Increased tariffs on imported and exported goods moving through the Los Angeles and Long Beach ports have cost American consumers billions of dollars, distanced U.S. businesses from foreign markets and have contributed to a dramatic drop in activity at the ports, a new study concludes.
And the longer the tariffs stay in place, the greater the long-term damage to the U.S. economy. That’s according to the study commissioned by the Port of Los Angeles and released in a news conference featuring the port and representatives of industries harmed by the trade conflict.
Researchers calculated a state-by-state, congressional district-by-district analysis of the current impact of the tariffs imposed on imported goods and the tariffs imposed by other countries on U.S. exports. Officials with the port and other associations added a forward-looking component to the study, looking at the potential for long-term shifts in supply chains and markets that will remain in place long after the current trade conflict has ended.
“This is not meant just to be a retrospective on what has happened. It is also a forward projection on what will happen,” said Port of Los Angeles Executive Director Gene Seroka. “This truly is an issue of national and international significance. America needs to know the impact of tariffs on its economy.”
During the past two years, a trade war has escalated between the U.S. and several other countries, with disagreements between the U.S. and China leading to tariffs that are higher than they have been in decades.
The impact is evident at the ports, where a massive amount of the materials moving in and out of them is subject to tariffs here or abroad. According to data released by the Port of Los Angeles, October 2019 represented 12 consecutive months of declining U.S. exports, 25% fewer ship calls, and a 19.1% decrease in cargo volume compared to that of a year ago.
It is not surprising that the impact would be seen at the ports, as 52.7% of total cargo coming into the San Pedro Bay ports is subject to import tariffs and 28.8% of total cargo moving out through the ports is subject to export tariffs.
The tariff-for-tariff conflict has had three impacts on U.S. residents, businesses and workers, the study shows.
Import tariffs increase costs for U.S. consumers and producers directly. That means that U.S. consumers pay more out-of-pocket for goods as businesses recoup the increased cost of imported goods created by the higher tariffs. And they drive up the final cost of U.S.-made goods that include imported raw materials or components.
“[These tariffs are] being paid by U.S. businesses. It’s not being paid by China,” said Jonathan Gold, spokesman for Americans for Free Trade, at the study’s release.
The second impact is that goods produced overseas become relatively cheaper to manufacture than those produced here, putting U.S.-made goods at a cost disadvantage. It becomes cheaper to create goods from supplies and components that are not subject to tariffs.
Finally, the trade barriers encourage companies overseas to look for suppliers outside of the U.S. for products. And this impact may be one of the hardest to reverse, even with a new trade agreement with China, because during the period of high tariffs, overseas companies will have forged bonds with suppliers that they are not likely to break immediately – if ever.
“This is at a time when our trading partners are engaging in freer trade with each other. China actually has lowered tariffs on products from other countries,” Rufus Yerxa, president of the National Foreign Trade Council, said. “This is now the greatest threat facing American businesses and farmers. The longer these tariffs stay in place, the harder it will be to recover these partners that we have given away.”
Declining exports are an indication that overseas customers are turning away from the U.S. as a supplier, particularly in the agricultural sector, according to the study. Exports from all 50 states have been hit by tariffs ranging from 26-51%, the study concluded.
The impact has been a 10% reduction in U.S. exports of animal products and feed in a year, researchers found. Angela Hofmann, co-executive director of Farmers for Free Trade, said the knock-on effect has been that farmers are not investing in new equipment and capital expenditures as they are uncertain about their access to foreign markets in the future.
And in the end, higher tariffs have not had the long-term impact on issues of contention with overseas countries – especially China – that U.S. industries and companies most wanted. Agreements over issues like intellectual rights violations and others have remained unsolved, as U.S. goods and products become more noncompetitive in the world marketplace and imported products become more expensive at home.
“If we want to pressure China on issues like IP theft, we need to work with our partners,” Gold said. “Right now, we’re imposing or threatening tariffs on countries we actually like. And it hasn’t gotten us a deal with China.”