U.S. Tariffs on Chinese Imports Negatively Affecting the U.S. West Coast Ports

The U.S. West Coast Ports posted strong Q1 2025 container volume results that were partly attributed to the frontloading of shipments by importers to avoid the potential U.S. tariffs. The beginning of Q2 2025 also looked promising as indicated by the Port Optimizer's data on the Port of Los Angeles (POLA). However, the U.S. tariffs on Chinese imports in February and March were starting to be felt more prominently across the U.S. West Coast ports in late April because of the lagging effect of tariffs due to transit time, and the imports from China account for a large portion of the port's businesses.

Key Credit Highlights
-- The POLA's weekly import volume began to plummet in the week starting April 27 by nearly -28% compared with the previous week starting April 20. The decline is projected to continue with another -16% in the week of May 4.
-- The Port of Long Beach (POLB) is also projecting a double-digit decline in weekly import volume in the week of May 4 compared with the previous week. However, the outlook on transpacific sailing in the next two months is staggeringly pessimistic and provides a glimpse into the severe impact of the U.S. tariffs on China.
-- The number of Chinese freight vessels sailing to the POLA and POLB have dropped dramatically since April 2, 2025. If the current tariffs remain in place for an extended period, we believe the downward trend is likely to continue.
-- Between 2018 and 2024, Vietnam increased its container volume to the U.S. by 45% during the same period. Despite the gradual shift in trade flow over the past six years, U.S. import volume from Vietnam remains at approximately a quarter of the import volume as that from China.

According to Valiant Ip, Vice President, Corporate Ratings, Asset Finance, "Presently, we believe the container terminal operators that are undergoing major expansionary capital programs and have increased leverage materially may experience weakening credit metrics and may face challenges in refinancing their debt in a weaker economic growth environment. Moreover, the container terminal operators with significant exposure to Chinese imports are highly vulnerable."