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Trump’s trade tariffs could hit 200,000 teu of transpacific container volumes

Trump’s trade tariffs could hit 200,000 teu of transpacific container volumes
With President Donald Trump completing his first year in office his efforts have been focused on actualising ideas that were voiced during the arduous 2016 sprint to the White House.

One set of campaign promises concerns US manufacturing; Trump’s visits to shuttered, or nearly so, factories around the “Rust Belt” Midwestern states were nightly fodder on the TV news during that year’s election season.

In the broadest context, the Executive branch is being viewed as firing warning salvos at Asian trade partners; early on, Trump rejected US participation in the Trans-Pacific Partnership on Trade (TPP). Also lurking in the background are tough choices that the President needs to make on the North American Free Trade Agreement (NAFTA), which has opened up extensive supply chains with Mexico, on the US’s southern rim.

This past week, the President’s actions, where tariffs were put in place, were aimed at white goods - in this case, washing machines and solar panels. At a high level, the President’s decision to impose tariffs is the result of industry petitioning, and then a review, with recommendations, by the “International Trade Commission” (USITC), a bi-partisan panel Federal agency. One aspect of the USITC’s mission is to investigate injury to US industries from imports, and then, in conjunction with the US Department of Commerce, to impose tariffs (or quotas) in response.

Impacted countries may seek redress through appeals to the World Trade Organization (WTO); South Korea has already made noises about such an appeal. The legislative authority comes from the 1970’s era “Section 201” of the Trade Act of 1974; last utilised in 2001 by President George W. Bush to slap down imports of steel into the United States.

Supply chains and sourcing are multi-dimensional, but, in this latest case, the end products are brought into the US from - washing machines from South Korea and solar panels from China. Bulky washing machines could impact inbound container volumes - sources estimate that US imports could total around 3 million units annually. Back of the envelope arithmetic suggests that these encompass about 150,000 teu - a very rough estimate, not all of which would be impacted.

Industry sources hinted that imports into the States ramped up in Q4 2017, in anticipation of tariffs that had been recommended last year. The Trump tariffs would be pegged at 20% of value, on the first 1.2 million units imported, with a 50% tariff on excess quantities. After two years, these tariffs would be scaled back to 16% and 40% respectively.

Solar cell components will see a 30% tariff will in the first year, which will decline to 15% by the fourth year. Tariffs would 2.5 gigawatts of unassembled solar cell capacity to be imported tariff-free in each year. Estimated impacted teu’s equivalent would be less, possibly around 50,000 teu as with the white goods, some imports would continue to flow.

With non-US producers of both products already in varied stages of setting up US operations, the tariffs will likely accelerate such moves. President Trump will likely be speaking at the World Economic Forum in Davos later this week, and he may discuss broader trade matters. He probably will not discuss teu’s but he might well talk about the theme of “re-shoring” industrial production to the US.

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