Im­port now to beat tar­iffs on goods from China? It will cost

The Standard Journal - - NATIONAL - By David Koenig AP Busi­ness Writer

New tar­iffs on im­ports from China may leave Amer­i­can com­pa­nies with a choice — pay a higher freight bill now or pay the tar­iffs start­ing in three weeks.

It can take sev­eral weeks for ship-borne cargo from China to reach the United States — too late to beat the July 6 dead­line. That could lead to more de­mand in the short run for air-freight ser­vices.

“The only ques­tion is how much do you want to pay,” said Bran­don Fried, ex­ec­u­tive di­rec­tor of the Air­for­warders As­so­ci­a­tion, “and which is bet­ter — pay­ing that or pay­ing the in­creased tar­iff?” Ship­ping by air is sev­eral times more costly than ocean ship­ping and the gap grows the heav­ier the cargo.

So far, how­ever, some freight han­dlers are see­ing lit­tle ev­i­dence of panic.

“We haven’t seen a rush, nor have any of our cus­tomers in­di­cated that we need to get ready” for last­minute orders, said Steen Chris­tensen, North Amer­ica CEO for Ger­man freight ar­range­ments provider Hell mann World­wide Lo­gis­tics. He said some of the com­modi­ties his cus­tomers buy from China won’t fall un­der the tar­iffs.

Pres­i­dent Don­ald Trump an­nounced Fri­day that start­ing next month the U.S. will im­pose a 25 per­cent tar­iff on up to $50 bil­lion in Chi­nese im­ports. Trump tar­geted Chi­nese industrial and agri­cul­tural ma­chin­ery, aero­space parts and com­mu­ni­ca­tions tech­nol­ogy. Most con­sumer goods from China such as smart­phones and TVs were left off the list.

Some freight in­dus­try ob­servers think a rush to beat the tar­iff dead­line is in­evitable.

“There will be a surge in ex­ports from China and from the U.S. as the date ap­proaches,” said John Man­ners-Bell, CEO of U.K. re­search firm Trans­port In­tel­li­gence. “We have cer­tainly seen that in the past with th­ese sorts of im­po­si­tions of tar­iffs and quo­tas.”

Man­ners-Bell ex­pects “sig­nif­i­cant” rate in­creases and a shift of some cargo from ships to air freight in com­ing weeks.

Rates for con­tainer ship­ping rose last year as the in­dus­try tried to sail past a pe­riod of over­ca­pac­ity and low freight rates. Rates for air freight have been ris­ing in re­cent years as re­tail­ers meet grow­ing de­mand from on­line shop­ping. Air freight is highly sea­sonal, with prices spik­ing in the fall as Christ­mas gifts are sent to stores and con­sumers.

“For­tu­nately we’re not in the high sea­son quite yet,” said Fried, the rep­re­sen­ta­tive of freight for­warders — they are like travel agents for com­pa­nies need­ing to make ship­ping ar­range­ments. He said it is still pos­si­ble to find space in the bel­lies of pas­sen­ger and cargo planes fly­ing over the Pa­cific.

Some com­pa­nies that source ma­te­ri­als from China could even­tu­ally look for sup­pli­ers in other Asian coun­tries with low la­bor costs in­clud­ing Viet­nam, the Philip­pines and Bangladesh, but many will take a wait-and-see ap­proach be­cause it takes times to re­wire sup­ply chains, said Erik Lundh, an economist spe­cial­iz­ing in China for The Con­fer­ence Board, a ma­jor busi­ness group.

It isn’t clear how long the tar­iffs will last, or whether the U.S. and China might set­tle their trade fight quickly.

“There is so much volatil­ity around this is­sue that in three weeks’ time this could all have been for noth­ing,” Lundh said.

Don­ald Trump

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