Après la Chine
By Jock O’Connell
There’s no question that trade between the world’s two largest economies is a big deal. So there’s no question that the trade fight President Donald Trump has chosen to pick with China is in search of an equally big deal. We may see one next month when American and Chinese officials have a sit-down in Washington. But, having been through this drill too many times and knowing just how complex the issues to be resolved are, I wouldn’t encourage anyone to hold his or her breath while awaiting an agreement that is more than cosmetic.
Meanwhile, the matter of exactly how the Sino-American trade dispute has been affecting life on this side of the Pacific has been a subject of lopsided contention. On the proverbial one hand, virtually every serious economist and business organization (including such leftwing stalwarts as the U.S. Chamber of Commerce) have been tabulating the mounting cost of Trump’s tariffs to American consumers and businesses. On the other hand, the president continues to maintain that it’s the Chinese who are the ones paying the tariffs he has been imposing. And the president’s hawkish trade advisor Peter Navarro has lately gone on air to insist there’s no evidence that the tariffs are adversely affecting the U.S. economy. That, I suppose, makes him the Oedipus of this drama, the man who would pluck out his eyes rather than see the damage he has wrought.
In truth, tariffs affect different people and businesses in different ways. If you’re among the cultists who eagerly pay exorbitant markups to own the latest iPhone, higher prices due to increased import duties will likely be sloughed off as a penalty for vanity. By contrast, the 75-year-old Pennsylvania small business owner, who imports horse-drawn carts on behalf of his Amish neighbors, is more apt to see his company fail in the face of a new 25% levy on a product apparently no longer manufactured in the USA.
Of course, prominent among those most directly affected by the trade conflict with China are those who actually handle the trade. Indeed, if your personal welfare is in any way associated with the operations of U.S. seaports, especially those along the West Coast, another round of failed negotiations may make it feel like it’s time to go to the mattresses.
For years now, the People’s Republic of China has dominated maritime trade through the maritime gateways of the U.S. West Coast. And, despite steadily intensifying tensions between Washington and Beijing, the China trade still accounted for 50.5% of the $177.76 billion in containerized imports that entered all USWC ports (including the so-called niche ports in California, Oregon, and Washington State) during the first half of this year.
To be sure, the impact of the inbound China trade varies from port to port. At the Los Angeles-Long Beach complex, 58.3% of the 24,408 million metric tons of containerized imports in this year’s first half came from China, down from 59.2% a year earlier. The NWSA Ports of Seattle and Tacoma are somewhat less dependent on Chinese imports, which accounted for 48.5% of the 4,634 million metric tons of containerized imports that arrived at those ports during this year’s first six months, down from 52.3% last year. Least reliant on China as an import provider is the Port of Oakland, where just 34.5% of the port’s 2,282 million metric tons of import tonnage in this year’s first half came from China, down from 39.9% a year earlier.
Still, as outsized a role China plays in the maritime trade passing through USWC ports, we mustn’t lose sight of the fact that the China trade is not the only show in town. We do, after all, import goods from other nations. So who are the non-Chinese countries from which USWC ports receive containerized imports and have their rankings changed much since the Great Recession?
Exhibits A and B look at containerized import tonnage from the five leading non-China sources of containerized import tonnage in the first half of each year from 2010 to 2019 at the Ports of Los Angeles and Long Beach and at the Northwest Seaport Alliance Ports of Seattle and Tacoma. Because the Port of Oakland boasts a somewhat unique import trade, Exhibit C will track that port’s eight trading partners through those same years.
As Exhibit A shows, Japan, which was the second largest import source at the Los Angeles/Long Beach port complex in 2010, saw its share of total import tonnage through the Southern California gateway drop from 5.6% to 4.7% last year and to 4.2% in this year’s first half. That was the result of both the rise of competitors as well as the fact that Japan shipped 5.5% less containerized tonnage to LA/LB in the first half of 2019 than it had in the same months of 2010.
South Korea followed Japan’s pattern, seeing its share of imports decline from 5.4% in 2010 to 4.0% this year as the volume of its shipments dropped by 2.0%. Although Taiwan and Thailand both saw appreciable increases in their shipments to LA/LB (24.7% and 48.4%, respectively) between 2010 and 2019, the big winner was obviously Vietnam. With imports increasing by 170.8% from 2010, Vietnam’s share of the containerized import trade at LA/LB soared from 2.9% in 2010 to 6.3% this year. All indications are that Vietnam will continue to see its share of the U.S. import trade rise, largely at China’s expense.
Of interest should be several other nations that posted increases in containerized import tonnage at LA/LB that were nearly as impressive as the pace recorded by Vietnam, albeit from a smaller base. For example, import tonnage from India rose by 90.3%, while Spain (189.4%), Turkey (129.2%), and Cambodia (151.1%) more than doubled their shipments to LA/LB. Even eternally-imperiled France posted a remarkable 88.5% gain in import tonnage since 2010.
Up at the Northwest Seaport Alliance Ports of Tacoma and Seattle, the containerized import picture is somewhat different. China is the foremost player, although its share of import tonnage has steadily deteriorated from 63.6% in 2010’s first half to 48.5% this year. As for the second-tier importers at the NWSA ports, Japan has seen its share fluctuate, with a high of 10.2% in 2012 before landing at 8.6% this year.
Since 2010, first-half containerized tonnage from China has declined by 15.8%, while tonnage from Japan and Taiwan increased by 15.6% and 24.2%, respectively. Tonnage from South Korea, however, has fallen by 11.8%. Reflecting shifts in sourcing of imports and the migration of manufacturing into Southeast Asia, some of the fastest-growing shippers of containerized import tonnage through the NWSA since 2010 are Vietnam (196.7%), Thailand (58.8%), Indonesia (73.5%), Malaysia (56.3%), and India (239.8%).
The picture is more complicated at the Port of Oakland, where the unique nature of Northern California’s import trade involves a wider variety of trading partners. Exhibit C (pardon the linguine of lines) shows that imports from India have risen fastest. Indeed, so far this year, India is Oakland’s second largest importer (after China) with a 5.7% share, up from 1.7% in 2010. As might be expected, Vietnam’s share of imports also jumped from 2.2% to 4.0%.
India’s rise appears due to a recent surge in imports of soybean meal as well as ornamental stone. France’s prominence rests largely on shipments of wines, both bottled and in bulk. In that vein, the sharp dip in Australia’s import share starting in 2013 pretty much coincides with the time I began substituting the Aussie plonk we had been inflicting on our guests with inexpensive Chilean wines. In contrast to the San Pedro Bay ports and the NWSA ports, where the two top containerized imports by weight are furniture products and automotive components, Oakland’s two leading imports by weight are empty wine bottles and wine.
From a historical perspective, certainly one of the more remarkable overall trends involves the diminishing role of Japan in the USWC containerized import trade. In tonnage terms, its share of coastwide import tonnage declined from 5.7% to 4.8%. So? Well, those of us who were doing trade back in the 1980s will recall that Japan’s economic rise had unnerved American officials every bit as much as China’s rapid emergence as an economic rival has caused consternation in Washington today.
The reaction of U.S. leaders to Japan’s rise then was understandable. After all, members of the Greatest Generation, who had fought an actual war against Japan four decades earlier, still held influential positions in our nation’s political and business leadership. So it is with a somewhat bemused sense of irony that I conclude this commentary by noting that today mighty Japan ships less containerized tonnage to USWC ports than does Vietnam, a nation my Boomer generation remembers as keenly as the draft lottery numbers we were assigned in 1969. (Mine was 105.)
The commentary, views, and opinions expressed by Jock O’Connell are his own and do not reflect the views or positions of the Pacific Merchant Shipping Association. PMSA does not endorse, support, or make any representations regarding the content provided by any third party commentator.