News / SME logistics players braced to bear the brunt of US trade downturn

Photo: © Oleksiy Makhalov | Dreamstime.com

Recent days have witnessed a groundswell of voices warning of an imminent downturn in US trade that will impact logistics providers as well as cargo owners, manufacturers, employees and consumers.

According to the US Chamber of Commerce, the biggest hit will be on small and mid-sized businesses (SMEs), which face an annual fallout of $202bn from Washington’s tariffs.

However, the west coast gateways should have cause for celebration: at over 1m teu last month, the port of Los Angeles clocked up its highest single-month volume, fuelled by an 8% annual rise in imports. And neighbouring Long Beach also set a monthly record, of more than 944,000 teu throughput.

Nevertheless, LA’s press briefing on Wednesday struck a sombre note, warning that front-loading had led to elevated inventory costs, after high warehouse utilisation, that will cascade down the supply chain to inland operators, importers, and consumers.

During the briefing, Zachary Rogers, assistant professor of supply chain management at Colorado State University, said overseas suppliers and middle-mile operators could not absorb any more costs, adding: “We’ve sort-of pulled all our levers already, and so now you would expect to see that cost get pushed downstream to consumers.”

But transport providers will struggle to pass on elevated costs in a slowing market. The soaring import levels last month are expected to segue into a pronounced slowdown this month, according to the monthly Port Tracker, published by the National Retail Federation (NRF) and Hackett Associates.

They predict containerised imports through the major US ocean gateways will fall 5% year on year this month, declining to drops of 19.5% in September, 18.9% in October, a 21.1% slump in November, and a 19.3% fall in December, resulting in a 5.6% overall shortfall for the year.

Along the supply chain, rail carriers and truckers are bracing for lower volumes. According to ACT Research, this could extend the recession that has been stifling the trucking industry, and killing any green shoots of recovery that may have been reported earlier..

Among air cargo carriers, FedEx expects a $170m hit in the quarter from June to August, said management in its earnings call.

And the picture looks even worse on the ground, according to Brandon Fried, executive director of the US Airforwarders Association.

“Airfreight continues to offer flexibility in times of disruption, but the broader freight network is showing signs of strain,” he said. “The current environment of shifting trade policies, tariffs, and regulatory changes has left shippers with fewer choices for moving goods.

“When carriers or routes are no longer viable, shippers must pivot quickly, often to more expensive alternatives,” he added.

Labour management is another indicator of a rising defensive stance in the logistics arena. A survey by Express Employment Professionals-Harris Poll on Tuesday found 80% of hiring managers see recession looming. and nearly half of those reckon it will hit within the next year. More than 80% are taking proactive steps – 23% leaving vacant jobs unfilled and 19% conducting lay-offs.

Freighwaves recently noted some 4,100 job cuts in trucking, logistics, timber, and manufacturing during “the past several weeks”.

Elevated costs are increasingly showing up downstream. US consumer inflation was up 2.7% year on year in June, a result ameliorated by relatively low oil prices. Core consumer prices excluding food and energy were up 3.1%.

The producer price index climbed 0.9% from June to July, to a level 3.3% higher than a year earlier. According to commentators, the differential with consumer prices indicates that importers have swallowed some of the costs from tariffs, but have scant leeway to continue this.

SMEs stand out among firms hit by the repercussions from tariffs. The US Chamber of Commerce estimates that each small importer (employing fewer than 500 people) will pay, on average, about $856,000 more a year as a result – a collective hit of $202bn a year. And a report from the JPMorganChase Institute calculates that tariffs will cost mid-sized businesses $82.3bn.

“Tariffs are beginning to drive up consumer prices, and fewer imports will eventually mean fewer goods on store shelves. Small businesses especially are grappling with the ability to stay in business,” warned Jonathan Gold, VP supply chain and customs policy at the NRF.

Meanwhile there is mounting scepticism about statistics put out by the federal government, after the head of the Bureau of Labor Statistics was fired following accusations from the White House that data published by the department showing a stall in job growth momentum in July had been manipulated. The president’s nominee to take over the job recently floated the idea of ending the publication of the monthly job report.