Businesses Rush to Beat Tariff Deadlines, Causing Shipping Surge

The Port of Los Angeles experienced its busiest June ever, with 892, 000 container units processed. This is an 8% increase from the previous year. This sudden surge in shipping volume is a direct result of businesses trying to avoid upcoming tariffs. The port's executive director, Gene Seroka, believes this spike is a sign of companies preparing for the next round of tariff uncertainty. Globally, similar trends have been observed. Supply-chain platform Project44 reports higher-than-normal imports from China. This is likely due to the 90-day tariff pause in April and a temporary de-escalation of the trade war with China. However, with the latest trade deadline looming on August 1, businesses are rushing to import goods before the new tariffs take effect. This situation is not new. In March, businesses pulled forward shipments to avoid higher costs before Trump's first round of tariffs went into effect. This strategy, known as "pull forward, " involves importing goods earlier than planned to avoid higher tariffs. However, this strategy comes with risks, such as having to dip into cash reserves or take out loans to finance the early shipments. Some businesses are also making noticeable supply chain shifts. They are asking suppliers to switch manufacturers or are pulling back from China in favor of doing business with manufacturers in Vietnam, Indonesia, Thailand, and Bangladesh. These countries offer cheaper operations, which can help businesses avoid the impact of tariffs. However, the trade environment remains uncertain. Trump has yet to unveil the details of a framework trade agreement with China, and there's no sign of trade deals with Mexico, Canada, or the European Union. This uncertainty is causing businesses to stockpile inventory, which can lead to excess supply and potentially lower prices. In order to have more steady shipping norms, there needs to be clarity on the actual tariff level that will remain mid- to long-term. Unfortunately, we are far from having that level of clarity.