A well-renowned shipping expert has said that victory for Donald Trump in this year’s US Presidential elections, or a perceived probability of a Trump victory, could prompt a surge of Chinese imports to the US during peak season.
Lar Jensen, CEO of Vespucci Maritime, wrote on Tuesday on LinkedIn that an “import boom” could occur in such a scenario as businesses seek to avoid the possibility of more tariffs being applied to Chinese imports.
Jensen made the comments in reaction to a Donald Trump speech made in Pennsylvania on August 17th.
“A tariff is a tax on a foreign country. That’s the way it is, whether you like it or not. A lot of people like to say “oh it’s a tax on us”. No no no. It’s a tax on a foreign country. […]. And it’s a tax that doesn’t affect our country,” said the former US President.
Jensen described Trump’s comments as “simply and plainly factually wrong and a complete misunderstanding of how tariffs work”.
The shipping expert then added:
“However, the point here is not whether you agree with Trump or not. The point is that if we do end up with a second Trump presidency, there is a high likelihood that Trump will increase tariffs on many countries as, according to him, this will benefit the US economically.”
Jensen stressed that US importers know very well it is they who will first pay these tariffs, which will then have a knock on effect on retail prices. He also added that the same behaviour is already visible due to tariffs being implemented by the Biden administration.
“We have over the past few months seen a boom in US imports. Part of this is due to Red Sea related disruptions, part is due to the risk of a strike on the US East Coast – but part is also being driven by importers wanting to import products before Biden’s new tariffs are implemented,” said Jensen.
The shipping expert went on to add that whenever US import tariff increases are announced, a surge in imports follows as businesses try to procure as much as possible before the tariffs kick in.
“If we see a Trump victory in November – or a high likelihood of a Trump victory in the period prior to the election – we could well be seeing a new import boom in container volumes into the US, as importers (who certainly do know how tariffs affect their business) will be scrambling to import as much as possible before any new Trump tariffs. This could well set the stage for a new demand-driven spike in freight rates on US imports from November,” said the Vespucci Maritime CEO.
Both Trump and Biden administrations have implemented tariffs while in office
According to research by the Tax Foundation published in June of this year, The Trump administration imposed nearly $80 billion worth of new taxes on Americans by levying tariffs on thousands of products valued at approximately $380 billion in 2018 and 2019.
The Tax Foundation adds that the Biden administration has since kept most of the Trump administration tariffs in place. Moreover, in May of this year, the US President announced tariff hikes on an additional $18 billion of Chinese goods, including semiconductors and electric vehicles, for an additional tax increase of $3.6 billion.
“Candidate Trump has proposed significant tariff hikes as part of his presidential campaign; we estimate that if imposed, his proposed tariff increases would hike taxes by another $524 billion annually and shrink GDP by at least 0.8 percent, the capital stock by 0.7 percent, and employment by 684,000 full-time equivalent jobs,” stressed the Tax Foundation, in its analysis.
Earlier this month, the Tax Policy Center also published an analysis on the potential impact of the tariff plans proposed by Trump, and Biden, who of course has since been replaced as the Presidential nominee for the Democratic Party by Kamila Harris.
The Tax Policy Center concluded that if Trump implemented a 10% worldwide tariff, and a 60% tax on imported Chinese goods, $3.7 trillion in gross tariff revenues would be generated. However, the net federal revenues would rise by much less (about $2.8 trillion over the next decade) because those tariffs would reduce other tax receipts.
“Trump’s tariffs would significantly raise prices of imported goods since they’d mostly be passed on to consumers. That would shrink both inflation-adjusted domestic incomes and income tax revenues. The Federal Reserve could raise interest rates to offset those price increases. But that likely would reduce profits of US corporations and incomes of US workers, lower projected corporate and individual tax revenues, and offset nearly $1 trillion of increased tariff revenue,” says Howard Gleckman of the Tax Policy Center.
As for Biden’s plans, the Tax Policy Center sees the potential impact as being less severe.
“Biden’s new tariffs are much more modest,” says Gleckman. “His efforts to target Chinese-made electric vehicles, metals, computer chips, and other products will lower imports by about one tenth of one percent, or about $50 billion, through 2033 and generate about $11 billion in net new tax revenue over the decade.”
Gleckman adds:
“Biden is subjecting only about $15 billion out of the $420 billion in Chinese exports to new or higher tariffs. And those goods represent a very small share of total US imports. For example, only about 1 percent of imported steel and a bit more than 5 percent of imported aluminium comes from China.”
Photo: Terez Sanogo / PDM 1.0