NEW YORK: To understand why the impact of President Donald Trump's tariffs could be felt throughout the United States, consider this: From the West Coast to the Great Lakes and the Gulf of Mexico, at least 10 percent of imports at many ports could be hit by new tariffs if Trump's proposals take full effect, according to an exclusive analysis of government data by The Associated Press.
Ports and ground terminals in nearly every state handle goods that are now or will likely soon be covered by import tariffs. And port officials fear this could mean a slowdown in shipping that would have ripple effects on truckers and others whose jobs depend on trade.
Since March, the U.S. has applied new tariffs of up to 25 percent on nearly $85 billion worth of steel and aluminum and various Chinese products, mostly goods used in manufacturing.
"Tariffs are working big time," Trump tweeted recently.
The president has argued that the tariffs will help protect American workers and force U.S. trading partners to change rules that the president insists are unfair to the United States.
At the same time, his administration is preparing to slap tariffs of up to 25 percent on an additional $200 billion in Chinese imports — many of them parts and materials U.S. companies depend on, along with consumer goods — after a public comment period ends Thursday.
These tariffs are the administration's response to its charges that Beijing uses predatory tactics to try to supplant U.S. technological supremacy. Those tactics include cyber-theft and a requirement that American companies hand over trade secrets in exchange for access to China's market.
In New Orleans, port officials say a tariff-related drop in shipments is real, not merely a forecast. Steel imports there have declined more than 25 percent from a year ago, according to the port's chief commercial officer, Robert Landry.
The port is scouting for other commodities it can import. But expectations appear to be low.
"In our business, steel is the ideal commodity," Landry said. "It's big, it's heavy, we charge by the ton so it pays well. You never find anything that pays as well as steel does."
The port of Milwaukee imports steel from Europe and ships out agricultural products from the Midwest. Steel imports haven't dropped yet because they are under long-term contracts, said the port director, Adam Schlicht. But there has been "an almost immediate halt" in outbound shipments of corn because of retaliatory duties imposed by the European Union on American products.
Much of the corn, he said, "is just staying in silos. They are filled to the brim."
Many other ports have been humming along and even enjoyed an unexpected bump in imports during June and July as U.S. businesses moved up orders to ship before the new tariffs took effect. That started with manufacturing goods and is now spreading to retail items for back-to-school and Christmas.
"Some of my retail customers are forward-shipping the best they can to offset proposed tariffs," says Peter Schneider, executive vice president of T.G.S. Transportation, a trucking company in Fresno, California.
Port officials were encouraged by this week's announcement that the United States and Mexico had reached a preliminary agreement to replace the North American Free Trade Agreement, hoping it might lead to reduced trade barriers. Canada's participation in any new deal to replace NAFTA, though, remains a major question mark.
The port officials continue to worry, though, that Trump will make good on a plan to expand tariffs to an additional $200 billion in Chinese imports — a list that includes fish and other foods, furniture, carpets, tires, rain jackets and hundreds of additional items. Tariffs would make those items costlier in the United States. And if Americans buy fewer of those goods, it would likely lead to fewer container ships steaming into U.S. ports.
The impact will be felt keenly at West Coast ports like Los Angeles and Long Beach.
Los Angeles Mayor Eric Garcetti, relying on information from his port officials, said his port — the biggest in the United States — could suffer a 20 percent drop in volume if the additional $200 billion in tariffs are imposed against Chinese goods.
Jock O'Connell, an economist in California who studies trade, said he doubts a downturn would be so severe — that would match the slump that accompanied the global recession of 2008 — "but we will see a definite impact."
Eugene Seroka, executive director of the Los Angeles port, worries that "if tariffs make it too expensive to import, there will be an impact on jobs."
Seroka and others don't expect layoffs on the docks. Union longshoremen — whose average pay last year on the West Coast was $163,000, according to the Pacific Maritime Association, which negotiates for the ports — often have contract provisions ensuring that they are paid even if there's no work. And there are fewer of them than there were a few decades ago because the advent of shipping containers has reduced the need for people on the docks.
Dwayne Boudreaux, an International Longshoremen's Association official in Louisiana, said, though, that his stevedores are handling about 10 percent less steel from Japan because of the new tariffs.
"We don't think it's going to (get) worse," he said. But, he added, "who knows — that could change from the next press conference."
The impact might be greater on truck drivers and warehouse workers. Fewer will be needed, according to O'Connell.
Many drivers who deliver shipping containers from the dock to warehouses are independents contracted by trucking companies, and they don't get paid if there is nothing to haul. Some might leave the profession, said Weston LaBar, CEO of the Harbor Trucking Association in Long Beach, California.
"It's hard to retain drivers," he said. "If we don't have work for those drivers, we're worried they will leave for some other segment of the trucking business or go into another business, like construction."
Less shipping means less revenue for the ports — something that could limit their ability to pay for expansion and improvement projects, according to Kurt Nagle, president of the American Association of Port Authorities. He said U.S. ports are in the midst of a planned $155 billion in infrastructure spending from 2016 through 2020.
The current trade war was foreshadowed in January by steep U.S. tariffs on imported solar panels and washing machines. It exploded with the U.S. tariffs of 25 percent on imported steel and 10 percent on aluminum. Then came two rounds of duties targeting about $50 billion in imports from China.
Along the way, China, the European Union, Turkey, Canada and Mexico imposed retaliatory duties on U.S. goods including farm products and Harley-Davidson motorcycles.
On top of the $200 billion in additional Chinese imports that could face U.S. tariffs starting next week, Trump has said that if Beijing continues to retaliate, he may eventually slap tariffs on, all told, $450 billion in Chinese goods. That would be equal to nearly 90 percent of China's 2017 exports to the U.S.
Trade wars are usually temporary. President George W. Bush abandoned his steel tariffs after less than two years.
Milwaukee's port director worries, however, that damage from the current trade dispute could linger. Canada is increasing corn exports to Europe, and Brazil is trying to pick up the slack in soybean exports to China.
"Others are already picking up that business," Schlicht said.
Tariffs stirring fear at many US points of entry for imports
Tariffs stirring fear at many US points of entry for imports
Iran conflict intensifies risk for specialty insurers: Moody’s
RIYADH: The Iran conflict has increased tail risk for Gulf specialty insurers according to Moody’s Ratings, although diversified firms are expected to face manageable losses under its baseline scenario.
The agency said the conflict has effectively blocked the Strait of Hormuz, through which just five vessels per day transited in the first eight days of March, down from a pre-conflict average of around 100 daily transits, citing Portwatch data.
Moody’s baseline scenario assumed the conflict would be relatively short-lived with navigation through the passage eventually resuming at scale. In this scenario, losses are expected to be manageable for large, diversified insurers due to careful risk selection, aggregate claims limits and reinsurance protection.
Amid widening conflict that has disrupted shipping in the region, the US International Development Finance Corp. on March 11 announced a $20 billion reinsurance facility, with Chubb serving as lead partner, according to Reuters.
Without such war-risk coverage, ships and cargo worth hundreds of millions of dollars remain exposed to attacks in the waterway, through which about one-fifth of global oil flows normally pass.
“Specialty insurers and reinsurers, which provide tailored coverage of complex risks such as marine, aviation and political violence, face increased likelihood of severe events leading to outsized claims as a result of the Iran conflict,” the report said.
Moody’s added that “they are also benefiting from an increase in the price of political violence and terrorism coverage amid rising demand from businesses looking to protect assets in the region.”
Since Feb. 28, the UK Maritime Trade Operations has recorded 17 incidents affecting vessels in the Arabian Gulf, Strait of Hormuz and Gulf of Oman, including 13 attacks and four reports of suspicious activity.
Marine insurers on March 5 issued notices of cancelation to terminate or reprice hull and cargo war-risk cover, which protects ships and cargo from damage caused by acts of war.
“In fast-moving conflicts, war-risk cover can become more expensive or may be canceled on short notice depending on the wording,” said Pillsbury Winthrop Shaw Pittman LLP, the international law firm, in a blog post.
The Lloyd’s Market Association confirmed that the vast majority of approximately 1,000 vessels in the Arabian Gulf, with an aggregate insured value exceeding $25 billion, remain covered in the London market, although at higher prices and under more restrictive terms.
Beyond the immediate insurance implications, the disruption is creating cascading operational challenges for ship operators. “Longer maritime voyages can mean more fuel, more crew time and missed contractual delivery windows as chokepoints become chokeholds,” Pillsbury added.
Protection and indemnity clubs, which cover liability risks such as oil spills, have reinstated some war-risk cover but halved liability limits for the Gulf to $250 million per event, forcing ship owners to retain more risk.
On March 6, the US International Development Finance Corp. announced a reinsurance facility to cover losses up to approximately $20 billion on a rolling basis to facilitate passage through the Strait of Hormuz, initially focusing on hull and cargo coverage.
Moody’s noted that prolonged vessel detention could trigger “blocking and trapping” provisions in war risk policies, allowing total loss claims after 12 months of detention, a scenario that could lead to clustered claims and legal disputes.
Aviation sector on alert
Aviation insurers face similar challenges, with airspace closures and missile activity increasing risks to aircraft on the ground at major regional airports. While insurers have largely maintained coverage, they have intensified monitoring and retain options for rapid repricing if conflict escalates.
The report drew parallels to the Russia-Ukraine conflict, where approximately 400 aircraft valued at over $10 billion were detained in Russia, leading to complex litigation and ultimately exposing contingency war risk policies to significant losses.
Moody’s added: “We see few parallels with the current conflict, where physical damage is the main driver of loss. We also estimate that there is more risk to primary war risk insurance than to contingency covers in this case.”
Political violence coverage in focus
Demand for political violence and terrorism insurance has risen sharply at significantly increased prices, a positive for insurer business volumes but one that increases exposure to potential further escalation.
Loss reports are already emerging, with Bapco Energies in Bahrain reportedly notifying insurers of damage to its refinery complex from recent attacks.
Legal uncertainty surrounds these policies, the report warns, as distinctions between war, terrorism and civil commotion are frequently contested in scenarios involving coordinated attacks or proxy actors.
Outlook
The concentration of high-value assets in the Gulf region increases potential for loss accumulation compared to recent geopolitical tensions such as Russia’s invasion of Ukraine. A prolonged conflict would raise the probability of larger, more complex loss scenarios.
“War exclusion clauses will also provide some insulation, although these will likely face legal challenges in some cases,” Moody’s noted.
The conflict has also heightened cyber risk exposure for global insurers, with potential for Iranian state-aligned cyberattacks on Western corporates representing a material tail risk.
Past Iranian state-backed cyberattacks have not breached cyber insurance attachment points, but legal uncertainty remains over the application of war exclusions.
Energy insurance is considered less vulnerable due to well-dispersed assets, though attacks on infrastructure or prolonged production disruption could generate correlated claims across property, energy, marine and credit lines.
