US Exporters Feel Lion's Share Of Pain In US-China Trade Dispute

Much of the focus in the tit-for-tat U.S.-China trade dispute has been on U.S. importers and consumers. Not as noticeable, but just as acute, if not more so, is the hurt trade tensions have put on U.S. exporters.

August 2019 exports to China through the Ports of Los Angeles and Long Beach, the two primary gateways, were down 22% compared to the same period a year ago. By contrast, exports from the ports to all countries fell 1.1% over the same period. "Because of retaliatory tariffs and other policies, the American exporter has been harmed irreparably," Gene Seroka, the Port of Los Angeles' executive director, said in mid-September.

Whether it be soybeans, distilled grains or cotton, the impact of retaliatory tariffs imposed by Beijing has decimated a large market for U.S. exporters. For example, Illinois-produced soybean exports to China have dropped to virtually nothing, according to Scott Sigman, transportation and export lead at the Illinois Soybean Association. About half of the state's soybean crop is exported.

Other Southeast Asian markets, like Vietnam, are picking up some of the export slack. Yet it is impossible for any country or even a multiple of countries to fully replace such a large customer as China, panelists said Oct. 23 at the Journal of Commerce Inland Transportation 2019 conference in Chicago.

U.S. and Chinese negotiators report a degree of progress, stating that they've come to some form of agreement under which President Trump will impose no further tariffs on Chinese imports if China agrees to buy an undetermined amount of farm goods from the U.S. But the agreement is tentative at best, and it could easily be scuttled by a 3 a.m. presidential tweet.

"Anyone who is telling you what's going on, doesn't know what's going on," said Bruce Abbe, strategic advisor for trade and transportation for the Specialty Soya and Grains Alliance.

Even if negotiators reach a full-blown agreement soon, much work would still lie ahead for U.S. exporters. The first step will be to rebuild relationships with Chinese buyers — relationships that, in some cases, have been "shattered" by the trade conflict, Sigman said. Added Abbe, "We are losing our reputation. It won't be the same over there for some time."

In a post-agreement world, U.S. exporters will eventually right the ship. The U.S. soybean supply chain is probably the most efficient in the world, Sigman said. Chinese buyers, he said, will return to it because of reliability and good pricing. Still, transitioning to some form of trade normalcy will be akin to drinking water from a fire hose. Empty containers will need to be located and repositioned without it costing exporters a fortune; getting empty containers to where cargo is has been a problem for years.

Exporters will have to utilize all available means of transport to get goods to U.S. seaports, and foreign buyers won't care about containers not being in the right place at the right time and at the right price. The situation may result in abandoning the use of containers for a period of time, Sigman said.

Barge transport could come into play, but the nation's inland waterways system is in extreme disrepair and some critical segments of the network will be out of commission. Illinois is planning to close six locks and dams for four months during mid- to late-2020 to allow the U.S. Army Corps of Engineers to perform $117 million of rehab work on the 90-year-old structures.

Exporters can also expect to pay more for inland shipping as demand spikes, experts said. Reversing the status quo will place a "huge burden on all logistics," said Don Lake, senior vice president of enterprise development for Dunavant Logistics Group, a third-party logistics provider.

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