Port of Los Angeles Sets Cargo Record Amid Tariff Concerns, 60% Freight Rate Drop

The Port of Los Angeles, the largest in the United States, has once again set a new record for cargo throughput. In July, the port handled 1,019,837 twenty-foot equivalent units (TEUs), marking the highest level in its 117-year history. This historic achievement is directly linked to market concerns over tariffs imposed by the Trump administration. To avoid these tariffs, shippers have been loading cargo onto vessels well in advance for several consecutive months.

The port's facilities were filled with vessels laden with goods in July, but the handling of these goods was remarkably efficient. This efficiency is largely attributable to the efforts of dockworkers, terminal operators, rail operators, truck drivers, and supply chain partners. The global president of a logistics company added that this year's peak shipping season began about two to three months earlier than usual. Typically, the peak season starts around now, but this year, the market has been in peak season for at least three to four months.

However, there are warnings that the current surge in cargo volumes may not be sustainable. The high tariff rates expected in the coming months are likely to prevent businesses from importing at their usual levels. Overall, the situation this year is not as robust as in previous years. The tariffs have created an artificial peak season, with the most significant impact felt in the retail sector and low-cost goods. In contrast, higher-value sectors such as technology and healthcare have shown relative resilience.

The primary shipping routes for the Port of Los Angeles are trans-Pacific routes from Asia to the U.S. West Coast, with the busiest routes originating from ports in China. Recently, the Trump administration announced an extension of the tariff suspension on Chinese goods, which is expected to expire in mid-November. This backdrop has led to a decline in shipping volumes, particularly in the retail sector and for low-cost goods. Meanwhile, sectors with higher-value products, such as technology and healthcare, have shown relative stability.

The number of container ships arriving at the Port of Los Angeles has started to decrease, and the number of containers en route is also declining. This trend is expected to continue over the next one to two weeks. As of the week ending August 7, 37 container ships arrived at the port, three fewer than usual. This reduction in the number of vessels is also reflected in freight rates. The average spot freight rate from Shanghai to the U.S. has decreased by nearly 60% from its peak in early June.

Despite efforts by carriers to manage capacity and slow the decline in spot freight rates, the downward trend is expected to continue. September may be the busiest month for the remainder of the year, as holiday season demand increases, potentially driving up spot freight rates. However, the chief executive of a logistics company believes that the current surge in shipping is not a genuine peak season. He emphasized that spot freight rates are influenced by trade volumes, which in turn are affected by consumer behavior and the risk-averse actions of importers. Currently, small and medium-sized importers are being impacted as high tariffs reduce their profit margins.