LOS ANGELES — The head of America’s largest port is trying to navigate through the Trump administration’s trade war.
Gene Seroka is executive director of the Port of Los Angeles, which — combined with the Port of Long Beach next door — handles roughly a third of the United States’ overseas imports and exports. That means Southern California is uniquely positioned for economic pain after Trump imposed 10 percent tariffs on all imported goods Wednesday, and even higher rates on trading partners like China, Japan and the European Union.
Seroka is now tasked with managing a complex network of international companies, mom-and-pop businesses and thousands of workers, all while he says there’s a complete information vacuum from the administration about its plan.
“You’ll see folks that have to scramble pretty quickly to keep their jobs and keep food on the table,” he said. “It’s going to be disruptive.”
Seroka spoke with POLITICO about how soon tariffs could disrupt the American economy, the potential impact on jobs in California and the information vacuum the trade world is operating in.
This interview has been edited for length and clarity.
Assuming these tariffs stay in place, what immediate impact on imports can we expect?
The main topic of discussion around this whole notion and concept has been uncertainty, not sure when, how long, what the bigger picture is, what the small picture is. This discussion really started back during campaign season last summer, when on the trail the president had said he wanted 10 percent tariffs across all $3 trillion worth of U.S. imports, and there may be specific targets like China, Mexico and Canada. Now, we’re slowly starting to see some of this play out.
So over the past eight or nine months, we’ve seen large companies and those that had the capability advance inventory or bring product into the U.S. earlier than they normally would, because they were not going to be dismissive of any of this talk on the campaign trail, and as we’ve seen today, they were right. But while the larger companies and those that had relatively extensive supply chains could maybe advance inventory, small to middle-size organizations probably could not during this time period, so they are stuck with market prices and market situations like we find today.
You’ll see folks start to negotiate with their manufacturers and their sourcing agents overseas to see if there’s a way that they can mitigate these additional tariffs and charges. Second, companies might try to look at absorbing some of these costs, but that’s going to hit their bottom line. It’s going to hit their margin, which is going to make them think twice about capital investment and investment human capital, right? Hiring as an example, staffing levels. And then, thirdly, and more likely than the first two, they’re simply going to pass on those costs in the supply chain for finished goods that come in for retailers. That means you and me, the consumer, are going to get hit.
So the forward look at this is really discouraging. Consumer confidence has plummeted. What does it mean for jobs? The expectations on investment, the expectations on corporate performance all seem to be hanging in the balance right now too.
When should we expect to see a decline in cargo volumes?
It’s my view that the second half of this year, beginning July 1 through the end of the year, we’re going to start to see a drop in cargo. The drop, I think, is going to be at least 10 percent at the nation’s largest port here in Los Angeles for two specific reasons. One is that a lot of folks have brought in so much cargo, it’s already here, and they don’t need to keep buying at that pace. And I’m talking about furniture, appliances, electronics, TVs, couches, dining room tables, products that are staples and are large that take up a lot of containers. The second reason is because these prices are now so high, folks are going to start looking at sourcing in a different way. They’re going to try to see where they can get better deals. And if China is a hot spot right now from a policy perspective, even with tariffs in Vietnam, Indonesia and Malaysia, maybe there’s deal-making capabilities there.
Now, as we work our way through the traditional slack season after Lunar New Year in Asia, you start getting into specialty goods, spring fashion, summer fashion and back to school are all in the mind of American retailers. And then you start looking at the new model year of cars, of televisions and of other electronic goods as you lead into the back half of the year. So it’s going to be a little bit of a mixture. We’re not going to fall off a complete cliff, but there’s going to be a recapitulation of, “Hey, this product is too expensive, the table, the chair, the air conditioning unit. I’ve got to focus my energy on the seasonal products and how I’m getting geared up for the next model year, whether I’m in the electronics appliances or the automotive markets.”
What impact does a port slowdown have on the jobs that support the supply chain here in Southern California?
The impact is wide-reaching. One in nine jobs in Southern California, about a million people go to work every day with the efforts that emanate from this port. And it’s stock workers, truck drivers, warehouse workers, manufacturers, agriculture folks, freight forwarders, intermediaries, the folks that do the coding on the tech side that move all the product through, and then you get all those government jobs like Customs and Border Protection, etc. So, every four containers we move create a job, on average. You start looking at a dissipation of about 10 percent of the cargo, you start chipping away at those jobs.
Some of the guys have to be at work every day. Think of the longshore mechanics who maintain and repair equipment. They’re going to be there. So you’re not just going to see lopping off 10 percent of the jobs at one fell swoop. But the truck drivers as an example, instead of moving international containers, they may slide over and try to move domestic product. They may move U.S. mail, FedEx, UPS product. So you’ll see folks that have to scramble pretty quickly to keep their jobs and keep food on the table. It’s going to be disruptive.
The other areas are those that generate the tax dollars. At the Port of Los Angeles, we lease out land to international companies that are involved in trade. If they’re moving less cargo, less folks come to work every day. There’s less draw on electricity and water. Those utility possessory use taxes go down because that land is not being used to its fullest extent. So whether it’s a municipality, county, state taxes, you start to see those go down as well. This is a ripple effect.
So it’s going to be a ding to the economy. There’s going to be an uptick in the prices that we pay at the store, and a lot less productivity happening on the ground through the supply chain. That simply means lower efficiency, and higher prices yield a slowing of the economy.
What have you heard from the Trump administration about its strategy?
We have heard very little, and I’m extremely hungry for information so I know how to run my business.
I’ve spent the past weeks and months, a lot of my time has been spent with importers and exporters, very large companies to those family-owned businesses here locally in the state, in the Los Angeles area. And what I hear consistently from these companies is they are spending an inordinate amount of time on simulation of what-if scenarios given policy changes, tariffs, when, how, how long, as opposed to doing the day-to-day job of moving their company’s business forward. That’s been a drag on people’s productivity as well. So I think that kind of underscores my statement that folks are really, really looking for what is the plan here? What is the outcome, and how do I prepare my business and my staffing to coincide with what this plan is going to be, if it truly exists?
Do you have any expectations about this set of tariffs, if they’ll still be here a week from now?
We just don’t know. But I will say this: The Port of Los Angeles and I believe in rules-based trade that protects American jobs and American companies’ interests. Ninety percent of world trade moves on water, and that’s why we have such an integral role in the country and world supply chain. We’ve heard directly through various media and spokespeople that this administration is looking at the art of the deal. They’re looking at negotiations. Yet, we don’t have a clear view of what that may mean. And thus far, early days in the administration, we’ve seen posturing and positioning change every day, maybe a couple times a day. I’m hopeful that with key trading partners and the administration at the grindstone, that folks will sit down and negotiate what’s needed so we can continue to push trade in the American economy.
I don’t know how long this could last, but what I do know so far is that things can change quickly, and I’m hopeful they change quickly for the better.
