US Ports Warn Trump Tariffs Diminishing Competitiveness

June 18, 2019 by Dan McCue

WASHINGTON – Representatives of America’s seaports are telling the U.S. Trade Representative this week that the Trump administration’s current tariffs on Chinese goods, and threat to impose more, are weakening the nation’s competitiveness and stymieing much needed infrastructure projects.

The office of the U.S. Trade Representative has scheduled two weeks of public hearings on proposed tariffs on approximately $300 billion worth of Chinese products. The hearings began Monday at the U.S. International Trade Commission and are scheduled to stretch through June 25.

The new round of tariffs is a supplemental action that the White House says is a necessary response to China’s unfair trade practices related to technology transfer, intellectual property, and innovation.

Tariffs on $250 billion in goods from China are currently in effect under a related Section 301 trade action.

In all, some 54 panels of speakers are expected to comment on the tariffs and their impacts over the next several days, The panelists represent everything from importers of tea to the manufacturers of bakery equipment and sporting goods.

In addition, more than 600 companies and associations have voiced opposition to the tariffs ahead of the hearing in a letter urging the Trump administration to strike a deal with China that “addresses longstanding structural issues, improves U.S. global competitiveness and eliminates tariffs.”

The letter, organized by the group Tariffs Hurt the Heartland, was signed by organizations including Levi Strauss, Ikea, and PetSmart.

Among those speaking across multiple days are officials from a handful of the nation’s seaports and their trade association, the American Association of Port Authorities.

They say they are not only being impacted by a slowdown in Chinese imports and exports, but also having to pay much more for the large cargo cranes and other infrastructure improvements they need to maintain their competitive edge.

The Waterfront Represents Trillions in Economic Activity

Ports are particularly interesting to look at when it comes to trade actions because their activity cuts across industry sectors and provides a window into broad economic impacts.

According to the AAPA, seaport cargo activity accounts for over one quarter of the U.S. economy, generates nearly $5.4 trillion in total annual economic activities, and is responsible for $378.1 billion annually in federal, state and local tax revenues.

In terms of jobs, the cargo moving through U.S. ports supports nearly 31 million American jobs, the association said.

In remarks prepared to be delivered on Friday, Kurt Nagle describes the list of products slated to be subject to the next round of tariffs, as a “veritable tsunami” that will include “nearly every product imported into the United States from China.”

This, he said, will have significant consequences.

“The total Section 301 tariffs on Chinese commodities and China’s retaliatory responses to date would cover 8.4 percent of trade through America’s ports by value,” Nagle’s written comments say.

“In California alone, the impact could be as much as 20 percent of containerized cargo imported throughout the state, representing $63.6 billion in trade value. Job loss and economic harm can be expected in the maritime sector and through the U.S. supply chain that ports support,” Nagle adds.

John Reinhart, CEO and executive director of Virginia Port Authority, also spoke of consequences, noting that because the ports he oversees serve as a gateway to and from the global market to the American Heartland, tariff impacts felt at his facilities will reverberate as far inland as Columbus, Chicago, St. Louis, Detroit, and Louisville.

“Supply chains work best when they run smoothly and efficiently – removing unnecessary steps and shaving costs from the system, Reinhart said when he appeared before the trade representative on Monday.

Of particular concern to the port industry representatives are proposed tariffs on ship-to-shore cranes, the largely steel structure that ports have been investing in to service the larger generation of cargo ships that are currently coming online.

According to Virginia’s Reinhart, the size of container vessels calling on U.S. ports has increased 80 percent since 2014 as ocean carriers have tried to minimize their costs while maximizing their efficiency.

A standard cargo container is referred to in the maritime industry as a “twenty-foot equivalent unit” or a “TEU.” A typical ship calling on the Port of Virginia today carries about 14,400 TEUs.

As the growth trend continues, “we expect to be working vessels in the 16,000-18,000 TEU range in the near future,” Reinhart said.

And that means U.S. ports need bigger cranes to lift the containers off the ships, because “the existing infrastructure cannot support them.”

Last year, the U.S. Trade Representative ultimately decided not to include ship-to-shore cranes in the initial round of tariffs. However, they are back on the list for inclusion in the next round.

“Tariffs on port equipment will have a detrimental impact on ports and their ability to fund needed infrastructure investments, which will in turn impede U.S. ports’ competitiveness with Canada and Mexico,” Nagle says in his written remarks.

“At a time when infrastructure investment is a national priority, we urge you to avoid increasing the cost of infrastructure through the imposition of new tariffs,” he says.

Nagle goes on to note that port operators are under “considerable pressure’ to make their facilities more efficient and sustainable and to reduce the impact of their operations on local communities.

Toward that end, ports and their private-sector partners have committed to spending an estimated $155 billion through 2020 on infrastructure improvements.

“As business leaders, however, they are concerned about making these sizable investments in an unstable trade environment.

Severe Consequences Foreseen

Nagle says tariffs on these cranes and other equipment used by ports to move containerized cargo around and through their facilities “would have severe consequences” for facility modernization programs.

Compounding the problem is the fact that only one company in the world currently manufactures the cranes the ports need — Shanghai Zhenhua Heavy Industries Co., Ltd. in Shanghai, China.

“With a cost of up to $14 million per crane, a 25 percent tariff would cost millions of dollars that might otherwise be spent on infrastructure improvements,” Nagle says.

And make no mistake about it, the nation’s ports have been spending on infrastructure.

In 2014, John Reinhart said, the Virginia Port Authority committed to investing nearly $1.5 billion through 2024 on terminal expansion, harbor dredging and other infrastructure needs.

It was a necessity, he explained, “to keep pace with the industry, sustain our momentum, and continue to create a safe and efficient supply chain which can create jobs throughout the country.”

Now, ports around the nation worry the tariffs on goods and especially the tariffs on the cranes the ports need to move those goods, might just put the brakes on all that.

Michelle Ganon, vice president of public affairs at the Port of New Orleans, said the proposed next round of tariffs on China would “cause disproportionate harm to U.S. economic interests.”

“A tariff on cranes would directly impact the Port of New Orleans, our tenants, and our customers,” she said. “Port NOLA’s container business has doubled in the past 10 years with volume reaching an all-time high in 2018, and growth continues to accelerate in 2019,” Ganon said.

At present, she said, New Orleans’ port generates and supports 119,510 jobs nationally and $29.8 billion of economic output.

“Due to increases in volume and ship size, we are investing in significant upgrades to our current facilities. We also expect to build an additional container terminal in the next several years,” Ganon said. “We have an immediate need for more and larger cranes that are necessary to efficiently handle the larger ships calling on Port NOLA today and those that will come online in years to come.

“Lack of adequate crane capacity would reverse the volume momentum we are enjoying, resulting in fewer calls and lost volume,” Ganon said.

That sentiment is shared by the South Carolina State Ports Authority, which last week asked the Trump administration for an exemption from the proposed tariffs on a dozen ship-to-shore cranes it is buying.

If it doesn’t get the exemption, the tariffs would add an additional $36 million to the cost of the cranes for the Charleston, S.C.-based authority.

In a letter to U.S. Trade Representative Robert Lighthizer, Jim Newsome, the authority’s president and CEO, said the tariff “would negatively affect (the authority’s) competitiveness” and possibly delay delivery of cranes that have been ordered and prohibit future orders.

“The ability to purchase equipment at a competitive price is critical to the port’s growth strategy and plays a direct role in the long-term success of our state, region and nation,” Newsome’s letter states.

 

Trade

US Budget Deficit Jumped By $140 Billion Through June Budget
US Budget Deficit Jumped By $140 Billion Through June
July 12, 2019
by Dan McCue

WASHINGTON - The U.S. budget deficit increased by $140 billion during the first nine months of the current fiscal year, rising to $747.1 billion, the Treasury Department said Thursday. The department said the deficit for the current fiscal year through June is up 23.1% over the... Read More

New Democrats Urge Lighthizer to Resolve Outstanding USMCA Issues Trade
New Democrats Urge Lighthizer to Resolve Outstanding USMCA Issues
July 8, 2019
by Dan McCue

WASHINGTON - Six members of the New Democrat Coalition wrote the U.S. Trade Representative on Monday urging him to respond to congressional concerns regarding the new North American Free Trade agreement, known as USMCA, to ensure its successful bipartisan passage. “While we appreciate your willingness to... Read More

House Democrats Call for Revival of Meat Labeling Law Trade
House Democrats Call for Revival of Meat Labeling Law

WASHINGTON — A meat labeling law repealed three years ago may be making a comeback as some lawmakers call for it to be added to the proposed trade pact designed to replace the 1994 North American Free Trade Agreement. The country-of-origin labeling requirement, known as COOL,... Read More

Trump, Canada's Trudeau Talk Trade and China at White House Meeting Trade
Trump, Canada's Trudeau Talk Trade and China at White House Meeting
June 20, 2019
by Dan McCue

WASHINGTON - President Donald Trump welcomed Canadian Prime Minister Justin Trudeau to the White House Thursday, to talk trade and their respective issues with China on a day otherwise dominated by concerns over an escalation in hostilities between the U.S. and Iran. Even as he stepped... Read More

Canadian Prime Minister Trudeau to Visit DC to Lobby for USMCA Trade
Canadian Prime Minister Trudeau to Visit DC to Lobby for USMCA
June 19, 2019
by Dan McCue

WASHINGTON - Canadian Prime Minister Justin Trudeau arrives in the nation's capital Wednesday evening to begin a busy 24 hours lobbying for U.S. passage of the USMCA trade deal. The prime minister will attend a reception hosted by David MacNaughton, Canada's ambassador to the United States,... Read More

US Ports Warn Trump Tariffs Diminishing Competitiveness Trade
US Ports Warn Trump Tariffs Diminishing Competitiveness
June 18, 2019
by Dan McCue

WASHINGTON - Representatives of America's seaports are telling the U.S. Trade Representative this week that the Trump administration's current tariffs on Chinese goods, and threat to impose more, are weakening the nation's competitiveness and stymieing much needed infrastructure projects. The office of the U.S. Trade Representative... Read More

Straight From The Well
scroll top