The Sunshine Economy: Trading With China

Apr 10, 2018

It seems appropriate that the first item on the list of Chinese goods facing the threat of a U.S. tariff in the gathering storm over trade -- Thorium -- is named for the Norse God of Thunder.

 

The last item on America’s $50 billion, 1,300-item list is parts of seats made of bamboo. The U.S. imported about $1 million worth of it from China last year.

 

Lots of the items on the Trump administration’s list are stuff America doesn’t buy from China -- like grenade launchers, communication satellites and big helicopters -- or stuff America buys very little of from China -- like Epinephrine, vinyl records and nuclear reactors. But there are loads of other goods that find their way through South Florida -- like equipment for air conditioners, aircraft parts and disk drives for computers  -- that are on the list. And later this spring, they could face a 25 percent tax if President Trump follows through with his threat.

The U.S. list of Chinese-made products that face a tariff includes 1,300 items.
Credit Photo Illustration: Leslie Ovalle

The Miami Customs District, which stretches from Key West to Palm Beach, did more than $7 billion worth of business with China last year. China is the second biggest trading partner with South Florida after Brazil. It made up about 7 percent of the global trading business last year in the region.

MIA & China

Arriving on the fifth floor of Terminal E of Miami International Airport you are greeted with a big full-color photo of an airplane. Not a surprise, but it isn’t an American Airlines passenger plane even though American carries more than half of the passengers through MIA. 

 

It is a Cathay Pacific cargo plane. It runs a route from MIA to Hong Kong.

In the administrative offices and above the reception desk is another big color photo. That one also features a cargo plane -- from China Airlines. It flies a route between Miami and Taipei, Taiwan, which China considers part of its territory.

 

These two photos may illustrate just how important the cargo business -- and China specifically -- is to the growth and economic impact of the airport on the entire region.

 

Lester Sola was named CEO of Miami International Airport in February. The airport saw an increase in its cargo business in 2017, while passenger traffic was down slightly.
Credit Tom Hudson

"Cargo is sometimes even more important than passenger traffic," says MIA CEO Lester Sola. In 2017, passenger traffic through the airport fell 1 percent. But cargo tonnage grew by 3 percent. In February, trade with China through MIA jumped 39 percent, according to data from WorldCity.   

China is the biggest trading partner for MIA outside of South America, and that business has been growing. Over the first two months of this year, trade between MIA and China is up 20 percent compared to a year ago, according to trade data firm World City. While the airport still sees about three times as much Chinese imports than American exports, exports headed to China from Miami almost doubled during the first two months of this year compared to the same time period last year.

Just days before the U.S. released its list of 1,300 items made in China items that may face tariffs, the airport announced a sixth airline will be flying trade routes between Miami and Asia. Southern Air is owned by cargo carrier Atlas and will fly weekly to Hong Kong.

 

"It is hard to tell what impact, if any, Miami International Airport will see" from the threat of tariffs, says airport boss Sola. "Some of the airlines that originally were flying only once a week are now having four times daily flights during the week."

 

South Florida Trade

 

Tucked away in the corner of a warehouse in western Miami-Dade County are hundreds of computer disk drives. Not the kind that you use to back-up your family photos. These drives go into computers. They are imported into the U.S., brought to Interport Logistics and loaded with operating systems of different languages before they are exported and installed in computers somewhere else along the global supply chain. 

 

"These products go to Europe. These products go to Asia. These products go all over the place," says Interport's Chief  Strategy Officer Gary Goldfarb. Interport is a freight forwarding and trade logistics company and Goldfarb is a trade industry veteran.

 

He came to South Florida in 1969 after graduating high school in Peru. That's when he says he started shipping American items back to his native country. He remembers packing one of his first shipments in a huge crate that he couldn't get out of the building to send it. "Those early mistakes were great."

 

Interport Logistics Chief Strategy Officer Gary Goldfarb in one of the company's two warehouses in Miami-Dade County. He thinks the area's foreign trade zones may help shelter South Florida's trade industry from some of the trade tensions between U.S. and China.
Credit Tom Hudson

Now he helps run an international company with two warehouses in South Florida with rows and rows of towering metal shelves on which are hundreds of products from all over the world. They sit in one of his warehouses waiting to be repacked and shipped out to customers, mainly in the Caribbean and South America.

"This new regulation will touch the majority of our customers," says Goldfarb.

The Miami Customs District, which stretches from Key West to Palm Beach, did more than $7 billion worth of business with China last year. China is the second biggest trading partner with South Florida after Brazil. It made up about 7 percent of the global trading business last year in the region.

 

One feature that may help shield the South Florida trade industry from a trade slowdown with China is right inside the warehouse just a few dozen feet from Goldfarb’s office at Interport -- a Foreign Trade Zone.

"If you were merchandise," he says as he goes through a door separating Interport's offices from its warehouse, "you would need a passport to get back into my office." 

There are more than 100 sites like this scattered throughout the half-dozen approved Foreign Trade Zones in South Florida. These zones allow goods imported into the U.S. to sit and not pay taxes until it is determined where the stuff is going. If it doesn't stay in America, it may avoid U.S. tariffs.

South Florida Manufacturers

While China President Xi Jinping pledged to "significantly lower" the tariffs his country puts on automobiles, China also filed a complaint with the World Trade Organization over American tariffs on Chinese steel and aluminum. Those taxes went in effect in March after the Trump administration made exemptions for imported steel from Canada, Mexico, the European Union, South Korea and Brazil.

"If our companies cannot do business anymore by buying overseas in China," says South Florida Manufacturers Association President Matthew Rocco, "they have to turn to the U.S. markets. Do the U.S. markets have the capacity to fulfill these orders?"

In February almost 93,000 South Floridians made their living in the manufacturing industry. That’s about one out of every 30 jobs. But in the past year, one out of every seven new jobs created in the region was added at a manufacturer. Miami-Dade is home to the most manufacturing jobs of any county in Florida. Broward and Palm Beach counties are fifth and eighth respectively among Florida counties. They paid their workers more than than $1 billion in combined wages in the third quarter of 2017 -- the latest date for which information is available. That $1 billion is more than 20 percent of all of the industry wages paid by all manufacturers throughout the state.

 

Rocco says some South Florida manufacturers already are experiencing an increase in the cost of their raw materials, especially those that use steel and aluminum. That would include metal roofs and aluminum for hurricane windows.