Multiperspective Analysis of Pandemic Impacts on U.S. Import Trade: What Happened, and Why?

Abstract

U.S. container ports have experienced unpresented congestion since mid-2020. The congestion is generally attributed to import surges triggered by heavy spending on consumer goods during the COVID-19 pandemic. Port congestion has been compounded by the inability of importers to retrieve, receive, and process all the inbound goods they have ordered, resulting in supply chain shortfalls and economic disruption. How can the shipping industry and government organizations predict the end of the current surge and anticipate future surges? Expected seasonal variations in import volume are associated with peak holiday shopping periods; nonseasonal import surges are signaled by other factors. The research goes beyond transportation data sources to examine broader connections between import volume and indicators of economic and retail industry conditions. The strongest and most useful relationship appears to be between retail inventory indicators and containerized import growth. From January 2018 through July 2021, there was a relatively strong negative correlation between retail inventory- and import TEU indices with a 4-month lag (corresponding roughly to the time between import orders and -arrival). In the 2020 to 2021 pandemic period the negative correlation was stronger, again with a 4-month lag. These findings suggest that observers might anticipate import surges after marked, nonseasonal drops in retail inventories, and that import surges are likely to last until target inventory levels are restored. In a broader sense, an awareness of the linkages between consumer demand, retail chain responses, and containerized import volumes could better inform port, freight transportation, and government planning and policy choices.

U.S. container ports experienced an unprecedented surge of imports starting in summer of 2020 and continuing through 2021. Shipping lines and terminal operators expected the surge to last at least into early 2022 ( 1 ). The surge has exceeded the capacity of U.S. import supply chains, resulting in overflowing warehouses, widespread container port congestion, increased shipping costs, and pervasive delays (2–4).

Import flows and supply chain functions are based on anticipated, and hopefully predictable, patterns of consumer demand and shipping conditions. The ideal supply chain is a steady and predictable flow—a “pipeline” from production through shipping, inventory, distribution, and delivery.

The import surge is widely attributed to the COVID-19 pandemic, and there are suggestions that the pandemic has “broken” supply chains ( 5 ). Whether supply chains are broken or merely disrupted, there is a need to understand the mechanisms by which the pandemic has overburdened that ideal pipeline. To gain that understanding, the authors have looked outside the realm of transportation data to locate economic drivers of the import surge.

Background: Import Cargo Surge

The import cargo surge would presumably be large, sustained, and unexpected to have had such a dramatic impact. As Figure 1 indicates, actual monthly import TEU (20-ft equivalent unit) volumes at major U.S. ports vary substantially. For comparison, Figure 1 shows expected TEU volumes based on a steady 3.65% compound annual growth rate (the actual 2005 to 2021 average) and typical 2005 to 2019 average monthly variations. Besides the apparent seasonal patterns, Figure 1 shows rapid growth leading to concerns over port congestion in 2005 to 2007 ( 6 ); recession and recovery in 2008 to 2014; 2018 to 2019 peaks attributable to “frontloading” in anticipation of U.S. import tariffs; and the 2020 to 2021 pandemic-induced surge.

Figure 1.

2005 to 2021 monthly actual versus expected import TEU at major U.S. ports.

Source: Global Port Tracker.

The magnitude of the 2020 to 2021 surge is displayed in Figure 2, as well as the variability in previous years. The peak surge of May 2021 was notable in multiple ways. First, it was 471,345 TEU (about 238,000 40-ft containers) above what might have been expected based on long-term patterns. Second, it followed eight prior surge months that had already pushed the limits of port capacity. Third, it capped a rise starting at a volume more than 400,000 TEU below that expected in March of 2020.

Figure 2.

Monthly TEU variations from expected at major U.S. ports.

Source: Global Port Tracker.

Southern California was, and is, ground zero for the import surge. Combined Los Angeles and Long Beach import volumes doubled between March 2020 (Figure 3) and May 2021 as retailers in the United States faced sustained strong consumer spending owing to a combination of panic buying, availability of Federal COVID-19 financial aid, and shifting of household spending from services to goods ( 7 , 8 ).

Figure 3.

Los Angeles–Long Beach monthly import TEU change 2020 to 2021.

Source: Ports of Los Angeles and Long Beach.

The pandemic, therefore, seems to have had extraordinary impacts on U.S. containerized imports.

Freight transportation is a derived demand. That demand, and much of the typical import peaking (Figure 2), is derived primarily from U.S. consumer spending habits. Seasonal shipment peaking typically starts in July as electronic and clothing imports are spurred by late summer back-to-school shopping ( 9 ) (Figure 4), and continues with the addition of books, sports equipment, toys, games, and so on for the holidays ( 10 ). Those predictable patterns ordinarily drive containerized import demand.

Figure 4.

U.S. imports in selected commodities 2018 to 2021.

Source: U.S. Census Bureau.

These import commodity groups reached record levels in 2020. Toys, games, and sports equipment not only hit an exceptionally high peak, but remained high. Furniture imports were more variable but were also at record levels. The surge in furniture imports was particularly significant because of the large cubic shipping capacity furniture requires compared with more compact goods such as electronics.

The supply of imported medical supplies and personal protective equipment was a matter for public concern and attention, beginning in March 2020. A review of the available data, however, indicates that increased imports in these categories had only a minor impact on the volume of containerized imports. As an illustration, census data indicate that 16 commodity categories associated with medical supplies ( 11 ) accounted for only 1.1% of total waterborne import tonnage in the first 9 months of 2021. The impact on air cargo was much greater ( 12 ).

Transportation data also showed that the surge was clearly a national issue: the West, East, and Gulf Coasts had roughly similar patterns and percentage changes (Figure 5). The exception was in April 2020, when the West Coast saw imports rise by about a third in a single month. In 2020, Lunar New Year was January 25th. The normal manufacturing lull as Asian workers return home to celebrate was followed by COVID-19 shutdowns, idling Asian production for an extended period ( 13 ). That strong decline was apparent in March 2020, especially on the West Coast, followed by the April rebound after the resumption of manufacturing and port operations in Asia.

Figure 5.

2020 to 2021 monthly TEU and TEU changes at major U.S. ports.

Source: Hackett Associates/Global Port Tracker.

The surge impacts have been widespread and complex, with worker, equipment, and storage capacity constraints. There have been nationwide shortages of warehouse workers, truck drivers, and longshore workers ( 14 ), not only because of COVID-19, but because there are simply have not been enough trained operators to staff all the extra shifts. There has also been a nationwide shortage of container chassis, owing to containers on chassis being delayed at import distribution centers nearing or at capacity, their use under empty containers awaiting entry to port terminals pending return overseas, and their use by retailers to store excess inventory ( 15 ). The chassis shortage made it difficult to clear the port terminals of containers. Container ships waiting for a berth backed up as fluidity and efficiency decreased at the terminals. In November 2021, the Ports of Los Angeles and Long Beach were working up to 31 vessels simultaneously but had over 80 vessels waiting to berth, with the Port of Los Angeles reporting an average wait time for a berth of almost 18 days ( 16 ). By December the wait had increased to over 20 days ( 16 ).

COVID-19 and Import Timelines

Figure 6 juxtaposes major pandemic milestones and import volumes. There are two apparent connections between the rise in new COVID-19 cases through 2020, the decline as vaccinations took hold, and U.S. containerized imports.

Figure 6.

Pandemic milestones and import volumes at major U.S. ports.

WH = White House; FDA = Food and Drug Administration; EUA = Emergency Use Authorization.

Source: Hackett Associates/Global Port Tracker.

• A rise in imports coinciding with, and following, the first round of Federal stimulus payments.

• A rise and a plateau in imports as vaccinations increased and new cases fell.

Background: Retail Inventory

Import demand and surge dynamics become more understandable when we look outside the transportation data realm to find economic causes and indicators. Examining month-to-month changes in possible indicators (Figure 7) may help explain what happened. Leading economic indicators are a familiar concept; there may also be useful leading import indicators.

Figure 7.

Month-to-month changes in potential indicators.

Source: U.S. Census Bureau/Hackett Associates/Global Port Tracker/IHS Markit.

Credit card spending could be a candidate leading indicator, and it matches some of the import TEU growth peaks. Yet, if credit card spending is a leading indicator of imports, its peaks should come before the import peaks. But the leap between March and April 2020 was in part the result of a 29% increase in the use of credit cards by Americans compared with before the pandemic began ( 17 ). Credit card spending may therefore be a current indicator for sales of goods already imported. Consumer sentiment might also be a candidate (Figure 7). There was no clear relationship, however, and consumer sentiment sometimes leads import growth and sometimes follows.

Actual retail sales data appeared more promising, and there should be a link between the goods we buy and how much we import. Yet, if retail sales were a leading indicator, there should be a lag between a rise in sales and a rise in imports. That is not apparent in Figure 7.

Comparing multiple perspectives suggests that the dramatic import surge was being driven by a consumer goods demand that continually outstripped retail inventories. The dynamics of retail inventories and the time needed to replenish those inventories together help explain the relative timing of retail sales increases and import growth.

Retail inventories are a balancing act. Too much, and holding costs rise while merchandise becomes dated (an issue that particularly affects clothing and consumer electronics). Too little, and sales are lost to better-stocked competitors. The U.S. inventory-to-sales ratio (the quantity of goods in stock compared with the quantity of goods sold) has decreased overall from the mid-1990s through to the present (Figure 8). The reduction in inventory required to support a given level of sales has been driven by cost minimization goals and enabled by a series of technological and information systems developments. Barcodes, initially used in the 1970s, became widespread in the 1980s as computer technology improved and facilitated use of the data they provide. More advanced computer systems in the 1980s and 1990s made inventory tracking increasingly efficient, which contributed to the gradual drop in the inventory-to-sales ratio during this period. A report from the Federal Reserve Bank of Richmond in 1992 points to a drop in the ratio as evidence of better inventory management ( 18 ). In the 1990s, much of this inventory information was scanned, then entered by hand, but in the 2000s technology allowed for instant updating without having to hand-enter the information. Radio-frequency identification technology, which was first patented in the 1970s, has been commonplace for managing inventory since the 2000s. This technology allows product tags to be read when they are not directly in sight, and also allows for significantly more data storage ( 19 ), further increasing inventory management efficiency. The widespread use of electronic data interchange beginning in the 1990s ( 20 ) enabled easy transmission of standardized purchase orders, shipping agreements, product transfers, and other messages between and within companies. These and other developments enabled supply chain managers to manage inventory with greater precision and confidence, and thus carry less inventory for the same volume of sales. Inventory would arrive in stores and factories as it was needed (“just in time” inventory management), with the increased efficiency in the supply chain reducing domestic inventory levels.

Figure 8.

Inventory-to-sales ratios, seasonally adjusted (SIASR) and nonadjusted (NSAISR), 1992 to 2021.

Source: U.S. Census Bureau, Manufacturing and Trade Inventories and Sales.

Figure 8 shows both the nonseasonally adjusted inventory-to-sales ratio (NSAISR) and the seasonally adjusted ratio (SAISR). As is evident, the ratio is highly seasonal, and adjusting for that seasonality makes the underlying trend clearer.

In the midst of the overall downward trend there have been several notable spikes and declines in inventory levels. One of the first spikes followed the 2008 to 2009 recession, attributable to reduced consumer purchasing with increased unemployment and concerns about the economy. During the postrecession recovery, supply chain managers increasingly adopted “lean logistics” (introduced decades earlier by Toyota and others) to minimize inventory carrying costs and product obsolescence losses. This practice led retailers to reduce inventory, and a sharp decline in the inventory-to-sales ratio followed in 2009. The adjusted total retail trade inventory-to-sales ratio fell to its lowest level yet, 1.37, in August 2009, and remained low throughout 2011 and much of 2012, dropping to 1.34 at several points ( 21 ).

As Figure 8 indicates, the ratio has been climbing overall since 2011. This climb is generally attributed to the increase in e-commerce and the higher inventories required to support next-day and even same-day delivery ( 22 ). The Journal of Commerce cited the need to “ensure products are on hand to meet same-day or next-day customer delivery requirements, especially for businesses engaged in e-commerce. Businesses also may be raising inventory levels to achieve short-term sales goals or expand into new markets” ( 23 ). Slower consumer spending growth led to even higher inventory levels and ratios in 2015 and 2016.

Following a decline in 2017 and 2018, the ratio climbed back up in 2019 from concerns over pending increased import tariffs on goods from China and other nations. The inventory buildup (termed “frontloading”) occurred despite increased consumer spending and strong economic growth. The combination of frontloading and inventory buildup led to congestion at the Ports of Los Angeles/Long Beach and New York/New Jersey in late 2019 and January 2020 ( 24 ). At the end of 2019 and the start of 2020, retailers were beginning to draw down these elevated inventories.

Sales, Inventory, and Import Patterns

As Figures 1 and 8 suggest, retail sales, retail inventories, and containerized imports have distinctive, related seasonal patterns. Figure 9 isolates those patterns for 2004 to 2019 by displaying average monthly variations from an even monthly share (one twelfth) of the annual total.

Figure 9.

2004 to 2019 monthly variance of sales, inventory, and imports at major U.S. ports.

Source: U.S. Census Bureau, Manufacturing and Trade Inventories and Sales/U.S. Census Bureau, Monthly Retail Trade/Hackett Associates/Global Port Tracker.

1. Retail sales are effectively split between a few peak months and other below-average periods. The peak retail months are May (Mother’s Day, school graduations), August (back to school), and November to December (Christmas).

2. The average annual inventory level is heavily influenced by the back-to-school and holiday buildup, starting in July. Inventories rise through November, then plunge in December through January. Inventories rise again in February to May to support Mother’s Day, graduations and related late spring/early summer sales.

The variability of import TEU is not as great, since a substantial portion is imported parts, materials, components, and other nonretail goods. Yet the monthly variability is clearly related to the retail inventory buildup pattern. Imports are lowest in February owing to both slack demand and lower Asian production during the Lunar New Year. Imports begin an upward climb in March and typically peak in August to support both back-to-school and holiday inventories. That buildup is essentially complete in October–November, and imports in December itself are typically below average.

Inventory and Cargo Surges

Inventory levels (Figure 10) typically signal the need for reorders, especially for commodities purchased year-round. In April 2020, rising inventories and declining sales were followed by import declines in May, although this was also because of COVID-19-related factory and port closures in China. Continuing inventory declines and rising sales in April to May 2020 should have been a clear sign to replenish stock, and that period was indeed followed by a strong June to July 2020 import rise. In March 2021, imports again responded to retail sales growth and inventory declines.

Figure 10.

Monthly change in import TEU, retail sales, and retail inventories.

Source: U.S. Census Bureau, Manufacturing and Trade Inventories and Sales/U.S. Census Bureau, Monthly Retail Trade/Hackett Associates/Global Port Tracker/IHS Markit.

The COVID-19 pandemic has caused major disruptions in inventory levels and distribution across the country. The global supply chain remains highly dependent on China both for intermediary and finished goods. In February 2020, the virus swept through China, leading to many temporary factory closures; the Journal of Commerce reported fears of stockouts all across North America, Europe, and elsewhere from a lack of Chinese-made factory goods ( 25 ). The UN Conference on Trade and Development stated that “Even if the outbreak of COVID-19 is contained mostly within China, the fact that Chinese suppliers are critical for many companies around the world implies that any disruption in China will be also felt outside China’s borders” ( 26 ).

Table 1 presents correlations between indices of retail inventory and import TEU (with January 2018 set to 1.00). The values suggest a relatively weak relationship between inventories and imports in 2018 to 2019, which may reflect the overriding impact of import frontloading in advance of increased tariffs. For the overall period from January 2018 through July 2021, however, the correlations were much stronger. The strongest correlations were between retail inventory indices and import TEU indices in the 2020 to 2021 pandemic period with a 3- to 4-month lag.

Table 1.

Correlation Between U.S. Retail Inventory and U.S. Import TEU Indices

Time lag	Period
	2018–Jul 2021	2018–2019	2020–Jul 2021
No lag	−0.345	0.123	−0.348
1 month	−0.457	0.017	−0.536
2 months	−0.535	0.114	−0.671
3 months	−0.631	0.008	−0.752
4 months	−0.683	−0.259	−0.764
5 months	−0.592	−0.258	−0.659

Note: January 2018 = 1.00, authors’ calculations.

The 3- to 4-month lag may be longer than usual, reflecting the very supply chain delays caused by the import surge.

Thus, although the COVID-19 pandemic has created an extraordinary U.S. import surge, import demand remains grounded in familiar economic forces and consumer behavior. COVID-19 resulted in increased spending on goods and reduced spending on services, retailers are still trying to maintain sufficient inventory levels, and those goods are mostly still trying to flow through the same pipelines.

The inventory-to-sales ratio consolidates these factors (Figure 8). As COVID-19 hit in March 2020, the ratio rose rapidly as stores closed and people temporarily stopped buying nonessentials (Figure 11).

Figure 11.

U.S. import TEU and inventory-to-sales ratio. WH = White House; FDA = Food and Drug Administration; EUA = Emergency Use Authorization.

Source: Hackett Associates/Global Port Tracker/U.S. Census Bureau, Manufacturing and Trade Inventories and Sales.

The initial closure of factories and ports in China, drops in U.S. retail sales, and canceled orders because of COVID-19 lockdowns produced an import decline in May 2020. The situation reversed almost immediately as stimulus payments went out and people focused on upgrading and updating their homes with purchases of new desks, laptops, and exercise bikes. Walmart noted in May 2020, “Call it relief spending as it was heavily influenced by stimulus dollars leading to sales increases in categories such as apparel, televisions, video games, sporting goods, and toys” ( 27 ). Recovery in sales of retail goods and the continued pattern of imports lagging retail sales changes followed. Imports climbed to replenish inventories and import levels stayed high while the ratio remained below pre-COVID-19 levels. Once vaccinations began and new cases declined, spending accelerated, the ratio dropped faster still, and imports responded.

There appear to be a few anomalies. In both years there were import declines in January and February, regardless of sales or inventories. The typical patterns in Figure 9, however, show the same declines. In most years this decline is attributable to slower restocking after the holidays and reduced Asian production during the Lunar New Year. Tariffs may have also depressed imports in early 2019. The 2020 COVID-19 factory shutdowns in China extended the Lunar New Year drop in export production and shipping into February and March. That slump was followed by the April import jump as factories restarted to fill backorders.

The COVID-19 wave of late 2020 coincided with increased sales through December, the seasonal import fall in February of 2021 (although continued production at some Asian factories softened the expected Lunar New Year decline), followed by recovery again in March.

Although the pandemic depleted inventories and pushed the inventory-to-sales ratio to a new low, an increase during late spring and summer 2020 was expected as Chinese manufacturing resumed. Retailers typically stock up around May and June for the late summer back-to-school rush ( 28 ). Yet the ratio stayed well below prepandemic levels. Retailers restocked their depleted inventories following increased consumer purchasing of home goods, office supplies, and personal protective equipment ( 29 ). This buying led to a spike starting in July 2020. Sales over the summer of 2020 also increased as stores reopened and stimulus checks were sent out, leading to stockouts across the country of a wide variety of products (exercise equipment and video game consoles were among the most in-demand products). The increased retail sales resulted in the import surge and subsequent port congestion ( 30 ).

2021 started with retail sales continuing to outpace inventory growth, with U.S. Census Bureau data showing that the seasonally adjusted retail inventories-to-sales ratio for January 2021 fell to its lowest level since 1992 with a ratio of 1.19, compared with 1.28 in December 2020 and 1.43 in January 2020 ( 31 ). Port congestion and supply chain delays, combined with strong retail sales, limited inventory buildup ( 32 ). Retailers anticipated the continued strong sales in 2021 as the pandemic subsided, and as vaccines and the third round of stimulus checks were distributed. Concerned that ports were already busy, retailers tried to front load seasonal holiday imports leading to severe port congestion, especially at Los Angeles/Long Beach ( 33 ). The inventory-to-sales ratio remained very low at the beginning of 2021, and although it started to climb back up early in the year it remained well below prepandemic levels.

In May 2021, the Journal of Commerce stated that “retailers are gradually rebuilding their inventories to prepare for increasing sales this year, although the inventory-to-sales ratio is still at a near-record low, which means retailers must continue to rebuild inventories to prepare for the back-to-school and holiday shopping seasons this fall” ( 34 ). This intense restocking resulted in a sustained high volume of imports and subsequent congestion through the summer and fall of 2021, although retail sales continued to outpace restocking efforts ( 35 ). Notably, inventories in 2021 were up when automotive parts and cars were excluded from the analysis, suggesting that a significant part of the overall shortage was automotive-related, reflecting strong demand and supply constrained by autos production cuts resulting from automotive semiconductor chip shortages.

This inventory buildup has resulted in a prolonged period of constrained warehouse capacity despite the low inventory-to-sales ratio, which continues to negatively affect the domestic supply chain by reducing chassis and driver availability ( 36 ).

The linkage between inventory levels and import volume implied that, as of late 2021, the import surge was not over (Figure 12). 2021 imports at major U.S. container ports peaked in May rather than in the usual peak period of August through October, in large part owing to port congestion. For key sales channels such as department stores, and key commodities such as furniture and electronics or clothing, however, the June 2021 inventory-to-sales ratios remained below prepandemic levels. Those low inventory levels implied a strong, continued demand for import replenishment. Some sources have reported that importers attempted to stockpile goods and materials in 2021 to avoid year-end shortages, adding to short-term import demand ( 37 ).

Figure 12.

2020 to 2021 U.S. inventory-to-sales ratios of selected commodities.

Source: U.S. Census Bureau/Hackett Associates/Global Port Tracker/IHS Markit.

Compounding the issue, the 2020 to 2021 supply chain paralysis has made the problem circular. Inventories remain low in part because many import goods ordered weeks and months earlier are not yet in inventory. There are indications that importers have increased orders to maximize the chances of getting what they want, and aim to increase inventory levels to minimize the impact of future shortages. Import Distribution Center (DCs) have not been able to accept and unload all the containers waiting at marine terminals, much less all those still on ships anchored in harbors, or those waiting in Asia for ships delayed at U.S. ports ( 38 ). Much of the needed inventory had been ordered, but no one knew exactly when it would arrive.

Looking ahead, most retailers expect continued Supply chain issues extended from 2021 into 2022. In September 2021, COVID-related factory shutdowns in Vietnam disrupted the supply chain further. Nike lost 80% of its Vietnamese production owing to government restrictions ( 39 ). Consumer demand eased somewhat in late 2021, but inventories have not yet recovered. E-commerce grew significantly during the start of the pandemic to account for 15.7% of total retail sales in the second quarter of 2020 compared with just 10.5% in the second quarter of 2019, and remained above 13.0% in the four quarters that followed ( 40 ). The continued strength of e-commerce is also expected to exacerbate inventory issues, as e-tailers require larger inventories at distribution and fulfillment centers nationwide to meet expectations of rapid delivery ( 41 ).

Conclusions

In an important sense, there is nothing new in these data. There is no new supply chain mechanism at work, and the existing chain is not broken.

The cause of the import surge has been extraordinary demand working through the ordinary sales and inventory links to prompt import replenishment. Declining inventory signals increased import orders and subsequent increased import arrivals. The linkage is strained, not broken, but the analysis needs to go outside the transportation data world to see that underlying economic demand–supply linkage.

There is a need for further research into the triggers of the observed import demand surges, with close attention paid to retail inventory management practices and the time lags between inventory replenishment or buildup decisions and corresponding containerized import shipments. The additional time lag between inventory changes and the availability of data to document those changes may be a challenge to analysts seeking to understand the linkage better. As more data do become available on the COVID-19 pandemic area, however, it may also be possible to bring more sophisticated statistical tools to bear. A better understanding of this linkage may facilitate improved short-term cargo forecasting and provide an early warning of impending surges.