U.S. Companies Stock Up to Beat Tariffs

The trade war with China is about to heat up and U.S. companies are anxiously awaiting the next wave of tariffs. Chinese imports have already been hit with $50 billion in tariffs, and $200 billion in new tariffs are scheduled to roll out over the next few months. To prepare, companies rushed to increase imports from October thru December to stock up for the upcoming selling season.

According to the monthly Global Port Tracker report released by the National Retail Federation (NRF) and Hackett Associates. The rates in which imports came into retailer container ports slowed down significantly in January. “With the holiday season behind us, the immediate pressure to stock up on merchandise has passed but retailers remain concerned about tariffs and their impact on the nation’s economy.” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “Retailers have also brought in much of their spring merchandise early to protect consumers against higher prices that will eventually come with tariffs.

New Tariffs Prompt Surge in Imports
During the third quarter of the year, ports covered by Global Port Tracker experienced a significant year-over-year increase in imports. October was up 11.4 percent and reached a record high 2.04 million Twenty-foot-Equivalent Units (TEU). There was a slight dip in November to 1.81 million TEU (up 2.4 percent from 2017). Each TEU is equivalent to one 20-foot-long cargo container. It’s estimated that December will come in at 1.79 million TEU. Overall, there was a 5.3 percent increase over the record of 20.5 million TEU set in 2017.

However, imports traditionally slow down during the first three months of the year. The NRF report attributes this to the drop in demand for goods after the holidays and the shutdown of factors in Asia to celebrate the Lunar New Year. “There have been record-high levels of imports over the past several months, primarily due to raised inventories ahead of expected tariff increases,” Hackett Associates Founder Ben Hackett said. “But we are projecting declining volumes in the coming months and an overall weakness in imports for the first half of the year.”

Seeking Long-Term Solutions
Rising tensions between China and the U.S. resulting from the fight over trade is deeply concerning to many companies. A number of prominent corporate leaders have voiced their opinions and urged the White House to make an effort to reduce tensions between the two countries and seek a long-term solution. The leaders of various organizations representing the retail industry also share this opinion.

In commenting on the situation, Jim Gold of the NRF says, “Our industry is hoping the talks currently under way will bring an end to this ill-advised trade war and result in a more appropriate way of responding to China’s trade abuses that won’t force American consumers, workers and businesses to pay the price.”  

Price Increases at Retail
Price increases resulting from trade wars will touch the entire supply chain–no one will be immune. However, the impact on some retailers will be greater than others depending on the amount of imported goods in their product assortment. Few people know what will happen next. It took years for the trade deficit with China to reach such staggering proportions and it may take just as much time to get it under control. Be prepared for a bumpy ride.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.