We’re on the verge of a major East/Gulf Coast port strike come Oct. 1, and everyone has been bracing for impact for months. Import volumes surged over the summer as companies stocked up in anticipation of a shutdown, while more traffic was routed through the West Coast.
Whatever way the presidential election falls, changes are coming in the Section 321 tariff rule. The Biden administration is looking to close loopholes, while Trump is advocating a big trade stick approach: a 10% tariff on all imports, including 60% imposed on goods from China.
In another trade-related issue, Mexico is ending up the beneficiary of the U.S.-China trade war. Chinese companies are stepping up component shipments to Mexico for assembly and then exporting to the U.S. as an end run around tariffs here.
Here’s more on the news affecting the world of logistics and supply chain.
East Coast, Gulf Coast Ports On the Brink
As this newsletter is published, ports on the East and Gulf Coasts are on the verge of a crippling dockworkers strike. In anticipation of labor trouble, U.S. container imports were up 12.9% in August, per Descartes.
The International Longshoremen's Association (ILA) promises a walkoff on Oct. 1. It’s locked in a stalemate with the U.S. Maritime Alliance (USMX), representing terminal operators at 36 ports.
On Sept. 23, the U.S. Department of Labor reached out to USMX, suggesting the Biden administration was willing to intervene, but nothing has happened since.
Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation (NRF), said: "Even a minor disruption would have a negative impact and cause delays at a critical time for both retailers and consumers."
Section 321 Changes Coming
The de minimis exemption on tariffs for imported goods valued under $800 is bound to undergo change regardless of who occupies the White House in January.
Already under fire from retailers, it is now the subject of proposed bipartisan legislation that would end Section 321 exemption for most textiles and apparel. It would impose new penalties for violations, require additional data reporting on all de minimis packages in order to catch violators, and impose a $2 per package fee to fund enforcement.
Meanwhile, the Biden administration has proposed excluding from the de minimis exemption all imported goods subject to tariffs under other trade acts. Section 301 tariffs alone cover about 40% of all U.S. imports and 70% of textile and apparel from China.
Freight Volumes Challenged
Overall, freight volumes are being affected by slower manufacturing production. The PMI for August was in contraction territory (47.2%) for the fifth consecutive month and the 21st time in the last 22 months.
Reflecting the pinch in manufacturing, the Cass Freight Index for August showed shipments up 1% month-over-month but down 1.9% compared to 2023 and down 12.3% from two years ago. The overall Cass Index is expected to fall 3% to 4% for the year, an improvement over a 5.5% drop in 2023.
Air Cargo Demand Strong
Air cargo demand has been seeing double-digit growth for months, driven largely by e-commerce flights out of China, and a port strike on the East Coast would further tighten capacity. As it stands, there’s already a significant imbalance, with air freight supply up 2% in August but demand up 11%, according to Xeneta.
Global air cargo volume was up 13.6% in July year-over-year, according to the International Air Transport Association (IATA). According to the Baltic Air Index, air freight rates were up 30% from China to the U.S. as of mid-September and up 28% from China to Europe, per the Journal of Commerce (subscription required).
LTL Volume Is Soft
Three major LTL carriers – FedEx, XPO, and Old Dominion – reported falling LTL volumes as demand for the service remains challenged.
FedEx executives said a weak industrial economy is impacting B2B volumes, while e-commerce and global trade saw modest gains. A strategic review of the LTL segment is underway, and the Q1 report was fairly bleak.
XPO said its LTL tonnage per day dropped 4.6% in August vs. 2023, as shipments per day declined 4.5% and weight per shipment went down 0.1%. This follows a July report where the same metrics were flat from the previous year.
Old Dominion reported a 5.2% decrease in revenue per day in August 2024, year-over-year, due to a 6.1% drop in LTL tons per day. The company said there was a 5% decrease in LTL shipments per day and a 1.1% decrease in LTL weight per shipment.
Mexico the Winner in China-US Trade War
In an ironic trade war twist, Chinese companies are taking advantage of the USMCA to ship raw materials to Mexico, manufacture goods there, and then export them to the U.S. duty-free. This trend is reflected in the growth of container traffic from China to Mexico: up 26.2% from January to July and up 33% in 2023, per Xeneta. According to CNBC, European firms that used to manufacture products in China are following the same nearshoring path to a lower TCO.
Buckling Up for a Rocky Q4
This should prove to be an especially interesting peak season, with an unusually consequential presidential election in play, the potential for an East/Gulf coast port strike, freight volumes down and economic uncertainty in the air.
The last thing you want as a shipper is to walk into this disruptive environment without a reliable, experienced logistics partner in your corner.
Wicker Park Logistics, a woman-owned logistics company and WBENC-Certified Business, has a veteran team that can help lessen the impact of market shocks on your transportation plan. Shippers benefit from an optimized service network built and maintained by a trusted, collaborative 3PL partner. Whatever your business needs across truckload, intermodal, expedited freight, supply chain services, and much more, Wicker Park can help optimize your spend and meet performance goals. Get in touch today for a quick quote.
