The Port of Long Beach just had its busiest month ever and is on pace for the busiest year in its 113-year history, port CEO Mario Cordero said Thursday, but with President-elect Donald Trump’s promise of strict tariffs looming, port officials are preparing for a new world when it comes to cargo volume and labor demand.
“From past experience, we can say businesses crave certainty, and when you have trade disputes, that creates uncertainty,” Cordero said.
When tariffs were implemented in 2018, during Trump’s first term, the Port of Long Beach saw an overall 20% decrease in two-way trade with China, Cordero said.
In June 2018, just before the tariffs took effect, the port experienced a 14.2% increase in cargo volume compared to the same month in 2017. After the first Trump tariffs on Chinese goods kicked in during July 2018, total cargo volume dropped over the next two months and did not return to June 2018 levels until December 2020.
China is the top trading partner for both imports and exports coming through the Port of Long Beach, accounting for about 70% of its imports and 20% of its exports, according to the port.
Those numbers could change drastically if Trump follows through on his campaign trail promise to levy a 60% tariff on all Chinese-made goods.
Tariffs are paid by the importing company, raising the price on foreign goods. Foreign companies shipping goods to the United States do not pay tariffs.
“I’ve said this before and I’ll say it again, no one wins in a trade war,” Cordero said.
Port of Long Beach workers account for about 1 of every 5 jobs in Long Beach and about 1 in 20 jobs in Southern California, according to the port’s website.
The port also sponsors numerous local events held by nonprofit organizations. This week, the port approved $845,110 in funding for local events set to take place starting in December.
Increased tariffs would likely lead to a decline in cargo volume through the port and a reduction in the amount of labor needed, Cordero said.
However, he expressed optimism that the port is prepared for a potential temporary dip in labor demands.
“We will continue to be a job producer here at the Port of Long Beach and with that, I continue to have optimism that the job impact will not be as much as some people may talk about,” he said.
Erica York, senior economist and research director with the Tax Foundation, said local businesses will be the first to feel the effects if Trump follows through on his campaign promise to raise tariffs.
“If tariffs worked the way Trump explained on the campaign trail, that would be awesome, but unfortunately they’re not a magic wand,” York said. “They do come with trade-offs and in some cases, those trade-offs are really steep.”
Businesses would have essentially two choices to react to the new tax increase on imports: pass that cost on to consumers or eat the cost and limit their ability to pay workers or invest in infrastructure, York said. Either choice hurts the economy.
A recent Tax Foundation analysis estimated that a 10% universal tariff would increase taxes on U.S. households by an average of $1,253 by reducing the spending power of consumers.
A 60% tariff on Chinese goods would increase taxes on U.S. households by an average of more than $2,400, York said.
The Biden administration kept most of the Trump administration tariffs in place and in May announced tariff hikes on an additional $18 billion of Chinese goods, including semiconductors and electric vehicles.
The current average tariff rate is under 3%, York said.
“The Biden administration hasn’t moved in a better direction on trade policy either and Trump has promised just going way further down that path,” York said.
Laura Gonzalez, a finance professor at Cal State Long Beach, also cautioned that tariffs could have a bigger impact on the balance between inflation and unemployment.
“We have been able, so far, to avoid a hard landing, and the Federal Reserve has been able to maintain a very difficult equilibrium of increasing interest rates to control inflation as a consequence of COVID without increasing unemployment,” Gonzalez said.
Tyler Reeb, interim executive director at CSULB’s Center for International Trade & Transportation, said it is too soon to speculate on specific effects on the local economy without knowing exactly what tariffs would be levied and on what goods.
Shifts since the first round of tariffs, including the emergence of Mexico as a logistics hub could help “mitigate some of those impacts,” said Port of Long Beach Chief Operating Officer Noel Hacegaba.
If there is a rise in shipping demands ahead of potential tariffs as there was last time, “we’re ready, we have the capacity and we’re ready for more cargo,” Hacegaba said.
Editor’s note: This story has been updated to correct the spelling of Noel Hacegaba’s name.