The crane trouble is just one example of how hard it will be to wean U.S. supply chains off China. After decades of industrialization, Chinese factories account for nearly a third of global manufacturing value added, far ahead of second-placed U.S. at 17%. Shanghai Zhenhua Heavy Industries Co., a Chinese state-owned company, supplies about 80% of the large port cranes that move shipping containers from ships to U.S. ports.
“The U.S. [the] “Assembling a crane is hard. There’s no crane ecosystem and there’s no capital goods ecosystem, so it’s hard,” said Chris Rogers, head of supply chain research at S&P Global Market Intelligence.
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Biden’s tariff proposal revives one that port operators thought they had already defeated: President Donald Trump proposed import taxes in 2018 and 2019 on both the giant ship-to-shore cranes and the smaller wheeled cranes that move cargo through ports. But the president abandoned those taxes after complaints from port authorities.
Trump has vowed this year to impose huge 60% tariffs on all imports from China if he returns to the White House in November.
The Biden administration has made supply chain “resilience” a key goal, aiming to reduce reliance on sole suppliers of strategic materials. Reducing U.S. reliance on China for products such as port cranes is particularly important to national security amid rising friction between Washington and Beijing, administration officials have said.
The U.S. now buys less directly from China than it did five years ago, before the pandemic and President Trump’s trade war rocked global trade. China accounted for less than 14% of foreign-made goods imported into the U.S. last year, down from 21% in 2018, according to the Census Bureau.
But these figures exaggerate China’s declining supply role.
In many cases, Chinese companies have responded to higher U.S. tariffs by setting up factories in countries such as Vietnam and Mexico to ship goods to American customers from there.
Even if the United States purchases products from manufacturers other than China, other These countries continue to be exposed to China through Chinese-made parts used in their products, with companies in countries like Canada and Thailand often relying on Chinese factories for key components of their products.
Chinese-made parts are particularly common in making cars and trucks, and a Brookings Institution study published last fall found that the U.S. has four times more “hidden exposure” to China than its direct imports of Chinese products would suggest.
Research by economists Richard Baldwin, Rebecca Freeman and Angelos Theodorakopoulos has found that there is also a large, unrecognised dependence on China in machinery, electrical equipment, electronics and clothing.
China’s control over the production of intermediate goods is so strong that Baldwin calls it the “OPEC of industrial materials,” referring to the oil-producing cartel that influences global crude prices.
In February, the White House announced that PACECO, a California subsidiary of Japanese company Mitsui E&S, would bring ship-to-shore crane manufacturing back to the U.S. for the first time in 30 years.
But more than four months later, the company’s plans remain a mystery. In April, during an official visit by Prime Minister Fumio Kishida, the White House announced that PACECO would work with investment firm Brookfield to bring “final assembly” of the cranes back to the United States.
When asked for an update, both companies declined to comment last week.
“Diversification doesn’t happen overnight. It’s a process that takes time,” said one White House official, who spoke on the condition of anonymity to discuss the administration’s thinking. “The goal is not to raise domestic raw material costs. It’s to de-risk and diversify.”
Decades of globalization have made U.S. supply chains highly dependent on China, and while Biden has taken some steps to diversify sources of key products and raw materials, it will take years to see results.
In its most sweeping industrial package in decades, the federal government is spending $39 billion to subsidize the construction of multiple semiconductor manufacturing facilities and billions more to spur the development of renewable energy.
Many economists worry such efforts will lead to rising costs, government waste and corporate cronyism, but administration officials and their supporters say lessons from China’s rise and supply-chain disruptions caused by the pandemic show a new approach is needed.
“We need to rethink some of our strategies given that China poses an economic, political and national security threat,” said Elizabeth Reynolds, a former White House manufacturing expert now at the Massachusetts Institute of Technology. “We don’t want to be locked into a monopoly supplier, regardless of product or country. That’s a bad strategy.”
National security considerations also underscore the push to bring port crane manufacturing back home: In February, the president issued an executive order directing the Coast Guard to police potential cybersecurity risks associated with the use of ZPMC cranes.
Onboard electronics that allow for remote software updates could also enable China to disrupt critical civilian and military port operations in the event of a crisis, according to the House Homeland Security and China Communist Party committees.
The ship-to-shore cranes at the center of the current reshoring and tariff debate are massive: They tower some 15 stories above the pier, with long arms that stretch nearly 70 yards out to pick up shipping containers from ocean-going ships below and haul them ashore.
“Ports typically require cranes that are customized to their specific needs, such as height, width, and even the salinity of the local air,” says Cary Davis, president of the American Association of Port Authorities (AAPA).ZPMC’s high production volumes give it the flexibility to fulfill these custom orders at an affordable price.
A joint investigation by two House of Representatives committees released in March said state-owned ZPMC received “tens of millions of dollars” in subsidies from the Chinese government, allowing it to keep prices lower than competitors.
Finland’s Kone and Germany’s Liebherr also sell ship-to-shore cranes in the U.S. But their products are significantly more expensive than Chinese models and will remain so even after the tariffs take effect, according to the AAPA.
Industry groups say the tariffs could discourage ports from purchasing newer, more efficient cranes needed to complete construction, as the administration budgets $20 billion for modernizing the nation’s ports.
In May, the administration announced tariffs on a number of strategic products produced in China, including port cranes. The administration said that imposing a 25% tariff on Chinese-made cranes would protect U.S. companies from “unfair trade practices” that have led to excessive concentration in the crane market.
But ports that buy these giant cranes are not happy: In a June 28 letter, AAPA pleaded with the government to delay the tariffs, or else ports face unexpected bills totaling tens of millions of dollars for Chinese-made cranes they’ve already ordered, they said.
In Norfolk, the Port of Virginia is waiting on 12 new ZMPC cranes, which the association said Biden’s tariffs would add more than $40 million to its $161.5 million price tag.
Similarly, the Port of New Orleans will face $52 million in tariffs on 10 new cranes it ordered for a container terminal scheduled to open in 2028.
Industry groups have urged U.S. Trade Representative Katherine Tai to delay the tariffs from their scheduled Aug. 1 start for at least two years or until domestic producers emerge.
Her office is considering the request, along with similar petitions from other industries affected by the China tariffs, and is expected to issue a decision in the coming weeks.
“We sincerely hope the government changes course on this,” said Davis, the AAPA president.
