America First, Southern Ports Last?
WHY YOU SHOULD CARE
Because the health of manufacturing, trade and jobs may hang in the balance.
Horse carriages dawdle through the Charleston City Market near historic cobbled streets and vendors hawking shark teeth and beach prints. Not far from here, sailboats sway in the harbor, and children dart beneath the 15 fountainheads of Waterfront Park, where the breeze is a distinctive mix of brine and swampland. It’s idyllic, and it’s not hard to find the source of these riches: A South Carolina port official strolling by remarks to a client that few people realize the sheer number of exports that leave — and undoubtedly feed — this estuary of new and old wealth.
The value of ports that ship goods overseas is expected only to increase, according to multiple economic forecasts. While the Port of Charleston is slightly import-dominant at the moment, officials predict that exports will grow at a faster rate — perhaps even double, notes Erin Dhand, a spokesperson: Last year, the port exported almost 750,000 containers as part of more than $75 billion worth of handled goods.
We are in the port business, so we are in the free-trade business.
Jim Newsome, CEO, South Carolina Ports Authority
The Port of Savannah, about 100 miles down the coast in Georgia, is also expanding rapidly, exporting a historic $25.8 billions of goods in 2015 — one of 63 metro areas to hit record exports in 2015, according to a U.S. Commerce Department report issued last September. The Southeast’s port trade is booming thanks to growth in population (which spurs imports) and manufacturing, particularly in the plastics and automotive sectors (which drives exports). However, there is an elephant in the room: Will those promising economics be stymied by the policies of the “America First” president? “We are in the port business, so we are in the free-trade business,” says South Carolina Ports Authority CEO Jim Newsome.
That concern is a bit ironic for this red-state region. It overwhelmingly voted for Donald Trump on his platforms of adding jobs and reviving industry, yet it could bear the brunt of the costs if skirmishes over tariffs emerge with China or Mexico. Although Newsome believes Trump is more likely to level the playing fields than eliminate them, “there’s no doubt a trade war would be harmful,” he says. If there is a slowdown in global trade, warns Brett Trusko, president of the International Association of Innovation Professionals, it would “idle our ports and potentially damage them for years.”
Just a few weeks ago, Trump proved his tough talk on trade may not be all bluster: The president threw down tariffs of up to 24 percent on Canadian softwoods. Trump has threatened to raise taxes on goods from Mexico by 20 percent and from China by as much as 45 percent. He also hired China critics Peter Navarro (author of Death by China) and Robert Lighthizer for key trade posts. Trade experts believe retaliation against his policies would cause a net drop in Chinese trade. “Emerging market economies are going to grow faster than developed economies,” Newsome says, with China dwarfing others as the largest of those new markets.
Trump also has promised at times to renegotiate the North American Free Trade Agreement and has already exited the Trans-Pacific Partnership, which would likely have lifted port traffic and opened new markets to port exporters. The ports “are definitely worried,” says Savannah Riverkeeper Tonya Bonitatibus, the head of a nonprofit that’s worked with ports on a handful of laws across the South.
Meanwhile, Charleston and Savannah are in a race to finish federally backed dredging projects that cost hundreds of millions of dollars. South Carolina is promising to invest $225 million in dredging costs; Georgia is ponying up $266 million, and both have added four massive cranes, costing each state tens of millions, to prepare for larger cargo loads. Expected completion dates are toward the beginning of the next decade. Whoever wins will get a head start on receiving the behemoth New Panamax ships that can carry 120,000 tons in goods and reach the East Coast of the U.S. from Asia more quickly, thanks to the expansion of the Panama Canal that was completed last year. “The quandary we’re in is that we are ready to deepen,” Newsome says, ”and we need to deepen — now.”
To be sure, Trumpian philosophy may help U.S. trade if the president’s gambles pay off. His hardball tactics could curb Chinese currency manipulation, particularly if other nations follow his lead and demand a fairer playing field regarding wages, labor laws and copyright infringement. “In principle, that would work,” says RealityChek blog founder Alan Tonelson, a trade policy analyst who advised the Trump administration as recently as January. Theoretically, Trump’s policies would create a healthier balance between exports and imports. While the comparison isn’t perfect, Tonelson admits, “we know from personal experience or common sense that when a household spends more than it takes in, it’s in very serious financial trouble.”
The president’s skeptics fear a repeat of the Smoot-Hawley Tariff Act of 1930, a large tariff hike that experts like Trusko say exacerbated the Great Depression when other nations retaliated. “While the argument from the Trump people is that we will become net exporters, it is more likely that we will hasten robotic manufacturing,” Trusko says. If Chinese workers are no longer readily available while American workers become increasingly more expensive, many companies might get rid of the human equation altogether. “The problem of displaced workers is also hastened,” Trusko adds.
If that scenario comes to fruition, it would be one final paradox: The president who promised to save manufacturing would have delivered the blow that killed it.