Weak November means imports likely coming up short for 2019

U.S. import container volumes may drop for 2019, albeit slightly, for the first time in a decade as gyrations in U.S.-China trade play havoc with shipper demand, according to a major trade group. 

The National Retail Federation (NRF) and Hackett Associates expect containerized goods imports to reach 21.6 million twenty-foot equivalent units (TEUs) in 2019.  

The forecast volume, while the second-highest year on record, would represent close to a 1% drop from a record-setting 2018. It would also be about 400,000 TEUs under the NRF’s last estimates for total U.S. import volumes for 2019.

Source: NRF Global Port Tracker

The 2019 numbers are preliminary and subject to revision as ports release actual volume figures, said NRF spokesperson Craig Shearman. 

The lowered forecast comes as a November peak in U.S. import volumes failed to materialize. The NRF and Hackett said 1.67 million TEUs hit the docks that month, well below an earlier forecast of 1.95 million TEUs. Its estimated number for December is now 1.7 million TEUs, down from an earlier 1.79 million TEU estimate.

The NRF also trimmed its outlook for first-quarter volumes by some 210,000 TEUs. 

Source: NRF Global Port Tracker

The culprit for the 2019 shortfall? Not surprisingly, it was tariffs. July and August import volumes surprised to the upside as the U.S. started tariffs on $110 billion in Chinese goods on Sept. 1. 

The phase one trade deal between the U.S. and China to be signed by President Donald Trump next week halted a Dec. 15 start of additional tariffs on an estimated $160 billion in Chinese imports. 

It’s unclear whether the phase one deal with China had any effect on November volumes as the agreement was made subsequent to any goods being able to move by water. 

Many U.S. businesses appear to still be sitting on adequate inventories thanks to earlier container front-loadings. The U.S. Total Business Inventory/Sales Ratio (SONAR: TBIS.USA) remains at a nearly two-decade high. Meanwhile, goods imports into the U.S. (SONAR: GOIM.USA) are falling to levels seen in 2017.  

U.S. Inventory/Sales Ratio remains high as goods imports fall. Source: SONAR

Nonetheless, the yo-yo effect of U.S. trade policy makes the job of planning freight all the much harder, said NRF Vice President Jonathan Gold. 

“With on-again, off-again progress on trade negotiations reported throughout the fall and other factors affecting shipping, an expected surge ahead of the canceled December tariff increase did not materialize,” the NRF said.

The U.S. has collected $45 billion in tariffs since March 2018, and those are a weight on the U.S. economy, according to the nation’s top bank.

The U.S. Federal Reserve found that manufacturing businesses “more exposed to tariff increases experience relative reductions in employment” and higher tariffs are also “associated with relative increases in producer prices via rising input costs.” 

Hackett Associates founder Ben Hackett said, “It is not surprising that even the Federal Reserve suggests that the impact of the trade war has a negative impact on the U.S. economy. This combination of reduced output counterbalanced by increased inventory underlies the uncertainties of the tariff wars.”