Urgent Demand: Red Sea Crisis and High Freight Costs

Due to the Red Sea crisis straining shipping capacity and driving up freight costs, the peak season at U.S. West Coast ports has arrived earlier than usual. Matt Priest, president of the Footwear Distributors and Retailers of America (FDRA), noted that current freight rates are higher than two years ago. He explained that while some new tariffs under the Biden administration won’t directly affect footwear, shipping capacity is already tightening as importers rush to bring goods in before August 1, when tariffs take effect.

Tariff Uncertainties and Early Stockpiling

Priest added that whether former U.S. President Donald Trump wins the November election is another reason importers are stockpiling early. Trump’s campaign has proposed higher tariffs, prompting many FDRA members to consider shipping goods to the U.S. before potential hikes.

Gene Seroka, executive director of the Port of Los Angeles, addressed global shipping disruptions and tariff uncertainties during a briefing: If Trump wins and imposes a 10% universal tariff on imports or 60% on Chinese goods, it could reshape the Port of Los Angeles’s future. He added that since Trump’s first tariffs in 2018, the port has remained agile, scrambling to secure cargo.

Election Impacts Import Decisions

Roger, a California-based shipping industry insider, said the U.S. election is a key factor in importers’ inventory decisions. If Trump is elected, he may impose additional tariffs on Chinese goods—possibly not 60%, but likely higher. This would directly raise U.S. retail prices, especially amid high inflation. Importers may stock up early to hedge against potential changes, he explained.

Strong Growth in U.S. West Coast Trade Volume

In the first half of 2024, U.S. West Coast ports saw strong trade growth. Data from the Port of Los Angeles shows it handled 4.7 million twenty-foot equivalent units (TEUs), up 14.4% year-on-year.

Seroka noted that falling inflation, rising wages, and a strong job market have boosted consumer spending, driving steady cargo volumes. I expect this trend to continue into Q3, he said.

The neighboring Port of Long Beach also set a record for total throughput in June, with inbound container volume reaching its highest level since mid-2022. In the first half of 2024, the ports total container volume increased by 15% year-on-year. Port of Long Beach CEO Mario Cordero stated: We are regaining market share. As the peak shipping season approaches, consumer spending is driving cargo to our terminals. I expect moderate growth in the second half of 2024.

Context of the Early Peak Season

Traditionally not peak season before September, the West Coast has seen an early arrival of peak season this year due to concerns about additional U.S. tariffs on Chinese goods and the impact of dockworker strikes at East Coast and Gulf Coast ports. On May 14, the U.S. released the four-year review results of Section 301 tariffs on China, announcing increased tariffs on Chinese imports including electric vehicles, lithium batteries,photovoltaicbatteries, critical minerals, semiconductors, as well as steel, aluminum, port cranes, personal protective equipment and other products. The new tariffs will take effect on August 1.

In response to the U.S. release of the four-year review results of Section 301 tariffs on China, a spokesperson for Chinas Ministry of Commerce stated that China firmly opposes and has lodged solemn representations. The spokesperson said the U.S. is abusing the Section 301 tariff review process for domestic political considerations, politicizing and instrumentalizing economic and trade issues, which is typical political manipulation. China expresses strong dissatisfaction. The WTO has long ruled that Section 301 tariffs violate WTO rules, but instead of correcting them, the U.S. persists in its course.

Tariff Concerns Loom Over Europe

Currently, importers are also concerned about the tariff plan proposed by Trump. In a recent interview, Trump stated he would impose a blanket 10% tariff on goods imported from other countries, complaining that foreign nations arent buying enough American products. He specifically mentioned Europe, believing its reluctance to import U.S. cars and agricultural products is the main reason for the over $200 billion trade deficit between the two sides.

During a campaign speech in March this year, Trump even suggested imposing 100% tariffs on every imported car. Although he didnt specify the targets, this has drawn widespread market attention. Cui Hongjian, Director of the EU and Regional Development Research Center at Beijing Foreign Studies University, believes Europe may adopt a bargaining strategy, proposing a comprehensive plan to mitigate the tariff impact while potentially redirecting the conflict toward China as a shield against Trumps tariff hikes.