Overall, freight shipped from Asia to the US fell 9% year-on-year in October, following a 3% decline in September, according to the Tokyo-based researcher Japan Maritime Center. Demand in the US ahead of the holiday shopping season is softer than usual this year as retail stores stockpiled inventories during the pandemic-driven supply chain crunch.
Freight on US-bound ships from China, including Hong Kong, totalled 876,786 twenty-foot equivalent units (TEU) in October, tumbling 21% on the year and the lowest since May 2020. The decline followed a 13% decrease in September when TEU fell below the 1 million mark for the first time in 13 months to 932,973.
In contrast, shipments from members of the Association of Southeast Asian Nations are growing, jumping 22% to 415,251 TEU in October after rising 23.1% to 402,882 the previous month. The growth owes, in part, to a rebound from weak exports due to pandemic-related production suspensions.
The latest figures mean Asean accounted for 26% of all US-bound freight from Asia in October, the highest since March 2020, while China’s share shrank to 54% as that country grappled with the first surge of coronavirus infections.
Some consumer goods for the US market that had been traditionally made in China – such as furniture, bedding and apparel – are now shifting to Vietnam and other Asean members.
One factor for the change is the spike in demand for home goods during Covid-19 lockdowns in the US is tapering off. People stuck at home at the beginning of the pandemic flocked to buy new furniture and electronics. While demand for exports soared, a drop in dock workers at US ports resulted in a long queue of vessels waiting to be unloaded, causing a global supply chain bottleneck.
China’s share of rubber products and machinery imported to the US increased in the 2020-2021 period compared with the 2018-2019 period, said Kaori Yamato, chief economist at Sumitomo Mitsui Trust Bank. The growth was driven by such items as latex gloves and computers, which became a must-have for working from home.
“Computers were subject to high tariffs, but thanks to exemptions and tariff rate cuts, imports grew amid surging demand,” Yamato said. With the pandemic winding down this year, such lockdown-spurred demand is petering out, and supply chain bottlenecks are easing.
Freight movement is also being impacted by inflation stemming from the Ukraine war and depressed consumer appetite caused by a series of interest rate hikes.
“Inflation is making life difficult for US households, particularly low-income earners,” said Yamato. “Among clothing, demand may be shifting from China, which exports many high-quality brands, to more affordable products from Vietnam and Cambodia.”
Asean-made goods are cheaper than those made in China due to such factors as labour costs, leading to the growing shift to Asean, said Takeomi Yoshioka at the Institute for International Trade and Investment.
Another factor is rising US-China tensions. In October, the US introduced sweeping controls on chip exports to China, aiming to prevent the world’s second-largest economy from obtaining cutting-edge technology and using it for military purposes. Hostility over the economy and security could escalate between the two countries.
“The US avoidance of imports from China is growing prominent once again,” said Hiromasa Goto, a researcher at Japan Maritime Center. Risk-averse companies may be seeking to reduce reliance on Chinese goods.
“We don’t feel any impact of a US-China conflict yet, but customers are inquiring about how a Chinese attack on Taiwan would influence logistics,” said an official at a major container vessel operator. This company is proactively investing in strengthening routes from Vietnam, Thailand and other parts of Southeast Asia.
Asean members are increasing exports to Russia after other countries have cut off trade with Moscow, said Yoshioka. Given its neutral stance on the US-China tensions and as well as the rift between Russia and the West, Asean’s presence will grow further in trade, he said.