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Trade war

Importers boosted US-China shipments ahead of tariff deadline

Extended truce gives companies longer to prepare, but risks remain

Ships piled high with cargo containers have been keeping longshoremen busy at the Port of Los Angeles.   © Reuters

HONG KONG/NEW YORK -- Logistics companies handling U.S.-China trade have seen record volumes in recent months as importers rushed to stock up on goods ahead of the initial deadline for tariff rises.

U.S. President Donald Trump this weekend said he would delay a March 1 deadline to raise tariffs on $200 billion worth of Chinese imports to 25% from 10%, pending the outcome of trade talks with Beijing.

The news offered some relief to companies trading between the two countries, which had been boosting U.S.-China shipments to beat the clock on planned tariffs.

Ahead of the deadline delay, Hessel Verhage, chief executive of Chicago-based St. George Logistics, said his company's warehouses in New York and New Jersey were "bursting at the seams," with an 11% rise in China-inbound volumes from a year ago.

While shipments from China typically rise in January amid pre-Chinese New Year stockpiling, Verhage said the holiday period in February had been uncharacteristically busy this time.

"We should already start seeing a slack season coming, but I'm not," he said.

The shipment rush has been apparent at the Port of Los Angeles. Its operator said warehouses filled up as the port recorded the busiest January in its 112-year history. Volumes were up 5.4% over the same month last year. Executive Director Gene Seroka attributed this to "continued tariff-related inventory advances and strong consumer demand."

A survey of 240 companies active in south China published Monday found that 36% of respondents have been accelerating orders from China in recent months, while a similar number said they were speeding up the finalization of business agreements.

"Companies will continue to take advantage of the opportunity to make orders and get them delivered as soon as possible," Harley Seyedin, president of the American Chamber of Commerce in South China, told the Nikkei Asian Review on Monday. The group's survey was carried out between Dec. 5 and Jan. 5.

Respondents to the AmCham survey also reported rushing goods in the other direction as well. Tesla has been among the highest profile U.S. companies stockpiling imports in China. The electric carmaker faces the risk that Chinese tariffs on American-made autos could revert to 40% next month from 15%.

"We don't know what is going to happen with the trade negotiations," Chief Executive Elon Musk said during Tesla's earnings call with analysts at the end of January. "We hope the trade negotiations go well... but we need to get [cars] there while there is sort of a de facto truce in the tariff war."

With seemingly little chance that U.S.-China trade relations will return to pre-conflict status regardless of what Trump and Xi agree on, companies continue to look at alternatives to their current supply chain arrangements and target markets.

Taiwanese toy maker Chien Ti Enterprise is considering shifting some production from Shanghai to India or Taiwan. Said Adrian Wu, marketing and sales director at the company's Chinese subsidiary, "We also need to reduce the share of the U.S. market in our portfolio." The country is the largest market for Chien Ti's children's scooters and other products.

In an AmCham survey in September about the trade war's impact when the atmosphere was more heated, most respondents said then that they were looking at shifting supply chains away from China and the U.S. and delaying investments in both countries.

In the chamber's latest survey, however, the biggest reported impact of recent tariffs on long-term strategy was to impel development of other markets and the further targeting of China's domestic market.

Nevertheless, Hutchison Port Holdings Trust, a subsidiary of CK Hutchison Holdings wrote down the value of its port assets in Hong Kong and southern China by 12.3 billion Hong Kong dollars ($1.57 billion) when it reported its annual results on Feb. 12 even though outbound cargoes to the U.S. rose 10% in the October-December quarter from a year before.

"Regardless of the outcome of the [trade] negotiations, there is a risk that long-established supply chains in southern China will be altered over time to the detriment of HPH Trust," the company said.

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