” when it comes to grappling with uncertainty is to cut costs, in part by throttling back on production (of goods that, all else being equal, would be earmarked for exports) or by slowing hiring until demand re-materializes. More immediately, jobs may be lost on the waterfront, but a hiring slowdown may translate into job cuts if the trade war continues and the global economic slowdown becomes more pronounced.
The signal from the port, then, and from the waves: Rough seas ahead.