SINGAPORE/HONG KONG/NEW YORK (BLOOMBERG) - The race is on to get Chinese goods into the United States before President Donald Trump's tariffs bite.
At sea and in the sky, the US President's trade war with China has ignited a freight frenzy. Hyundai Merchant Marine Co's vessels leaving China for the US are full, deliveries to California ports are surging, and cargo rates for journeys across the Pacific are at a four-year high.
The levies that kick in next Monday (Sept 24) have amplified the busy pre-holiday season as Chinese manufacturers rush everything from toys to bikes to car parts into American stores before tariffs hit. At Air China, freight to the US is booming.
In Jiangsu province on China's east coast, E.D. Opto Electrical Lighting Co dispatched a batch of car lights by sea to Los Angeles in late August, earlier than planned.
"It takes about 25 days, so I hope we can make it," said export manager Melissa Shu. The company is racing to complete an order for another US customer who is prepared to pay extra for air freight if it means dodging the new tariffs, she said.
Starting from next Monday, a 10 per cent duty applies to US$200 billion (S$273 billion) of Chinese imports - Mr Trump's biggest salvo yet in a trade war between the world's largest economies that now directly hits US consumers. After that, American importers have until the end of the year to stockpile Chinese products before the tariff leaps to 25 per cent.
As companies accelerate shipments from China to beat those deadlines, American consumers could get a leg-up: anticipated price hikes on household goods at retailers like Walmart and Target might be held off in the short term. In China, this front-loading of exports helped push China's trade surplus with the US to a record in August.
Mr Trump has threatened duties on a further US$267 billion of made-in-China goods, which would hit nearly all other consumer products including mobile phones, shoes and clothes. That escalation could spur US companies to pre-emptively load up on those goods, too, Deutsche Bank AG said in a report this week. The National Retail Federation in the US warned that duties will lead to higher prices and even product shortages.
In the industrial hub of Dongguan in southern China, toy maker Lung Cheong Group - which supplies Hasbro - is getting squeezed by American customers watching their calendars.
"More clients in the last two months are asking if we can deliver goods ahead of the scheduled time to avoid the upcoming tariffs," said its chairman Lun Leung. For small high-tech toys that have higher retail selling prices, some clients are willing to upgrade from sea freight to air, he said.
Such expedited orders are helping to fill ports along the US West Coast. Imports to northern California's Port of Oakland surged 9.2 per cent in August. That was the busiest August in the port's 91-year history. At the Port of Long Beach, imports of containers rose 9.4 per cent this year through August. That comes after a record 2017.
Spot freight rates from Shanghai to Los Angeles, the biggest US port, reached US$2,362 per 40-foot container in the week ended Sept 13, the highest weekly level since December 2014, according to the Drewry World Container Index.
The threat of the looming tariffs is supercharging business at Hyundai Merchant Marine, South Korea's biggest shipping company, and at APL, one of the largest shippers on the trans-Pacific route, during the industry's peak season, representatives for the companies said.
Concerns about the trade dispute is also spurring last-minute shipments across the Pacific for Ocean Network Express, a combination of the container operations of Japan's three biggest shipping firms, it said.
"We have a rush game with the tariff," said Mr Rahul Kapoor, an analyst at Bloomberg Intelligence in Singapore. He said he'd heard of cargo being left behind at Chinese docks because America-bound ships were so full.
While Monday's tariff may come too soon for some US companies importing Chinese products, they still have a window of more than three months before duties surge on Jan 1.
Mr Ralph Bradley, chief executive officer of a small automotive lighting manufacturer in Fort Worth, Texas, has more than US$300,000 of products coming to the US on a boat from China. There is not much he can do about paying the 10 per cent duty, or US$30,000, on those vehicle-lighting parts.
But Mr Bradley's firm, Jammy Inc, is considering bringing extra goods into the US from China before the tariffs more than double, he said. "I'm anxiously awaiting any word that Congress might fix this situation," he said.
For some businesses, there's no way to sidestep Mr Trump.
Ms Hannah Kain, chief executive officer of Alom Technologies Corp, which helps companies manage their supply chains, said clients have been fast-tracking orders for months in an effort to avoid the tariffs. Yet, many products have lead times stretching to two years.
"There is really no way to navigate it," said Ms Kain, whose clients have included Ford Motor. "You just have to be very reactive, as far as you can."