US Importers Rush To Get Ready For Trump’s Proposed Tariffs
As Donald Trump prepares for a return to the White House, US businesses that rely on importing goods from China are facing significant challenges. The looming threat of new tariffs is forcing many importers to act quickly and find ways to shield themselves from potential financial setbacks. In this article, we look at how these businesses are responding, the impact on America’s ports, and what it could mean for the economy.
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Jimmy Zollo’s Response to Tariff Fears
For Jimmy Zollo, the founder of the adaptive clothing brand Joe & Bella, the threat of higher tariffs has been a constant worry. As the November election drew near, Zollo saw that Trump was leading in the polls, which prompted him to make a big decision. Fearing the possibility of increased tariffs on Chinese imports, Zollo placed an emergency order for 5,000 shirts from his supplier in Guangzhou, China. This was the largest order he had ever placed for his men’s button-down shirts, designed to stockpile inventory in case tariffs were introduced.
Zollo’s fears were confirmed when, just weeks after Trump’s election victory, he announced a 10% tariff on all Chinese imports, set to take effect on January 20, the first day of his second term. This new tariff raised Zollo’s concerns even more. He described it as a “big deal” and emphasized the urgency of securing more inventory before the tariffs went into effect.
Zollo’s situation is not unique. Across the US, businesses are preparing for the impact of these new tariffs, with the country’s busiest ports being particularly affected. With the deadline for the new tariffs fast approaching, US ports are seeing an influx of goods from China as importers rush to get their shipments in before the tariffs hit. The Port of Los Angeles, the busiest port in the western hemisphere, is handling record numbers of containers as businesses try to stock up.
Impact on US Ports and Shipping Industry
Gene Seroka, the executive director of the Port of Los Angeles, noted that many businesses are front-loading their orders, concerned about the potential impact of Trump’s tariff policies. In October, the port processed over 900,000 shipping containers, a 25% increase from the previous year. This surge in activity is expected to continue as businesses rush to import goods before the tariffs kick in.
But this rush to import goods comes with its own set of challenges. Retailers and manufacturers are facing a tight timeline as they try to stockpile enough products to cushion the blow of higher tariffs. Zollo, for example, struggled to secure more inventory as Chinese factories were already seeing a surge in orders ahead of the Lunar New Year in late January, when factories typically shut down for several weeks.
Some businesses, like the National Bobblehead Hall of Fame and Museum, are choosing not to stock up on extra inventory. Phil Sklar, the CEO of the Museum, explained that the potential savings from avoiding tariffs could be offset by the high costs of storing and paying for inventory before it’s needed.
Broader Economic Implications of Trump’s Tariffs
Despite the rush to import goods, economists are warning that the broader economic impact of these new tariffs could be severe. The National Retail Federation has revised its forecast for US import volumes, expecting them to rise by 14% in November, compared to just 1% before the election. However, experts caution that higher tariffs could lead to increased costs for US consumers, which may result in job losses and slower economic growth.
A recent Bloomberg survey predicted that Chinese exports would likely increase by 7% in the final quarter of 2024 as businesses rush to place orders ahead of the tariff hikes. This surge in exports could push total Chinese exports to nearly $3.5 trillion, a near-record level.
Shifting Trade Dynamics and the Future of US-China Trade
While some businesses are rushing to import goods from China, others are diversifying their supply chains in response to the uncertainty. The Port of Los Angeles, which traditionally relied heavily on trade with China, has seen an increasing shift towards imports from other countries, including Mexico and Southeast Asia. By mid-2024, the port’s reliance on Chinese imports is expected to decrease to 45%.
This shift reflects the broader trend of companies diversifying their supply chains to reduce their dependence on China. Some businesses are adopting “China +1” or “China +2” strategies, meaning they are sourcing products not just from China but from other countries as well. This diversification helps companies hedge against the risks of tariffs and trade disruptions.
The Port of Los Angeles is concerned that if the trade war between the US and China intensifies, it could have ripple effects across the broader supply chain. The port plays a critical role in the US economy, handling 40% of the country’s seaborne imports. Any disruption in trade could lead to job losses, not just at the port but across many industries that depend on imported goods. In fact, Seroka emphasized that for every four containers moved through the port, one job is created, and more than a million people in Southern California rely on the port for their livelihoods.
Experts like Mary Lovely, a senior fellow at the Peterson Institute for International Economics, warn that Trump’s focus on “reshoring” manufacturing to the US could hurt both imports and exports, potentially leading to a loss of nearly a million jobs. She explained that reducing imports could hurt US manufacturers who rely on imported components to make finished products.
For now, businesses like Joe & Bella are facing a period of uncertainty. Zollo, who founded his company to provide adaptive clothing for people with disabilities, admitted that he wasn’t sure what his strategy would be once the tariffs took effect. He likened it to a game of “whack-a-mole,” where the next challenge is always just around the corner.
As Trump prepares to take office again, the future of US-China trade remains uncertain. The next few months will be crucial for businesses, ports, and the economy as they navigate the challenges posed by new tariffs and shifting global trade dynamics.