Port executive director Gene Seroka officially declared this bad omen a recession harbinger on CNBC’s “Squawk Box.” One of the main causes, he said, was the lingering effects of tariffs that the last administration – the Trump administration – placed on imports from China.
According to Seroka, these tariffs have driven the largest American retailers to halt every inbound shipment from China. As such, we should look to see at least a quarter less than normal vessels cancelled in May. He stated, “Realistically speaking, until some accord or framework can be reached with China, the volume coming out of there — save a couple of different commodities — will be very light at best.”
The circumstances pose enormous obstacles for the Port of Los Angeles. Its supply chain is particularly exposed with nearly 45% of its business dependent on shipments from China. Seroka noted that businesses had been pre-loading their shipments ahead of tariff announcements. He said the effects of less shipping will hit U.S. retailers before long.
“According to our own port optimizer, which measures the loadings in Asia, we’ll be down just a little bit over 35% next week compared to last year. And it’s a precipitous drop in volume with a number of major American retailers stopping all shipments from China based on the tariffs,” – Gene Seroka
As the story continues to develop, Seroka told us how transport firms are proactively seeking out alternative sourcing measures. They want to load their vessels off Southeast Asia. He stressed that the short-term picture is still grim.
During the meeting, the executive director was passionate about protecting consumers from negative outcomes. Though store shelves will not be bare by any means, shoppers may be faced with fewer options. He remarked, “I don’t see a complete emptiness on store shelves or online when we’re buying. If you’re out looking for a blue shirt, you might find 11 purple ones and one blue in a size that’s not yours. So we’ll start seeing less choice on those shelves simply because we’re not getting the variety of goods coming in here based on the additional costs in place. All of those unknown blue shirts that are still lingering can expect a price increase.”
Seroka’s forecasts are consistent with data showing that the trend toward a slowing trade volume to the U.S. was started before he made the comparisons above. The Port of Los Angeles is at a tipping point. It’s too early to know how long this trend will last and what the eventual long-term impacts of the current tariff situation will be.