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January 10, 2020

US retail imports to settle after year of tariff surges

After a year of fluctuations driven by the uncertainty of the trade war with China, volume at major US retail container ports is expected to return to its usual seasonal patterns during the first few months of 2020.

By Beth Wright

After a year of fluctuations driven by the uncertainty of the trade war with China, volume at major US retail container ports is expected to return to its usual seasonal patterns during the first few months of 2020.

President Trump is scheduled to sign a ‘Phase One’ partial trade deal with China next week after the two sides reached an agreement on 13 December. The move announced by President Trump on Twitter suspended new tariffs that had been due to take effect on 15 December and proposed a halving of the punitive rates already imposed on List 4A goods – which includes most apparel items imported from China – to 7.5%.

“We’ll be more confident after we see the Phase One agreement signed, but right now 2020 looks like it should be back to what used to be normal,” explains Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation (NRF). “We’ve been through a cycle of imports surging ahead of expected tariff increases – some of which got delayed, reduced or cancelled – and falling off again afterward. That’s not good for retailers trying to manage their inventory levels or trying to make long-term business plans. And tariffs are never good for consumers, businesses or the economy.”

The latest Global Port Tracker report released by the NRF and Hackett Associates shows US ports handled 1.67m Twenty-Foot Equivalent Units (TEU) in November, the latest month for which after-the-fact numbers are available. That was down 11.2% from October and down 7.5% year-over-year.

With on-again, off-again progress on trade negotiations reported throughout autumn and other factors affecting shipping, an expected surge ahead of the cancelled December tariff increase did not materialise. A TEU is one 20-foot-long cargo container or its equivalent.

December was estimated at 1.7m TEU, down 13.4% from unusually high numbers seen in December 2018, when retailers had frontloaded imports ahead of a scheduled 1 January 2019 tariff increase that was ultimately postponed.

While numbers for the full year are not yet final, estimates indicate that 2019 came in at 21.6m TEU, a 0.9% decrease from 2018 but still the second-highest year on record. Imports during 2018 hit a record 21.8m TEU, partly due to frontloading ahead of anticipated 2019 tariffs.

January 2020, meanwhile, is forecast at 1.8m TEU, down 5% from January 2019. February is forecast to be down 4.9% year-over-year at 1.54m TEU, but March is expected to be up 5.2% at 1.7m TEU, with both swings tied to fluctuations in the Lunar New Year calendar and related factory shutdowns in Asia.

Looking further ahead, April is forecast at 1.78m TEU, up 2.1% year-over-year, and May is forecast at 1.87m TEU as summer merchandise arrives, up 1% year-over-year.

“It is not surprising that even the Federal Reserve suggests that the impact of the trade war has a negative impact on the US economy,” adds Hackett Associates founder Ben Hackett, citing recent government data on declines in industrial production and increases in inventory-to-sales ratios.

“This combination of reduced output counterbalanced by increased inventory underlies the uncertainties of the tariff wars.”

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