November 22, 2018
Black Friday comes up later this week , a day most of us think of as the start of the holiday buying season, with special discounts and long lines at retail stores.
This year, however, Black Friday is going to be different — largely due to the imposition of tariffs on imported goods and all the business gyrations that go along with them.
In past years, the international shipping calendar centered around the holidays in the United States. In August and September, imports would increase as retailers built their inventories of holiday toys and other goods.
But this year, the increase in imports has extended through the fall, and ports up and down the West Coast are reporting unprecedented cargo volume growth. There is evidence that American retailers are not just planning for the holidays but also speeding up shipments into the U.S. to build up their inventory before tariffs rise again in January.
The latest round of tariffs, on $200 billion worth of Chinese imports, went into effect on Sept. 24. The Port of Long Beach, located just south of Los Angeles, reported a 7.4 percent increase in inbound shipments in October and an overall increase of 7.9 percent in shipments for the year. In fact, this October was the third-busiest month in the 107-year history of the port. While ports are overall busier this year, there is concern among supply-chain experts is that all this front-loading of imported goods will lead to a disappointing open to 2019.
An interesting backdrop to all this is the movement in the Chinese yuan. As we have noted before, the Chinese currency is off by nearly 9 percent since May. That almost completely offsets the 10 percent tariffs imposed in September, although the effect is somewhat muddled due to details such as payment currency and business arrangements between U.S. importers and Chinese suppliers.
What is more important is what happens from here, which leads us to our thoughts for the end of the year on trade issues.
Our View: The biggest unknown is whether we will get any breakthrough with China before tariffs ratchet up in the New Year. For that, all eyes will be on the upcoming G-20 meeting in Buenos Aires, when between President Trump and Chinese President Xi Jinping are scheduled to talk. What impact that might have on our holiday season is still to be seen - until then, have a great Thanksgiving.
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