U.S. seaborne imports surged 13.0% higher vs. a year earlier in February, Panjiva data shows, making for the fastest rate of expansion since February 2016. That’s partly explained by the later-than-usual timing of the lunar new year, and is likely to result in a correction in March.

The optics of surging imports make a difference nonetheless, particularly with the Trump administration considering a broad range of tariffs on Chinese imports as part of the section 301 review of its IP policies, outlined in Panjiva research of March 8.

Chart shows U.S. seaborne imports of all products to all ports. Source: Panjiva

That timing effect partly led to a 23.7% surge in imports from China, including Hong Kong, putting it well ahead of other markets except Vietnam (30.1%). Notably Taiwan saw a – possibly temporary – recovery back to growth with a 1.9% increase in shipments after nine straight months of decline. The only major country tracked by Panjiva that saw a decline was Singapore, which fell 12.7%.

Chart segments U.S. seaborne imports by country of origin. Source: Panjiva

Products that have a high proportion of production in China also saw a more rapid growth including furnishings (24.7%) and toys (27.6%) as a potential pre-emption of tariffs. There is also likely a similar effect seen in imports of iron and steel which increased 19.0% (the fastest expansion since March 2015) and of the launch of section 232 tariffs. Even perennial underperformer apparel rose 12.3%. All the major product groups tracked by Panjiva experienced an increase, with the slowest being energy (including coal, oil and gas) which rose by a more modest 4.2%.

Chart segments U.S. seaborne imports by product category (HS-2). Source: Panjiva

The acceleration in imports on a quarterly trailing basis, at 8.1%, was the fastest rate since February 2013. That’s been supported by a mixture of robust consumer confidence (at its highest since November 2000 S&P Global Capital IQ data shows), business confidence (at an 11 year high according to the ISM survey), as well as potential attempts to “beat the tariff”. The latter may continue in March even as tariffs in metals begin assuming no short-term announcement of section 301 tariffs (or concerns about backdating).

Chart compares growth in U.S. seaborne imports on a quarter (bar) and monthly (dot) basis. Source: Panjiva

U.S. imports opened 2018 with a bang, Panjiva data shows, with seaborne shipments in January having risen 7.7% on a year earlier. That was the fastest rate of growth since April, and well ahead of the 4.1% recorded for 2017 as a whole. It also comes after a record year for U.S. imports in aggregate, as outlined in Panjiva research of February 26, which in turn led to a record trade deficit.

Chart shows U.S. seaborne imports. Lower panel indicates year-over-year change. Source: Panjiva

Among the main supplier economies a 10.3% jump in shipment from China was the main driver, and continues a run of growth going back to February. That growth may continue in the coming month as the lunar new year holiday is later this year, and so will only cut shipments leaving from mid February rather than late January.

Exports from developing economies with expanding manufacturing sectors continued, with shipments from India having increased by 15.2% while those from Vietnam improved by 13.3%. The more mature markets of Taiwan (down 1.2%) and Japan (off by 0.2%) lost out, though the European Union continued to grow its shipments to the U.S. with a 4.9% improvement.

Chart segments U.S. seaborne import growth by country of origin. Source: Panjiva

All the major product groups tracked by Panjiva saw growth for the first time since February 2016. Autos were the slowest at 2.7% while toys (13.0% higher, beating the seasonal lull) and machinery / electronics (up 12.2%) being the fastest. That likely reflects three major factors which may remain supportive for imports for the next couple of months at least.

American business confidence remains high after the tax reform, leading suppliers to expect an increase in investment. Consumer confidence has begun to slip from 10 year highs according to Bloomberg, though spending growth has continued.

Third, while the Trump administration has begun to implement tariffs on imports these have yet to be widespread, with only washing machines and solar panels seeing significant moves so far beyond normal anti-dumping cases.

Chart segments U.S. seaborne import growth by product category (HS-4). Source: Panjiva

#1 Trump’s GSP renewal could leave India out (Jan 4) The Generalized System of Preferences allows duty free imports of 5,000 products to the U.S., with India the largest beneficiary. It has now lapsed, and while the Trump administration is expected to renew it, there may be adjustments. India has  $23 billion trade surplus with the U.S., though only 14% points of the top 65% of its exports are eligible. One alternative is to target specific products for exclusion including auto-parts or aluminum.

Chart segments Indian exports to the U.S. by product (HS-4 for top 200 lines) for the past 12 months. Orange labelled dots are examples of GSP-eligible products. Source: Panjiva

#2 K+N looks east for deals, but has competition (Jan 8) K+N’s Chairman, Joerg Wolle, has indicated the company is looking for bolt-on deals in Asia. That would put it in competition for assets with Panalpina and DSV, though a wide range of consolidation in the fragmented forwarding industry is needed. Potential targets on Asia-U.S. routes would include Kerry Logistics, Orient Express or Honour Lane among larger firms, while mid-sized operators include Hecny or De Well.

Chart segments U.S. inbound seaborne shipping from Asia by port of lading and NVOCC SCAC. Data shown in TEUs for last 12 months. Source: Panjiva

#3 Action on metals possible after Trump-Xi call (Jan 17) A phone call between President Xi and President Trump included a discussion of how to address the trade imbalance between the two countries. Xi called for a continued economic dialogue, while Trump referred to the deficit as being “not sustainable”. That heightens the likelihood of increased U.S. tariffs in the context of the section 301 review of Chinese IP practices. Should the President wish to avoid hitting consumer goods, the largest Chinese export lines to the U.S. where tariffs could be applied include base metals ($12 billion) and plastics ($13 billion).

Chart segments top 200 Chinese exports to the U.S. by product category (HS-4).   Source: Panjiva

#4 201 down, 6 to go (Jan 22) President Trump’s willingness to take action on consumer goods was proven a few days later when he applied tariffs of up to 50% on washing machine imports and 30% on solar panels under the section 201 “safeguarding reviews” of each product. Manufacturers of both had raced to build inventories, with washing machine imports in the fourth quarter being 194% higher than in the first, and solar power equipment 199% higher.

Chart shows U.S. seaborne imports of washing machines (8450.20) and solar cells/modules (8541.40). Source: Panjiva

#5 26 actions taken, deficit still rising (Jan 18) One year on from the inauguration we identified 26 specific actions on trade policy taken by the Trump administration ranging from renegotiations of trade deals, new trade cases of varying stripes (see above) as well as several items left on the to-do list. Yet, while the President has kept his promise to act, the trade deficit has continued to grow and breached $50 billion for the first time in November since January 2012.

Chart compares the U.S. goods deficit (exports less imports) to the total trade deficit including services. Calculations include U.S. Census Bureau data. Source: Panjiva

#6 Black swan risks for 2018 (Jan 5) Out of the eight reports we published in our 2018 Outlook series it was the attempt to spot low-probability / high-materiality risks for global supply chains that got the most attention. Conflicts in the South China Sea or Middle East worry us most, while a simultaneous NAFTA failure / border wall combination could have more mundane but still expensive consequences. Port labor disputes in response to automation plans could strike later in the year, while mega-mergers in the container-line space are still a possibility if profits don’t recover.

Chart segments Chinese exports to countries that require shipping access via the South China Sea by product (HS-4) for the past 12 months. Source: Panjiva

#7 CH Robinson bests Nippon Express (Jan 31) The freight forwarders’ 4Q earnings may be better than anticipated, with both CH Robinson and Nippon Express reporting higher revenues than expected (CH Robinson did slightly better) and profit margins inline with analysts’ forecasts. Yet, both are below the industry average 11% EBITDA margin. The main risk remains a price war that could be triggered by the U.S. tax reform’s impact on corporate tax rates.

Chart compares EBITDA margin (earnings before interest, tax, depreciation and amortization) for freight forwarders. Total includes companies shown plus CH Robinson, K+N, Panalpina, Fedex, Deutsche Post, JB Hunt and XPO Logistics. Calculations based on company financial statements and average analysts’ forecasts gathered from Bloomberg on Jan 3 2018. Source: Panjiva

#8 Record 2017 volumes for forwarders (Jan 11) Freight forwarders had a record 2017 in terms of U.S.-inbound seaborne freight with a 4% rise in December. Orient Express was the most aggressive in expanding in December (16% higher) while Expeditors took a step back (down 1%). That took Orient Express up three places to third in the volume rankings. Our full year trade-lane analysis showed only Expeditors and K+N have more than a handful of top three ranks, indicating the degree of fragmentation and need for consolidation in the industry.

Chart shows ranking of NVOCCs by U.S.-inbound trade lane. Source: Panjiva

#9 Make-in-India comes to the fore (Jan 25) The Indian government announced, or was reported to be ready to implement, several protectionist measures to support the “Make in India” strategy in January. We covered the phenomenon in a series of reports, including an analysis of how it could spoil an attempt to build relations in the ASEAN region. At particular risk are relations with Singapore, Thailand and Vietnam on the basis of their consumer electronics exports to India.

Chart segments Indian imports by country of origin and product (HS-4). Source: Panjiva

#10 NAFTA to die another day (Jan 30) The sixth round of NAFTA talks was to have proven pivotal, and needed an agreement on automotive rules-of-origin to avoid a U.S. withdrawal. Yet, the three parties appeared to consider negotiations beyond the previous March deadline, leaving the process free to continue for now. The U.S. rejected Canada’s suggestions on altering the weightings used in ROO calculations, casting doubt over the supply chains of General Motors and Fiat-Chrysler in particular.

Chart segments Mexican imports of automotive parts by consignee and shipment origin. Source: Panjiva

U.S. imports ended the year on a high note with a 3.8% increase in seaborne shipments in December, Panjiva data shows. That was the 17th increase in the past 18 months, and brought the total for 2017 to a 4.1% rise to reach 11.6 million shipments.

Chart shows U.S. seaborne imports by number of records. Lower panel shows change vs. a year earlier. Source: Panjiva

The performance of trade during the latter part of the year shows some evidence for the “ship later” strategies being followed by retailers and other importers as they seek to optimize inventories. In 2017 16.8% of full year shipments arrived in November and December, compared to 16.7% in 2016 and 16.3% in the prior five years. For early 2018 it is worth noting that lunar new year starts 19 days later than in 2017, potentially flattering January and February figures.

Chart segments U.S. seaborne imports by month as a proportion of that calendar year’s total. Min/Max range covers 2010-2017. Source: Panjiva

As has been the case for most of 2017 the fastest growing major exporter to the U.S. has been Vietnam, with a 17.3% increase in December and 12.6% for the year as a whole. That’s been driven by a relocation of manufacturing capacity from mature Asian markets including Japan (down 3.2% for the year) and Taiwan (6.8% lower). Vietnam has now consistently outpaced Japan as an exporter to the U.S. since April 2017.

Yet, China remains the dominant reason for U.S. import growth though with a 7.1% rise for the year. That may soon come to a halt though, as outlined in Panjiva research of January 8, if the Trump administration makes good on its threat to apply broad-based tariffs in retaliation for intellectual property rights rules violations.

Chart segments U.S. seaborne imports by shipment origin. Source: Panjiva

At the product level the strength in consumer and business sentiment in the U.S. continued to make itself felt. Among consumer durables imports of furniture climbed 7.4% in December to end the year 8.7% higher. With 51.9% of imports of furniture having come from China in 2017 that may be an area for tariffs to be applied if the Trump administration are willing to make consumers bear the price of not buying American.

Chart segments U.S. seaborne imports of furniture in 2017 by country of origin and product type (HS-6). Source: Panjiva

The worst performing major sector for the year autos which saw a 2.3% decline in shipments for the year overall as light vehicle sales dropped. Second worst was apparel with a 0.7% decline for 2017, though a 4.1% growth in December suggests a turnaround may be underway. At the business level imports of machinery and electronics climbed 7.5% to end the year 6.8% higher. With business sentiment regarding trade in the U.S. at the highest since 2014, and at multi-year highs globally, it would be a surprise to see an end to import growth in the near term without significant protectionist policy intervention from the government.

Chart segments U.S. seaborne imports by selected product category for autos/parts, furnishings, apparel, toys, energy and machinery/electronics. Source: Panjiva

The growth in U.S. imports seen throughout 2017, with the exception of February, accelerated in November. Seaborne shipments climbed 5.6% on a year earlier, Panjiva data shows, reaching 10.625 million for the month.

Chart shows total U.S. seaborne shipments. Note data is provisional due to late reporting shippers. Source: Panjiva

The longer term trend of a rotation of manufacturing capacity, and related exports to the U.S., from the more-developed to less-developed Asian economies. Shipments from Vietnam soared 18.7% higher and those from Thailand climbed by 15.0% while those from Taiwan fell by 8.8% (the seventh straight drop) and from South Korea there was a 1.1% decline.

China remained the number one supplier after an 8.3% rise – it’s 2.6x the imports from the EU – and number one generator of the expanding U.S. trade deficit, as outlined in Panjiva research of December 5.

Chart segments U.S. imports by sea by country of origin. Bubble size indicates total shipments. Source: Panjiva

At the product level the most marked turnaround was the apparel sector. Imports expanded by 6.9%, the fastest rate of expansion since February 2016. That may indicate that the steady process of moving to leaner inventories may have reached a conclusion.

By contrast shipments of toys fell by 0.4% vs. the prior year after three months of growth, potentially as a result of the bankruptcy filing by Toys’R’Us as well as a rotation to electronics as gifts. Automotive imports also did poorly, with a 3.2% reduction tracking the downturn in sales of imported vehicles.

Among industrial products imports of iron and steel surged 7.7% after a small reduction the prior month. Continued delays in implementing the section 232 reviews of the industry by the Commerce Department have left the window open for suppliers to continue building inventory. Continued business confidence – and consumers’ appetite for electronics and appliances – drove the imports of electrical and electronics equipment 8.5% higher. That was the 18th increase in the past 19 months for the sector.

Data for shipments segmented by HS code for furnishings (HS 9401/3), autos and parts (8703/8), apparel (61-64), toys (9504), steel (72,73), energy (27) and electronics / electricals (HS 84/85). Note data is provisional due to late reporting shippers. Source: Panjiva

Going into the last month of the year the conditions for growth look robust. Business surveys remain firmly in positive territory globally, albeit with a modest reduction in optimism in the U.S. more recently. Consumer confidence meanwhile has continued to rise, and reached its highest since November 2000, Bloomberg data shows.

Finally, it looks unlikely that the administration of President Donald Trump will enact broad-based protectionist measures before year end, and even if it does (for example the section 301 review of China) the impact won’t be felt until 2018. As a consequence, and on the basis of prior year’s patterns, U.S. import growth in 2017 overall could reach 3.8% (upgrade from 3.4% last month) or 11.56 million shipments.

U.S. seaborne shipment data segmented by month Source: Panjiva