Global Supply Network Troubles May Push Up Import Costs

The United Nations has warned worldwide supply network constraints could significantly increase import and consumer costs.

Some of these constraints include cargo vessel maximum load, container shortages, availability of labor, projected on and off COVID-19 constraints across port areas, and overcrowding at ports. This could lead to price increases through 2023.

Summary of the Findings

According to the paper, manufacturers in the United States rely heavily on industrial goods from China and other East Asian nations. Thus, prolonged pricing pressures, disturbances, and disruptions in containerized shipping would impede productivity.

A 10 percent rise in container freight prices, along with supply chain interruptions, is predicted to reduce industrial output by more than 1 percent in the United States and the EU. On the other hand, manufacturing in China is expected to decline by 0.2 percent.

Import expenses may be especially burdensome for underdeveloped economies. Increased freight costs would significantly impact small island developing states (SIDS), where import prices could rise by 24 percent and consumer prices by 7.5 percent.

In the Least Developed Countries (LDCs), consumer prices could rise by 2.2 percent. Higher marine trade expenses will also have an impact on supply chains.

Low-value-added commodities manufactured in smaller economies, in particular, may see their comparative advantages erode significantly.

The following consumer items are expected to see the most drastic price increases: computer, digital, and optical goods (11.4 percent), decor, and other production (10.2 percent).

Other consumer items likewise include fabrics, wearing attire, and leather goods (10.2 percent), rubber, and plastics (9.4 percent), and basic medical drugs and pharmaceuticals (7.5 percent).

Biden’s Proposed Solution

President Biden proposed that Los Angeles and Long Beach ports run “24 hrs a day, seven days a week” to alleviate supply chain constraints.

However, it appears the regulation has failed to reduce congestion since truckers and warehouse businesses are not taking advantage of the difference.

According to the Wall Street Journal, one station at the Port of Long Beach opened its doors around the clock for trucks from Monday through Thursday in mid-September.

Bottlenecks in the supply chain now threaten to reduce the availability of Christmas decorations and other holiday-related merchandise. This is a very serious issue that’s having a series of ripple effects throughout the United States.

National Tree Company CEO Chris Butler told CNBC that demand this year would be quite high and consumers should not wait. Likewise, Dollar Tree just announced they’re raising prices from $1.00 to $1.25. What a coincidence.

Consumers should shop now because there could be a lot of empty shelves by the time we get to Thanksgiving (which is a busy week), let alone by the time when Christmas rolls around.

Compared to the previous year, they already see significant revenue increases, and he believes they’re in for a particularly successful season this year.