The following is an archived collection of our weekly insights throughout the month of October. Those who had signed up to our Interlog Insights newsletter received each week’s update to their inbox on the original release date. If you like what you see below, please feel free to sign up yourself to get these updates right as they come!
This month's insights
- Ocean Carrier Alliances
- Tariffs
- U.S. Longshore Negotiations
Week 3 - Originally released Oct. 25
Insight: Exploring the Function and Impact of Tariffs
Anxiety over the outcome of the upcoming presidential election has bled into the U.S. trade community. While campaigning for the highest office, former President Donald Trump has proposed higher tariffs on foreign-made goods as an economic policy to offer U.S. industries respite from cheaper overseas markets, namely China.
Trump’s proposal would double down on aggressive tariffs towards China imports he implemented while president, a program still in place by President Joe Biden.
The Republican presidential nominee has touted further hikes to tariffs as a way to draw more revenue from exporting countries paying the would-be higher taxes, while also boosting domestic production. However, opponents of the proposal, which include U.S. importers, argue the former president misunderstands how import taxes work.
“Tariffs are paid by the importer and not the producing country, and that is passed on to the consumer. It’s a tax paid by the consumer,” said Matt Shay, chief executive of the National Retail Federation, the largest U.S. retail trade group.
So, how do tariffs work? Can they be levied at the expense of exporting countries to shore up U.S. production and its economic competitiveness? Or are they unnecessary taxes at the expense of the U.S. importer and, by extension, the consumer?
Well, like most contentious topics during the election cycle, tariffs have a reasonable function that straddles the fence of divisive opinions fanned by heightened political rhetoric.
By definition, tariffs are taxes on foreign-made goods paid by the importing business to the home country’s government. In the case here, it would be U.S. importers who would pay the tax to the U.S. government.
Historically, tariffs have been used to curb foreign markets in favor of supporting domestic industries. These intended effects are what Trump has promoted in his trade policy. However, generally speaking, as countries continue to globalize, the practice is deployed more sparingly in the present day as they can lead to reduced trade, frayed relations, and higher prices for consumers. While tariffs are designed to protect domestic industries, the U.S. is the world’s largest importer which complicates their impacts on American consumers, a point of emphasis retailers have made against Trump’s proposal.
While there are exceptions to how their amount can be calculated, tariffs are typically imposed as a fixed percentage of the value of the imports. Considering the scope of U.S. import activity, tariffs function as a steady source of government revenue.
By and large, most countries impose tariffs to some extent. Higher tariffs are more likely imposed by lower income, less developed, countries, while higher income, more developed, countries maintain lower tariffs in comparison.
These import taxes are not one-size-fits-all charges. The amount, usually imposed by a percentage, is attached to the classification of goods. Certain commodities, or industries as a whole, are susceptible to higher tariffs in the U.S. For example, the automotive and sugar industries have been fortified with tariffs for decades.
However, while the U.S. boasts strong production of cars and manufactured sugar, the country’s supply chains are seldom self-reliant in other areas of industry—most notably, retail—and defer to cheaper means of production overseas.
Most clothing, footwear, electronics, toys, and other retail products available across U.S. stores hail from factories in China, as well as Southeast Asia and India. Given small profit margins, retailers usually adjust to higher tariffs by passing on the bulk of the added cost on to consumers.
This unintended consequence arising from the country’s distinction as a heavy importer challenges the logic of tariffs being implemented in certain industries. Can the price of consumer goods increase as a result and still be interpreted as good for the U.S. economy?
A specific understanding of which industries would be targeted by former President Donald Trump’s proposed tariff increases would be valuable to know. The Trump administration imposed several rounds of tariffs on steel, aluminum, washing machines, solar panels, and goods from China. The Biden administration has since maintained most of these tariffs
Insight: Premier Alliance Enhances Services Ahead of February 2025 Launch
The Premier Alliance is enhancing several of its proposed services just weeks after unveiling its trade network ahead of a February 2025 launch. The group announced updates to two trans-Pacific services and an Asia-Mediterranean service.
Members of the Premier Alliance include: Ocean Network Express (ONE), HMM, and Yang Ming.
As the Premier partnership takes over from THE Alliance following Hapag-Lloyd’s shift to the Gemini Cooperation with Maersk, a key change involves splitting the Pacific North 3 loop, which connects Asia to the Pacific Northwest, into two separate services: PN3 and PN4. This adjustment aims to improve transit times and enhance schedule reliability, with ONE noting in a customer advisory that the number of eastbound port calls will be reduced from six to four for each service.
The new PN3 rotation includes Qingdao, Busan, Vancouver, Tacoma, and back, with a 15-day transit from Qingdao to Vancouver and 11 days from Busan. The PN4 service will rotate through Ningbo, Shanghai, Vancouver, Tacoma, and back, with transit times of 16 days from Ningbo and 12 days from Shanghai, according to the Journal of Commerce.
In a different customer advisory, ONE explained another change the Premier Alliance would be introducing a new Mediterranean 5 (MD5) service on its Asia-Mediterranean route, enhancing direct connectivity between the Mediterranean and Asia with a rotation that includes Barcelona, Singapore, and Shanghai.
Week 2 - Originally released Oct. 11
Insight: U.S. Longshore Strike is Over, But Keep an Eye on January Deadline
Last week, a dockworker strike which stretched across 14 ports along the U.S. East and Gulf coasts ended after three days as ILA union leaders and maritime employers reached a tentative agreement on certain issues and an extension of the current labor contract until mid-January.
In a joint statement Oct. 3, ILA and USMX stated the labor action will be indefinitely suspended as they came to tentative terms on wages and technology. These agreements are not final and will need to be ratified by the democratic consensus of ILA’s some 45,000 rank-and-file members.
The agreement also does not cover all issues of dispute, notably assurances the union has demanded against port automation.
That said, there is still a lot of ground to cover in their negotiations towards a new Master Contract, a final proposal approved by both sides that ILA dockworkers could finally vote their seal of approval of.
Longshore strike ends, threat gone for foreseeable time
The most notable takeaway from last week’s statement was the announcement of a new, apparent deadline—Jan. 15. The date now represents when the current dockworker contract will expire upon the extension included in last week’s agreement.
For the short-term future, specifically between the present and mid-January, an ILA strike is highly unlikely—a major win considering how futile a resolution, even if temporary, seemed when the labor action occurred early last week. International trade can return to East and Gulf ports, presidential candidates no longer have to fret about the strike’s impact on the election, and U.S. consumers can worry less about increased prices and tightened supply leading into the holiday season.
Is this finally a happy ending to the prolonged contract saga between ILA and USMX?
ILA labor uncertainty in 2025?
If the dispute was adapted into a television series, this may be only the end to the season and not the entire show. 2024 is positioned to end the year without any labor uncertainty, but it is too early to make the same prediction about 2025. What happens if a final (tentative) agreement on a new Master Contract fails to materialize by Jan. 15?
While the two sides stated they will resume negotiations towards a new deal, certain issues, like automation, have proven to sully good faith in these talks. Can we expect them to magically turn it around now? Will this four-month extension in negotiations be enough time to come to a final agreement when several months beforehand spelled little progress to begin with?
The main takeaway from last week’s agreement should be that a strike was averted. But another development equally important to note is the fact that major issues of dispute have not been ironed out yet.
When January approaches, and if ILA and USMX remain without a deal, have a contingency plan drafted in case the threat of labor action reemerges. ILA has already proved its willing to strike if it deems it necessary.
Insight: Gemini Cooperation Update: Why Maersk and Hapag-Lloyd Chose the Cape Network
Maersk and Hapag-Lloyd have announced their decision regarding the use of the Suez Canal within their Gemini Cooperation, opting for the Cape Network as their current route. The two ocean carriers will continue to use the Cape Network until the ongoing conflict in the Red Sea subsides and is deemed safe to tread those waters again.
As the name suggests, the program avoids the Red Sea/Suez Canal by routing around southern Africa’s Cape of Good Hope.
While the Cape network offers a longer transit time, it provides customers with greater clarity and certainty regarding the safety of their shipments. The Cooperation emphasized that both networks will deliver “broad port coverage with an efficient mainliner network, dedicated shuttle services and complementing feeders services,” as described on their website.
The Cape Network features 29 mainline and 30 shuttle services, utilizing 341 ships and handling 3.7 million TEUs, across various trade routes. Depending on the selected route, users can access between 57-59 services supported by a fleet of over 300 vessels.
Maersk’s and Hapag-Lloyd’s Gemini Cooperation shipping alliance will begin February.
Dig deeper on the topic of the Gemini Cooperation and other global shipping alliances:
FMC Greenlights Gemini Cooperation Alliance, Vows They Will Monitor Impact on U.S. Shippers
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Week 1 - Originally released Oct. 4
Insight: U.S. Longshore Strike Ends as Tentative Agreement on Wages, Contract Extension Reached
The U.S. longshore strike that shut down East and Gulf coast ports ended late Thursday when union leaders and maritime employers came to a tentative agreement on wages, while agreeing to an extension of the master contract until Mid-January. The labor action lasted three days.
Upon releasing the news to the public, the International Longshoremen’s Association (ILA) immediately recalled some 45,000 unionized dockworkers from the picket lines. ILA-affiliated dockworkers are now back to work covered by the previous master contract which formerly expired Sep. 30.
In a joint statement on the union’s website, ILA and the United States Maritime Alliance (USMX), the group representing maritime employers, have stated that the two sides will return to the bargaining table to negotiate all other outstanding issues. While not referred to directly in the brief statement, automation has proven to be the most contentious of items to address. The union has appeared uncompromising in its demands of assurances against port automation.
The extension of the previous master contract will expire Jan. 15. That said, this new window to reach a deal likely spans from the present to mid-January.
The tentative agreement on wages is reportedly a pay raise of 61 percent ($4 per hour over each of the six years of the pact). A final agreement, once which encapsulates other remaining issues as well, would have to be ratified (approved) by ILA members.
Post-strike congestion, delays must clear up
Off the shores of East and Gulf coast ports are ship backlogs formed by the short-lived shutdown. In the coming weeks, delays in cargo handling can be expected as transportation networks, including inland rail ramps, work through moderate congestion. In the meantime, ocean carriers are still subject to revising schedules and routings as it relates to residual congestion.
However, the immediate threat for a supply chain crisis to hit the U.S. economy right before the holidays and an election cycle is averted.
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Insight: What if the U.S. Longshore Strike Lasted Longer than a Week?
The U.S. longshoreman strike has ended after the ILA and USMX received a tentative agreement on wages. In a joint statement, both parties agreed to extend the master contract negotiations until January 15th to come to agreements on all other outstanding issues (most notably, automation).
Now, we don’t want to live in the past, but what would have happened if the strike lasted more than a week? According to Sea-Intelligence, they had forecasted that if the strike lasted at least a week, there would be around 60 ships waiting off the East and Gulf Coast, carrying approximately 775,000 twenty-foot containers (TEUs). They also predicted that if a strike continued into October, this loss of capacity would persist, albeit at a slower pace, with more expected losses of TEUs in the upcoming weeks.
In other news, on Thursday afternoon, before it was announced that the strike would be ending, Florida Governor DeSantis stated that he had ordered the Florida National Guard and State Guard to ports affected by the strike (Tampa Bay, Miami, Everglades, and JAXPORT). His post on Twitter/X indicated that the Guards would help maintain order and attempt to restore operations at ports that were closed due to the strike. It was not certain what this plan entailed. He also mentioned that the Florida Highway Patrol would assist in managing traffic from seaports to improve efficiency and escort commercial vehicles if necessary.