Like them or not, tariffs have an impact, some intended, some not. It looks like one of the impacts the tariff battle will result in is a slowdown for the transportation and warehouse sectors for 2019. It’s not that tariffs and tariff talk eliminated all of the tonnage transported, but it certainly had an impact on when some cargo moved. During the time of tariff saber rattling and eventual implementation of tariffs, many retailers tried to stock up on inventory before the tariffs took effect which would result in price increases; the result was a frenzy of orders for goods from Asia in 2018.
Wasn’t 2018 great? Ocean carriers were busy, trucking companies were gaining market share and increasing profits, and the influx of early tariff driven cargo swelled warehouses to the limits. The transportation and warehouse industry not only enjoyed the benefits of a better and stronger economy overall for the past couple of years, but they also got to finish the run with a late 2018 surge in revenue. Containerized imports from Asia in the fourth quarter of 2018 alone rose by *15.5%. Since ocean freight surged, trucks and warehousing also surged as inbound ocean cargo has to go somewhere. There is no doubt 2018 was a boom for many of us. Oh, those were the days.
I often give my grandson advice, whether he wants it or not. It’s my job. One of the financial pearls of wisdom I have bestowed upon him was “You can’t spend your money this week and expect to have it next week.” I know he doesn’t pay much attention to my pontificating, but he was raised right and is polite enough to pretend to listen.
So here we are in 2019, and there is only one thing we can reasonably expect to happen in the transportation and warehousing industries. Like my grandson’s allowance, retailers have already spent their money in the second half of 2018 playing ‘beat the train’ with tariffs so the same money won’t be spent again in the first half of 2019. It’s not that the money never got spent, but it did get frontloaded to an earlier time essentially spending the 2019 springtime and early summer re-stocking money in the fall of 2018. So what happens now?
I don’t believe we are heading back to the famine days of 2009. But ocean container carriers, truckers, and warehousing will see a definite cool down for the next few months. Rates will flatten or decline in some cases, there will be more blank sailings, and warehouse and trucking capacity will increase putting downward pressure on spot rates. In short, it will likely be a long summer for those industries.
Barring any catastrophic occurrences, retail inventories getting siphoned down over the next couple of months, and if the government can refrain from trying to fix things, the whole thing should straighten itself out, minus permanent tariff driven impacts, beginning late summer as orders again start to roll in as usual for the fall buying season.
* PIERS data as quoted by JOC https://www.joc.com/international-logistics/industrial-real-estate/rising-us-retail-inventories-set-stage-transport-pullback_20190422.html?utm_source=Eloqua&utm_medium=email&utm_campaign=CL_JOC%20Daily%204%2F23%2F19_PC9156_e-production_E-31779_DB_0423_0617