Ongoing cargo frontloading as a hedge against tariffs led the Port of Los Angeles to its second-best February on record, Executive Director Gene Seroka said during a March 19 press briefing.
Despite the strong start to the year, Seroka anticipates volumes to soften at some point, particularly with respect to larger imports like furniture and appliances.
“Given the substantial inventory already here and the uncertainty of tariffs, it's possible we can see a 10% drop in volume in the second half of this year,” Seroka said.
Until then, Seroka expects the port to maintain consistent volume growth in the first and second quarters.
Cargo frontloading has been a popular tactic to navigate logistics hurdles, including port labor concerns, the crisis in the Red Sea and drought issues at the Panama Canal.
President Donald Trump has been pursuing a tariff-heavy trade policy since taking office in his second term. Earlier this month, he upped the ordered tariffs on imports from China to 20%. Tariffs on goods covered by the United States-Mexico-Canada Agreement, meanwhile, have been paused until April 2.
At its peak, cargo shipments from China represented 57% of the port’s traffic, said Seroka, and has since dropped down as low as 43% in recent months.
Seroka said more cargo may begin arriving from other locations in Asia as shippers look to diversify their manufacturing and sourcing footprint.
“But right now, after the activation of the most recent tariff changes, we're not seeing that switch off the beat, but what we are seeing are more and more of the import community negotiating with their manufacturers back in China,” he said.
During Trump’s first administration, the tariffs were more “narrowly focused,” said Seroka. The Port of Los Angeles reported an uptick in cargo volume coming in prior to the implementation of several tariffs in March 2018. Afterwards, Seroka said there were “pretty severe drop offs” in the port’s volumes. At the end of Q4 2019, the Port of Los Angeles saw a 16% year over year drop in business.
“And that's the consideration that some are talking about today, as folks who have the ability are frontloading or advancing inventory into the country to get in under the tariff implementation dates — does it catch someone by surprise?” Seroka asked.
The port remains optimistic about handling any surges in cargo volume, however, as its Port Optimizer can see cargo 40 days prior to arrival at the Port of Los Angeles, said Seroka.
February volumes
In February the port processed 801,398 total twenty-foot equivalent units, up 2.5% year over year and exceeding its February average by more than 15.5%, Seroka said.
Loaded imports were the primary driver of the port’s strong February, coming in at 413,236 TEUs — 17% more than the port’s five-year running average, Seroka said.
Exports, on the other hand, dipped 18% year over year to 109,156 TEUs, marking the port’s third consecutive month of lower exports following two years of growth, according to Seroka. He added that the port and its agriculture and manufacturing stakeholders will keep a “close eye on the situation, especially as retaliatory tariffs now come into play.”
Earlier this month, China added duties on several U.S. agricultural imports as a countermeasure to tariffs imposed by the Trump administration. As of March 10, China is levying added tariffs on imports like chicken, cotton, vegetables and dairy products.
