Standing between the shortages of metals and semiconductors, and empty containers still leaving U.S. ports in a race to fill them with Made in China goods, is an American manufacturing industry wholly dependent on Asia for its supply chain. Moreover, e-commerce platforms that allow for direct purchase at Chinese manufactures has led to a China consumer goods product dump never before seen in U.S. markets.
E-commerce orders going to China are up 254% from the first quarter of 2020, based on proprietary industry data. A lot of that is contributing to an explosion in demand for shipping containers.
The takeaway from the ongoing trade bottlenecks is that the U.S. supplies the demand, and China supplies the supplies. It’s a dangerous precedent as the China and U.S. trade war continues. We are witnessing a supply chain in need of some serious liquid Drano. China reliance is a headwind that needs to be addressed by Congress.
Shipping companies can charge upwards of $5,190 for a container leaving China for the U.S. compared with $821 for one leaving the U.S. and bound for China. Because of that massive price differential, shipping companies are loading from China, offloading port side, and then returning the empty containers back to China for a quick refill rather than load them up with American goods for export.
The Backup: U.S. Exporters at the Back of the Line
Congress often talks about wanting to help U.S. companies export to world markets. Right now, they can’t get a container to load their wares into.
Empty export containers have risen by 213%. Gene Seroka, executive director of the Port of Los Angeles said in his press conference that the month of March saw their highest ever number of empty containers leave the port.
According to trade reporter Lori Ann LaRocco, author of the book “Trade War: Containers Don’t Lie”, delays at ports in China are adding to U.S. supply chain restraints. There is a roughly two-week backup in China. Companies with manufacturers in Vietnam and Malaysia are also having a hard time finding empty containers, meaning the entire thing is driven by U.S. demand for Made in China goods.
To add insult to injury, many Chinese companies have been purposely delaying or declining orders of strategic goods from American companies, according to Paul Ericksen, Industry Week’s supply chain advisor.
Where purchase orders are still in play, U.S. companies are often now at the back of the line as China is giving priority to other markets. Ericksen said in an article published by the magazine on Wednesday that “expecting a quick resolution to the current supply chain crisis is fanciful. The sad reality is America is at least a generation away from any kind of self-sufficiency in too many important areas. Rare earths and pharmaceuticals are two more examples of this.”
In an interview with Freightwaves on April 1, Daniel Maffei, new chairman of the Federal Maritime Commission, said, “We have seen hundreds and thousands of export containers that have been rejected for the last several months,” he said, adding that an investigation is still ongoing. “I am a former member of Congress. My colleagues need to know coming out of this situation where are the areas where there is no ability to make room for exports? No one is, quote, ‘doing nothing wrong,’ but because of market forces, it is creating a situation that is a huge disadvantage to American exporters. Congress (should) not want this to continue. I am looking closely at this.”
Fed Warns of Increasing Shortages
China has been open for months now. Germany is going into lockdown to fight Covid-19. Large companies are having a hard time finding supply. There is a shortage of paper. There is a shortage of glue. There is a shortage of steel.
Wednesday’s Fed Beige Book had the word “shortage” throughout its report from the 12 Federal Reserve Banks.They named shortages in metals and raw materials and semiconductors as the primary items in hot demand, with low supply.
Each item has its own supply chain problem, either due to the pandemic, China hoarding, or Asia not being able to ramp up fast enough to meet demand following months of industrial capacity put on ice due to the pandemic.
Some Benefits: Can U.S. Companies Fill the Gaps?
We have been hearing from domestic producers that their big multinational clients are in desperate search of supply. Companies that do not usually see such demand for their goods from other countries are seeing it now.
Pent up demand coupled with massive stimulus is helping the U.S. economy rebound post-pandemic. But we are overweighted on the demand side and underweighted on the supply side. Years of de-industrialization have made it hard for companies to ramp up and invest in new capacity. Many are already firing on all eight cylinders and cannot meet local demand.
To invest in more capacity, or in different but related niches, could take a couple of years depending on the product line. What happens if after that investment is made, the market then returns to low-cost Asia and China?
U.S. firms in the middle of the supply chain, from tool makers to apparel manufacturers, need domestic customers. From the e-commerce and trade container data we are seeing, those customers are looking to China.
Moreover, many U.S. companies are dependent on giant multinationals – whether it’s a Detroit automaker or a German wind turbine manufacture. The globalization model, based on the pricing power of multinational corporations and a China-centric globalization, is being worn thin. To be more resilient, the U.S. needs policies that make it competitive to do business domestically and serve local demand, leading to import replacement.
If we cannot get action on that, then demand will continue to come from us post-pandemic, and supply will come from Asia. American demand for Asian goods is akin to a China jobs program, often to the detriment of American working-class labor.
The time is now to remap these supply chains as demand picks up. Any fix, whether it’s money for semiconductors, or tariffs, needs to have longevity and give American companies the ability to compete for product orders long term, especially against Asia, a region where we will almost never be able to compete on price given currency misalignments, China’s economies of scale, state subsidies and entrenched supply chains still swimming against the tide.
Trade Blockage Another Example Why China Decoupling is Necessary
Standing between the shortages of metals and semiconductors, and empty containers still leaving U.S. ports in a race to fill them with Made in China goods, is an American manufacturing industry wholly dependent on Asia for its supply chain. Moreover, e-commerce platforms that allow for direct purchase at Chinese manufactures has led to a China consumer goods product dump never before seen in U.S. markets.
E-commerce orders going to China are up 254% from the first quarter of 2020, based on proprietary industry data. A lot of that is contributing to an explosion in demand for shipping containers.
The takeaway from the ongoing trade bottlenecks is that the U.S. supplies the demand, and China supplies the supplies. It’s a dangerous precedent as the China and U.S. trade war continues. We are witnessing a supply chain in need of some serious liquid Drano. China reliance is a headwind that needs to be addressed by Congress.
Shipping companies can charge upwards of $5,190 for a container leaving China for the U.S. compared with $821 for one leaving the U.S. and bound for China. Because of that massive price differential, shipping companies are loading from China, offloading port side, and then returning the empty containers back to China for a quick refill rather than load them up with American goods for export.
The Backup: U.S. Exporters at the Back of the Line
Congress often talks about wanting to help U.S. companies export to world markets. Right now, they can’t get a container to load their wares into.
Empty export containers have risen by 213%. Gene Seroka, executive director of the Port of Los Angeles said in his press conference that the month of March saw their highest ever number of empty containers leave the port.
According to trade reporter Lori Ann LaRocco, author of the book “Trade War: Containers Don’t Lie”, delays at ports in China are adding to U.S. supply chain restraints. There is a roughly two-week backup in China. Companies with manufacturers in Vietnam and Malaysia are also having a hard time finding empty containers, meaning the entire thing is driven by U.S. demand for Made in China goods.
To add insult to injury, many Chinese companies have been purposely delaying or declining orders of strategic goods from American companies, according to Paul Ericksen, Industry Week’s supply chain advisor.
Where purchase orders are still in play, U.S. companies are often now at the back of the line as China is giving priority to other markets. Ericksen said in an article published by the magazine on Wednesday that “expecting a quick resolution to the current supply chain crisis is fanciful. The sad reality is America is at least a generation away from any kind of self-sufficiency in too many important areas. Rare earths and pharmaceuticals are two more examples of this.”
In an interview with Freightwaves on April 1, Daniel Maffei, new chairman of the Federal Maritime Commission, said, “We have seen hundreds and thousands of export containers that have been rejected for the last several months,” he said, adding that an investigation is still ongoing. “I am a former member of Congress. My colleagues need to know coming out of this situation where are the areas where there is no ability to make room for exports? No one is, quote, ‘doing nothing wrong,’ but because of market forces, it is creating a situation that is a huge disadvantage to American exporters. Congress (should) not want this to continue. I am looking closely at this.”
Fed Warns of Increasing Shortages
China has been open for months now. Germany is going into lockdown to fight Covid-19. Large companies are having a hard time finding supply. There is a shortage of paper. There is a shortage of glue. There is a shortage of steel.
Wednesday’s Fed Beige Book had the word “shortage” throughout its report from the 12 Federal Reserve Banks.They named shortages in metals and raw materials and semiconductors as the primary items in hot demand, with low supply.
Each item has its own supply chain problem, either due to the pandemic, China hoarding, or Asia not being able to ramp up fast enough to meet demand following months of industrial capacity put on ice due to the pandemic.
Some Benefits: Can U.S. Companies Fill the Gaps?
We have been hearing from domestic producers that their big multinational clients are in desperate search of supply. Companies that do not usually see such demand for their goods from other countries are seeing it now.
Pent up demand coupled with massive stimulus is helping the U.S. economy rebound post-pandemic. But we are overweighted on the demand side and underweighted on the supply side. Years of de-industrialization have made it hard for companies to ramp up and invest in new capacity. Many are already firing on all eight cylinders and cannot meet local demand.
To invest in more capacity, or in different but related niches, could take a couple of years depending on the product line. What happens if after that investment is made, the market then returns to low-cost Asia and China?
U.S. firms in the middle of the supply chain, from tool makers to apparel manufacturers, need domestic customers. From the e-commerce and trade container data we are seeing, those customers are looking to China.
Moreover, many U.S. companies are dependent on giant multinationals – whether it’s a Detroit automaker or a German wind turbine manufacture. The globalization model, based on the pricing power of multinational corporations and a China-centric globalization, is being worn thin. To be more resilient, the U.S. needs policies that make it competitive to do business domestically and serve local demand, leading to import replacement.
If we cannot get action on that, then demand will continue to come from us post-pandemic, and supply will come from Asia. American demand for Asian goods is akin to a China jobs program, often to the detriment of American working-class labor.
The time is now to remap these supply chains as demand picks up. Any fix, whether it’s money for semiconductors, or tariffs, needs to have longevity and give American companies the ability to compete for product orders long term, especially against Asia, a region where we will almost never be able to compete on price given currency misalignments, China’s economies of scale, state subsidies and entrenched supply chains still swimming against the tide.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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