U.S. Ports and Railroads Brace for Potential Disruptions as China-U.S. Trade Declines
After a surge in container traffic from West Coast ports earlier this year, driven by U.S. companies pulling imports forward to avoid tariffs, the landscape has shifted dramatically. With tariffs reaching as high as 145% on goods made in China, shipping volumes from China to the U.S. have plummeted.
Shipping line Hapag-Lloyd has experienced a significant drop in its China-U.S. bookings since tariffs were imposed on April 2, leading many carriers to cancel sailings from Chinese ports. Port of Los Angeles officials expect that within two weeks, arrivals could decline by as much as 35%, as shipments from major retailers and manufacturers have nearly halted, and cargo from Southeast Asia remains weaker than usual.
This disruption is creating a paradoxical situation: a potential shortage of containers in Asia and congestion in U.S. ports. The containers arriving during the recent import surge now need to be returned to Asia, but with fewer ships calling at U.S. ports, capacity to ship empties back is decreasing. Experts warn of an impending pile-up of empty containers, describing the situation as a “storm brewing.”
Both Union Pacific and BNSF Railway state they are prepared for any potential disruptions. While they experienced congestion during the pandemic due to a demand surge, they now emphasize their capacity to handle volume fluctuations. Union Pacific is actively monitoring terminal capacity to avoid past delays, and port expansions in Los Angeles, Long Beach, Seattle, and Tacoma have improved their ability to handle current volumes.
Union Pacific’s leadership highlights that proactive management of container flows is essential to prevent congestion, referencing lessons learned during the pandemic. Similarly, BNSF has expanded capacity with additional miles of double-track and upgraded intermodal facilities and remains confident in its ability to handle potential issues.
Despite these preparations, the supply chain remains vulnerable. Ongoing disruptions may lead to increased costs, contributing to inflation, especially if tariffs remain uncertain. The current imbalance of supply and demand could result in increased costs without creating additional value. Infrastructure investments, such as the planned $1.5 billion Barstow International Gateway, are seen as critical to improving container flow and reducing port congestion, helping to prevent a repeat of the supply chain challenges experienced in 2021.
