Trans-Pacific data shows a significant shift in US import volumes from China to Southeast Asia in the first half of 2019, the clearest evidence yet of how the United States trade war is affecting Asian sourcing patterns.
US imports from China declined 5 percent in the first six months of the year against the same period in 2018, while imports from Vietnam were up 30.5 percent, according to data from PIERS, a JOC sister company within IHS Markit. US imports from Southeast Asia reached 1.6 million TEU in the January-June period, up almost 300,000 TEU, or 23.1 percent, over the first half of 2018.
China is by far the US’ largest trading partner — 5.1 million TEU crossed the Pacific eastward in the first half of the year. Vietnam, long a favored alternative to manufacturing in China, exported 705,246 TEU to the US in the period.
Other Southeast Asia nations have also experienced robust growth in the first half compared with the same period in 2018. US imports from Thailand rose 19.6 percent, Malaysia 22 percent, Indonesia 11.5 percent, and Cambodia 38.8 percent.
Port call changes
Carriers have been adjusting their port calls to factor in this rising volume from Southeast Asia. SeaIntelligence found that compared with the 2018 peak season, the 2019 peak season has seen an increase from 14 to 18 weekly Southeast Asia-based trans-Pacific services.
“We also found that the number of Southeast Asia port calls on trans-Pacific services per week increased substantially, from 33 per week in the 2018 peak season to 38 in the 2019 peak season,” said Alan Murphy, SeaIntelligence CEO.
Last year, the US imposed tariffs of 10 percent on Chinese-made goods worth $250 billion, and this May raised the tariffs on $200 billion of Chinese products from 10 percent to 25 percent. China retaliated with its own tariffs on $110 billion of US goods, and in May raised that to include another $60 billion of US products.
A US plan to target an additional $300 billion of Chinese goods was called off by Washington at the G20 Summit in Japan last month, but by then it was clear that uncertainty over the duration of the tariffs and what they hoped to achieve had pushed US importers to seek alternative sourcing destinations to China.
In fact, a survey conducted by the American Chambers of Commerce for Shanghai and China after the May tariff rate increase found that more than 40 percent of US businesses with operations in China said they were either considering relocating manufacturing facilities out of the country or had already done so. Among those that have chosen to go elsewhere, the top destinations were neighboring countries in Southeast Asia (25 percent) and Mexico (10.5 percent). Only 6 percent were looking at moving operations to the US, according to the survey.
Recent reports from the New York Times and Bloomberg have indicated Chinese manufacturers are relabeling products as “Made in Vietnam” and exporting via Vietnamese or other Southeast Asian ports in a bid to get around the US tariffs. But analysts quoted in those reports do not believe the tariff workarounds will be on any significant scale, with customs authorities on both sides of the Pacific cracking down on the practice.
Source: Greg Knowler, JOC