Lots More on What America's Busiest Port is Seeing from the Trade Tariffs

We're about two months on from Liberation Day, and there's still a lot of confusion about what's going on with global trade. Some countries, like China, have been granted delays from tariffs. But other trade restrictions, like the 50% tariff on foreign steel, have come into effect. So what exactly is going on and what impact is this having on the physical flow of goods into America? In this episode, we catch up with Gene Seroka, executive director of the Port of LA, to get a sense of what he's actually seeing and what it means for US consumers and the prospect of empty store shelves. Read more: Port Leaders Warn Tariffs Bring ‘Radical Uncertainty’ to EconomyEmpty Store Shelves Might Be Coming Sooner Than You ThinkOnly Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox — now delivered every weekday — plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

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• 0:00Speaker 00

  Finance is increasingly being built on digital rails. But as the adoption of virtual assets, tokenization and stable coins grows, can regulation not only keep pace but help accelerate it? Find out more later in the podcast.

• 0:16Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 0:59Speaker 01

  But according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

• 1:41Speaker 01

  Bloomberg Audio Studios, podcasts, radio, news.

• 1:47Tracy Alloway?

  Joe, did you know you can buy a container gantry crane on Alibaba?

• 1:52Joe Weisenthal?

  Oh, I think I saw that. How much is it?

• 1:55Tracy Alloway?

  They have different price points, as you might imagine, but I'm looking at one right now that's thirty seven thousand to twenty eight thousand. Ooh, and it's customizable. You can change the color.

• 2:06Joe Weisenthal?

  Some of those prices for like industrial equipment on Alibaba are so cheap that like I cannot believe they're real. I think they are real, which is sort of the scary part, or at least in terms of from the perspective of an American industrial perspective. I think in many cases they are actually real, but I still can't believe what's theoretically available.

• 2:29Joe Weisenthal?

  I did a deadlift.

• 2:30Tracy Alloway?

  I am both the most popular trader and most successful trader at Citadel.

• 2:34Joe Weisenthal?

  Fed has gone viral.

• 2:35Tracy Alloway?

  Uh, barges.

• 2:36Joe Weisenthal?

  This is an after school special, except.

• 2:38Tracy Alloway?

  I've decided I'm going to base my entire personality going forward on campaigning for a strategic pork reserve in the US.

• 2:44Joe Weisenthal?

  Black gold.

• 2:45Tracy Alloway?

  These are the important questions. Is it robots taking over the world?

• 2:48Joe Weisenthal?

  No, I think that like in a couple of years, the AI will do a really good job of making the Odd Lots podcast. One day that person will have the mandate of heaven.

• 2:58Tracy Alloway?

  How do I get more popular and successful?

• 3:00Joe Weisenthal?

  We do have.

• 3:01Tracy Alloway?

  The perfect guest. You're listening to Lots More, where we catch up with friends about what's going on right now.

• 3:08Joe Weisenthal?

  Because even when Odd Lots is over, there's always lots more.

• 3:12Tracy Alloway?

  And we really do have the perfect guest. I'm very curious, why would you need a gantry crane in a specific color? Like, is branding very important for these things?

• 3:24Joe Weisenthal?

  I don't know. You know who might know?

• 3:26Tracy Alloway?

  Oh, yes. So we have with us Jean Soroka, the executive director of the Port of LA, which is the busiest port in the US. Welcome back to the show, Jean.

• 3:36Speaker 04

  Tracy, Joe, good to be here.

• 3:38Tracy Alloway?

  So one of the reasons we wanted to talk to you is obviously there's a lot of confusion about what's going on with trade policy right now. And, you know, we talked on the show about the potential for empty shelves in America if goods aren't coming in any longer. And so I really wanted to go kind of directly to the source and figure out exactly what is going on in terms of imports right now. So we thought you were the perfect person to catch up with.

• 4:03Speaker 04

  Your timing is impeccable because over the last seven days, here at the largest port in the Western Hemisphere, we've averaged five container ships a day. Normally, at this time of year, it would be about 10 to 12 ships in port every single day.

• 4:20Tracy Alloway?

  All right.

• 4:21Speaker 04

  Subsequently, job openings for our dock workers are down almost 50% over the last several weeks.

• 4:30Tracy Alloway?

  So this is really interesting because, you know, on the one hand, we've had the delay in tariffs, the 90-day delay, and who knows what's going to happen after that. So you expected to see a drop in traffic in April and early May, but on the other hand, you could see some front-loading of traffic going into the port as people try to get ahead of the new deadline. But that's not what you're seeing right now.

• 4:53Speaker 04

  No, not at all. And the thing of this is Tracy, that 30% tariffs is simply an average, and that's still really high. A lot of American importers simply slammed on the brakes when they saw the 145%. And after the Geneva meetings, it was said that they dropped down to 30%? That wasn't met with a lot of enthusiasm in the import community. So you've still got some cargo coming in. Folks went back and scooped up what had been manufactured. Others let orders complete that cycle before shipping out. But what I'm not seeing are a lot of new orders because 90 days is a short period of time in our business. That's traditionally how long it takes for an importer to put that paperwork into a factory in Asia, make

• 5:38Speaker 04

  the product, and simply get it ready to ship to the United States. We're a long way from there.

• 5:44Joe Weisenthal?

  That's really interesting because in a lot of the conversations that we've had, you know, they're long cycle orders, right? So, you know, you talk about retailers and they're thinking about October, or they're thinking about Halloween, or maybe they're thinking about Thanksgiving, or maybe they're thinking, pretty soon they're going to be thinking about Christmas. I guess from that perspective, a 90-day window, for some retailers, it must be a pretty big risk. If you're a big retailer, maybe you can like, take the risk that like, yeah, you know, they'll probably extend it again, etc. But I, my guess, you know, for smaller ones, like, that's probably not enough certainty that they're not going to end up with a bunch of goods that they have to pay a huge bill on at the end.

• 6:22Speaker 04

  That's right, Joe. And the majority of the companies that import through the Port of Los Angeles are small to middle-sized businesses.

• 6:29Joe Weisenthal?

  Why is that? Wait, I didn't know that. Explain that further.

• 6:31Speaker 04

  Yeah, yeah, yeah. We've got 125,000 companies that call LA's port home for all their imports. And we know the big box retailers, the home improvement stores, an equal amount of cargo comes in as parts for American factories. But of those 125,000 importing companies, the great majority are the smaller to mid-size, even family businesses. They didn't have the wherewithal, in some cases, to be able to front-load inventory, push carrying costs out, or get extra warehousing. So they're still having to make the choice right now to buy at these extraordinarily high levels. And I call 30% extraordinarily high. Because if they do bring those products in, they're likely not going to be able to pass on those costs to their customers

• 7:16Speaker 04

  because they become uncompetitive with the big guys.

• 7:19Tracy Alloway?

  This is something that we hear over and over again in the tariff discussions, which is, you know, for the big guys, they have certain levers to pull. As you point out, they can front load some of their orders because they have the capital, the cash to get through that, or they could try to negotiate prices with their suppliers, things like that. But the smaller guys seem to really struggle here.

• 7:40Speaker 04

  That's exactly right. And what we're hearing on the ground, there's a part supplier for the big three automotive companies in Detroit that's right up the freeway from us here at the port. And they're telling me that their effective tariff rate is 57.5% on these auto parts that go to the plants. Now, here's the dilemma. If they slow down too much or stop buying because 57.5% is too much, they run the risk of shutting a factory line down back in Detroit. If that happens, it costs the auto manufacturer between $2 and $4 million an hour in lost sales, wages and cost structure. It's unbelievable.

• 8:34Speaker 00

  What's next for virtual assets? I'm Jacob Rees, host of Economy Scale, a series exploring growth in key global sectors. And in this episode, we're diving into the digital forces shaping finance. Sean McHugh from Dubai-based Virtual Assets Regulatory Authority has this to say.

• 8:50Speaker 05

  We're seeing a lot of insocial players come in, digital asset, dedicated hedge funds, high frequency traders and that sort of thing, and folks who service insocial clients.

• 8:59Speaker 00

  As more capital enters the market, adaptive regulation is likely to become increasingly key. Reese Merrick of Ripple says.

• 9:06Speaker 06

  A lot of regulators globally would like to keep the industry at arm's length. That's the opposite here. I think also what you'll find is that regulation and frameworks can come out, but some of them are maybe a slight iteration on some 80-year-old policy and not actually in line with what the technology can do and offer. And again, that's very different in Dubai.

• 9:26Speaker 00

  Listen to the full episode wherever you get your podcasts. This series is brought to you by Bloomberg Media Studios and the Dubai Department of Economy and Tourism.

• 9:36Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume, so writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 10:18Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 10:59Joe Weisenthal?

  Actually, I'm sort of curious about Port of Los Angeles corporate structure. You mentioned the dock worker job listings are currently down. Like, what is the structure? Who employs them? Who's putting up those listings? If someone is a dock worker, what company are they working for and what companies and what are those companies' relationship to your entity, the Port of Los Angeles?

• 11:19Speaker 04

  Joe, the Dock Workers, the International Longshore and Warehouse Union, 15,000 strong members here at the twin ports of Los Angeles and Long Beach, are hired by the Pacific Maritime Association.

• 11:30Joe Weisenthal?

  Okay.

• 11:31Speaker 04

  That's a representative group covering 75 companies in our industry. Think of the shipping lines, the marine terminal operators, and the maintenance and repair companies. So each one of these terminals, every morning and every evening, wants to bring on the dock workers to work at their facility. Here at the Port of Los Angeles, we're a city entity, the port authority, if you will.

• 11:54Joe Weisenthal?

  Yeah.

• 11:54Speaker 04

  Our job is that of a real estate company to lease out property to these international and national trading interests to promote trade through this gateway.

• 12:04Tracy Alloway?

  So on this note, I mean, one of the things I wanted to ask you about is how you personally at the Port of L.A. are actually dealing with forecasting and coming up with your business plans for the rest of the year because it just seems, I mean, it seems almost impossible at this point. You don't know what's going to happen with the deadline. And then on top of that, you're not really sure what's going to happen with shipping because maybe people front load and traffic goes up, although it doesn't sound like that's happening, or maybe traffic goes down because people are just nervous. It seems really, really difficult to make any sort of plan right now.

• 12:38Speaker 04

  Yeah, to your point, Tracy, traditional forecasting is super difficult right now. But because we have a great information system, deep relationships in Asia and contacts that span nearly four decades in this industry, we're able to predict quite a bit. For example, last month in May, 17 vessels were canceled that eliminated 225,000 container units coming our way. The drop off was so great that the first time in memory, I can remember that the month of May had lower cargo volume than did the month of April, down 16% when we otherwise should be going up toward peak season. The month of June will have an additional 10 vessel sailings canceled. So I can work from that kind of parameter right now. But

• 13:23Speaker 04

  we're in the midst of our budgeting season here in the city of Los Angeles. We're trying to make sure that we have everything lined up from proper staffing and training of the workforce, all the way to how we're going to carry out these infrastructure projects, digitalization, cybersecurity, as well as our investment in the sustainability programs that we have. Fortunately, we've had a very strong financial policy for the last 10 years. So we'll be able to continue our investment through cycle. But the forecasting end of this is really sketchy.

• 13:54Joe Weisenthal?

  So obviously, the first ever time we talked to you was in 2021, I think, you know, during the peak of when everyone was focused on the logjam at the ports. And there was so much stuff coming in, and there was all of this talk about, oh, there's this big traffic jam and backup, et cetera. When the tariffs first got announced, and then there was some talk of rolling back, some people were worried that we'd get A similar sort of phenomenon where maybe because of the pull ahead, et cetera, that we get another pile up. That hasn't happened, but let's just say it did. Let's say something happened and there were a surge of orders tomorrow, et cetera. Based on the experience of 2021 and the stress of the 2021, has anything changed fundamentally at the port such that a sudden spike of imports

• 14:35Joe Weisenthal?

  that were sustained, there are best practices that would be able to be put in place today to avoid that sort of bottleneck the same way? Like, has anything changed or learned that could ameliorate an event like that in the future?

• 14:48Speaker 04

  Absolutely, Joe. And the first thing we did was an inward look. What could we learn, do better, replicate from best practices elsewhere? And what we found was that we all started working closer together. We looked at what the root causes were. And again, it's not this simple.

• 15:04Joe Weisenthal?

  Yeah.

• 15:04Speaker 04

  But it's about the velocity. It's about how fast we can unload a ship and get the cargo on and off the port property quickly. That's what we didn't have in 2021, when those 109 ships were lined up.

• 15:16Joe Weisenthal?

  So what's changed in terms of your potential velocity today? Why should people think that it could be higher?

• 15:21Speaker 04

  Well, it's much better. And I'll give you this example. During 2021, the average container that was to leave the port by truck sat for 11 days. Today, that average container is sitting for three days, and that's been a trend for some time now. And I'm not just talking months. The average box that was going out by rail during that time period was 13 and a half days. Right now, it's just shy of four and a half days. So we made a concerted effort to work with rail and trucking firms, importers and exporters, to show them the value of speed when it comes to containers resting at any one time at our port. And it's been just a piece of work to continue to move forward with,

• 16:05Speaker 04

  meaning that we can work the next ship faster, we can put more cargo through here, hire more dock workers and truckers to handle that volume, and it's grown exponentially. The last point here is that because we started seeing front loading of cargo last summertime, we went 10 consecutive peak season-like months from July through April, and not one ship was backed up. We moved more cargo during that time than we did at the height of 21 or 22.

• 16:33Tracy Alloway?

  How many cranes for containers did you purchase off Alibaba at that time?

• 16:38Speaker 04

  Unfortunately, based on the opening back and forth between you and Joe Tracy, I have never seen a gantry crane in $25,000 to $35,000 sale prices.

• 16:50Tracy Alloway?

  It is a little suspicious, isn't it?

• 16:52Speaker 04

  They do come in different colors because companies have logos, they've got color schemes. Branding is really important in this business, but the average gantry crane on the ground right now, and we have 86 of them, is about 12 million bucks a piece.

• 17:05Tracy Alloway?

  Oh, wow.

• 17:05Joe Weisenthal?

  These must be little toy versions. Boy, why is branding important? I'm looking at every picture I have of the Port of Los Angeles, they all look like this sort of very satisfying aquamarine or like a blue or something like that. Why is branding important in the logistics shipping business?

• 17:18Speaker 04

  Well, just like it would be in clothing or footwear or for your favorite sports team, it really identifies the company. APMT headquartered in The Hague with their parent company, Maersk and Copenhagen, is a light, we would call it a Carolina blue. Phoenix, owned by CMA CGM in Marseille, France, is red, white, and blue, mirroring that French flag. And then we go over to Evergreen, based in Taiwan, and as you could imagine, green gantry cranes, green containers. So that branding across an industry of maybe 10 major players really identifies, as you see a box moving on a train off a ship or the truck through your city, you know who they are.

• 17:59Tracy Alloway?

  Yeah, I have to say, I have a little miniature Evergreen container on my desk. It's actually, it's a Kleenex box, I guess.

• 18:06Joe Weisenthal?

  Oh, the green, yeah.

• 18:07Tracy Alloway?

  Yeah, and it's a very bright green, Evergreen's colors. Okay, so one of the things we've been talking about on the show is this idea that if imports into the US are slowing down, eventually you might see some shortages or at least lack of options at stores, let's put it that way. When would you expect the slowdown in containers shipping to actually hit the shelves and affect the American consumer?

• 18:33Speaker 04

  Later this summer, Tracy, and this is why. We've seen 60 different announcements on trade policy and tariffs since January. Even the most seasoned professional is having a difficult time keeping up with this. But I think one thing is consistent. That with high tariff levels and increasing prices to the buyer, folks just slammed on the brakes, hit the pause button on business and hiring capital investments and said, let's see how this thing shakes out because there could be new information that comes out in two hours, two days, or maybe even two weeks. Not sure how this is all going to end. So I'm going to buy the bare necessities. And we're seeing that now with these

• 19:13Speaker 04

  single digit container ship volumes at the Port of Los Angeles on a daily basis. So likely we'll see fewer selections on store shelves and online buying platforms and higher prices. Fulfillment rates will also look different. If a blue, red, and white shirt option are not moving at high levels, you're not going to see them replenish just to top off inventory, but you likely will see the item that's selling get a backfill. And that just looks different from a supply chain perspective. Right now, the month of May that just closed would normally see a flurry of purchase orders over to Asia factories, getting ready for the year end and Christmas holiday seasons. We're not seeing that at this point.

• 19:58Tracy Alloway?

  All right. Well, Jean, thank you so much for coming back on and giving us an update on what you're seeing. It was really good to get your perspective.

• 20:05Speaker 04

  Tracy, Joe, great being with you again. Thank you.

• 20:08Joe Weisenthal?

  Thanks, Jean.

• 20:08Tracy Alloway?

  Joe, what color should my crane be?

• 20:12Joe Weisenthal?

  Um, I got a nice yellow or something.

• 20:15Tracy Alloway?

  Ah, no, not yellow.

• 20:16Joe Weisenthal?

  Maybe bright red.

• 20:17Tracy Alloway?

  Pink.

• 20:18Joe Weisenthal?

  Pink. I wonder if pink crane, that could, that would be distinctive. You don't see that color in logistics very much. I agree with you.

• 20:28Joe Weisenthal?

  Lots More is produced by Carmen Rodriguez and Dashil Bennett with help from Moses Andam and Kale Brooks.

• 20:34Tracy Alloway?

  Our sound engineer is Blake Maples. Sage Baumann is the head of Bloomberg Podcasts.

• 20:39Joe Weisenthal?

  Please rate, review, and subscribe to Odd Lots and Lots More on your favorite podcast platforms.

• 20:45Tracy Alloway?

  And remember that Bloomberg subscribers can listen to all our podcasts ad free by connecting through Apple Podcasts. Thanks for listening.

• 20:55Tracy Alloway?

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