Mitch Mac Donald has more than 30 years of experience in both the newspaper and magazine businesses. He has covered the logistics and supply chain fields since 1988. Twice named one of the Top 10 Business Journalists in the U.S., he has served in a multitude of editorial and publishing roles. The leading force behind the launch of Supply Chain Management Review, he was that brand's founding publisher and editorial director from 1997 to 2000. Additionally, he has served as news editor, chief editor, publisher and editorial director of Logistics Management, as well as publisher of Modern Materials Handling. Mitch is also the president and CEO of Agile Business Media, LLC, the parent company of DC VELOCITY and CSCMP's Supply Chain Quarterly.
Any good commercial fisherman will tell you that casting a wide net may land you some prize catches but also some fish that don't belong there. Likewise, in its trade fight with China, which presents as wide a net as there can be, the Trump administration risks ensnaring species that don't belong there.
Take the American Lighting Association (ALA), whose 3,000 members—makers of residential lighting, ceiling fans, and controls—are facing 10- or 25-percent tariffs on what they import from China. Like virtually all U.S. business interests, ALA believes China should be held accountable for bad trade behavior. Yet the group doesn't have any issue with Beijing over intellectual property (IP) theft, which is purportedly the main reason behind the administration's tariff actions. "While the lighting industry takes the issue of IP protection very seriously, we do not have any severe cases of IP theft for which tariff protection is warranted," said Eric Jacobson, the group's president and CEO.
About 97 percent of residential lighting sold in the U.S. is made by U.S. producers, whom ALA said are providing more high-paying jobs than ever before. Large-scale tariffs will eliminate many of these jobs because manufacturers will be forced to cut spending on domestic R&D (research and development), the group said. ALA has asked the U.S. Trade Representative to review the appropriate harmonized tariff codes that would determine which of its products would be subject to the new levy. A ruling had not been made as of Sept. 12, the day this column was written.
ALA's situation underscores the unintended consequences that accompany a trade war on such a massive scale. According to Yu Miaojie, a vice dean at Peking University's National School of Development, about one-third of China's US$2 trillion in annual export value comes from a practice called "processing," where China imports raw materials and components from a dozen or so countries—including the U.S.—and turns them into finished goods for sale to the U.S. and European Union (EU). The imposition of tariffs on $200 billion in Chinese products may cut so deeply into Chinese firms' process profitability that they will be forced to shut down some assembly lines, Miaojie told "NewsChina" magazine in September. This, in turn, will reduce demand for raw materials, parts, and components from supplier nations, he said.
The academician makes one more point that should resonate in an election year: About 260,000 American jobs will be lost should the U.S. accompany the tariffs with restrictions on Chinese foreign investment.
These downside risks might have been mitigated, if not avoided, had Trump not withdrawn the U.S. from the 12-nation Trans-Pacific Partnership (TPP), which excluded China. In so doing, he reduced foreign market access to U.S. producers, ceded trans-Pacific trade leadership to China, engendered ill will from otherwise-staunch allies, and perhaps most importantly, weakened the U.S.'s negotiating posture by not having a coalition to confront China when it behaves badly. The other nations are not standing still, and they will negotiate their own trade pacts with or without America.
The administration has framed the China tussle as a great crusade that requires some degree of sacrifice. As the theory goes, U.S. businesses should accept pain today in the form of closed-off end markets, shrinking supply sources, and higher input costs, in return for greater gains tomorrow. Faced with punishing import levies, a humbled China would be forced to end 17 years of bad trade acting, which would finally create a level playing field for U.S. companies to prosper.
That may indeed come to pass. In the meantime, though, there will be some fish undeservedly caught in a very wide net.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.