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Trade Deal Unlikely To Result In Rapid Return Of Cargo Volumes

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Trade Deal Unlikely To Result In Rapid Return Of Cargo Volumes

Port of Los Angeles Executive Gene Seroka cautioned the port's Board of Harbor Commissioners that even if a trade deal is reached with China, it may take months or years for trade volumes to snap back.

President Trump on Friday once again gave mixed signals on the likelihood of a trade deal with China as a December 15 deadline for another round of tariffs approaches. He told broadcasters on Fox News "we have a deal, potentially very close," but that China President Xi Jinping "wants to make it much more than I want to make it; I'm not anxious to make it" and that "I tell President Xi – this can't be an even deal, because we are starting off on the floor and you are already at the ceiling – so we have to have a better deal.' "

Seroka was in Washington earlier this month to talk about a new study the port commissioned to detail the negative impacts of the China tariffs. He also spoke about his concern that the country is in a "360 degree trade negotiation" that includes not only China, but ongoing trade talks with the European Union, Canada and Mexico.

Those concerns were discussed at the Port of Los Angeles Harbor Commission meeting on Nov. 21. Commissioner Anthony Pirozzi Jr. asked Seroka "If this trade deal goes through… where will it go and when will we see it turn positive or will it?"

"I don't think it will," said Seroka. "We have done irreparable damage to the export community and by trying to attempt to go at this alone we have given sales leads to every other country in the world to do business with China, and the EU, as well as Canada and Mexico."

Seroka continued, "Cargo is moving, especially in the agriculture space, from other geographies and those are not transactional agreements. Those will go on for some time. Even if a deal were to be struck today, it's going to take us a long time to come back. And a long time meaning six months, 24, 36. We just cannot tell yet," he informed the meeting's audience.

"On the import side, it is a little bit more difficult because we have such a high level of inventory throughout the nation – whether it is brake pads or computer keyboards, finished goods that go into our retail sector that you and I buy online or go into the store. That is why you saw such a precipitous drop," he said, referring to the port's most recent trade data.

While the volume of containers moving through the Port of Los Angeles in the first 10 months of this year is up 1.8%, in October the number took a hard turn downward, dropping 19% below October 2018 levels. (However, October 2018 volumes were boosted by importers racing to get cargo into the U.S. before tariffs increased.).

"I don't see us getting back to the levels we were at," Seroka said. "My guidance for the full year is that we will come out just a little bit short."

He said exporters of agricultural products, recyclables and heavy duty manufactured products have been especially hard hit, saying they have been in a recession for 12 months.

"Meanwhile, we are hustling for every bit of freight we can. We are in front of decision makers, looking at the virtues of this port complex and always trying to improve on areas of operational efficiency and our digitization platform."

Seroka spoke about the need for "rules-based trade" and the need to build industry coalitions to address issues such as protection of workers and the environment, currency manipulation, and protection of intellectual property and technology transfer through the World Trade Organization (WTO), rather than through one-on-one bilateral trade deals.

While there may be problems with the WTO, he asked "Who better than the United States of America to rebuild that framework?"

Other members of the harbor commission expressed their concerns about the lack of a trade agreement with China and falling container volumes.

Commissioner Diane Middleton said less cargo means less revenue for the port and possible reduced investment in projects to benefit the community living near the port.

Commissioner Ed Renwick said that he was concerned that the tariffs "create winners and losers in industry and the winners develop a constituency that wants to perpetuate the tariffs. And it becomes a form of corporate welfare."

He thanked Seroka for being outspoken, and joked that he was going to develop a pool with the other commissioners to wager on what Seroka's "Trump-provided nickname is going to be on a tweet. I'm looking forward to that."

"Any day the president talks about the Port of Los Angeles is a good day," said Seroka with a chuckle.

Image Sourced from Pixabay

Posted-In: Government News Regulations Commodities Politics Global Markets General

 

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