PORTSMOUTH, Va. — Perched in the cab of a crane roughly 15 stories above the ground, Bobby Rascoe toggled a black joystick and zoomed out over the Elizabeth River and the East Coast’s third-largest port.
“It’s like the Cadillac of cranes,” said Rascoe, 44, of Virginia Beach. “It’s very smooth.”
It also may be among the last ones installed here, depending upon the results of President Trump’s meeting late Friday night Washington time with Chinese President Xi Jinping at the Group of 20 summit in Japan.
Trump has said he will impose 25 percent tariffs on roughly $300 billion in additional Chinese products — including future shipments of these cranes — if the two men can’t agree to revive stalled trade talks. On Wednesday as he prepared to leave the White House, the president said Chinese goods were “ripe for the taxing,” though perhaps with a 10 percent levy.
Along with dealing a fresh blow to China’s economy, the tariffs would mean unexpected cost increases for vital port modernization projects around the United States, damaging local economies and imperiling U.S. hopes of keeping pace with foreign rivals.
The crane episode also illustrates how Trump’s attempts to pressure Beijing can spill beyond U.S.-China trade to exact a broader economic toll.
In Virginia, the tariffs would add nearly $6 million to the tab for the two cranes that John Reinhart, the Port of Virginia’s chief executive, ordered last month.
At least a dozen ports in places such as Baltimore, New Orleans, Seattle and Fort Lauderdale, Fla., which together have ordered more than 20 of these cranes, also face multimillion-dollar tariff bills if the president proceeds. Officials from those ports testified before officials of the U.S. Trade Representative’s office (USTR) in hearings that ended Tuesday, in hopes of getting the cranes exempted.
Reinhart’s crane order is part of an ambitious expansion designed for a trading environment that looks a lot like the last two decades of globalization — not the “America First” vision of a president who employs tariffs with greater frequency than any U.S. chief executive since Herbert Hoover.
“Trade is always going to continue,” Reinhart said over a box lunch in a conference room overlooking the sprawling port. “With the evolution of the ship sizes, if you don’t make the capital investments, you will be marginalized because those ships won’t be able to call on you.”
Evidence of ongoing improvements is visible from the conference room window. To the right, optical camera readers scrutinize trucks entering and leaving, instantly registering their contents. Straight ahead, new lanes for stacks of containers and the rolling cranes that move them from the dock to waiting trucks. And to the left, an expanded rail yard with a platoon of smaller, swiveling cranes, controlled remotely by operators on the other side of the terminal.
Two years ago, Reinhart broke ground on a modernization program that has added a slew of cranes and berth space for larger vessels. By the end of next year, his two main terminals will be able to handle 40 percent more shipping containers.
Dredging work to deepen and widen the waterway linking the port to the open sea — to permit two-way traffic for the largest container ships — will begin in January, using federal funding approved by Trump.
Officials also have taken the first steps to create 600 acres of land with dredged material, providing space for a new terminal that will accommodate expected growth beyond the 2020s.
Keeping this facility competitive is critical for Virginia’s economy but also the nation’s. More than one-third of the freight that lands on these docks moves by rail to heartland states such as Ohio, Illinois, Kentucky, Michigan and Missouri. The U.S. military moves meals, clothes and parts through the port.
Reinhart, who took the top job in 2014 when the port was losing $78,000 a day on operations and lagging more modern rivals, said that population growth and the spread of consumer culture in the developing world justifies the investment.
“In the last 60 years, everyone has always said [trade] is over,” he said. “Other than ’07, ’08, it’s continued to grow. I still see trade growing.”
The view is different from certain quarters of the White House, where influential advisers like Peter Navarro, director of the office of trade and manufacturing policy, want to shrink global supply chains to fit inside U.S. borders.
The president’s embrace of protectionism, and the retaliation it has triggered by American trading partners, has aggravated the post-financial-crisis slowdown in cross-border commerce.
From the fall of the Berlin Wall to the eve of the 2008 financial crisis — as corporations moved production to capitalize on inexpensive developing world labor — trade grew about twice as fast as world output.
In recent years, it has grown only as much as the global economy or roughly half as fast as the quarter-century that marked globalization’s heyday, according to the World Trade Organization.
In Norfolk, the nation’s sixth-largest port, total tonnage in the five years ending in 2017 grew by about one-third, less than half as fast as during a similar period before the financial crisis, according to U.S. Maritime Administration figures.
Trump’s tariffs have plunged shipping companies into uncertainty and disturbed traditional trade flows. Last year, the port saw a rush of imports as companies tried to get ahead of the president’s tariff plans. That later led to a lull, with shippers canceling scheduled stops, Reinhart said.
“The president likes to use chaos as a negotiating tool,” he said. “Chaos is the antithesis of good business.”
This week’s meeting could be a turning point. Trump began hitting China with tariffs last year in a dispute over China’s coercive technology transfer policies and discriminatory treatment of foreign companies.
But if additional tariffs are imposed, raising the cost of Chinese cranes by 25 percent, Reinhart said he may be forced to find savings elsewhere by eliminating spending that is budgeted for American-made equipment or construction services from U.S. contractors, or by delaying a shift from diesel power to lower-emissions electric. To avoid those cuts, he’s directed the port’s legal team to look into potential challenges to the proposed tariffs.
“We’re still fighting,” he said. “We’ve got some time to plan.”
Reinhart, 65, ordered two more of the $12 million ship-to-shore (STS) cranes in May just before Trump issued the tariff threat. The administration had agreed last year to exclude the massive cranes from its tariff hit list after port operators complained, so Reinhart did not expect any difficulties with his latest order.
No U.S. company in decades has manufactured cranes like these, which are needed to keep pace with the needs of shipping industry customers who are increasingly moving to ever larger vessels in a drive for greater efficiency, lower costs and reduced emissions.
Reinhart’s expansion plans hinge on new port cranes made by Shanghai Zhenhua Heavy Industries Co. (ZPMC), a state-owned Chinese manufacturer.
“If you don’t have the big ship-to-shore cranes, then you don’t need all this other stuff,” he said, gesturing toward the cargo vehicles and smaller cranes populating the dock, “because you won’t be able to get the big ships.”
Reinhart’s plans are being replicated at ports around the country, as operators essentially make massive bets that world trade will survive the Trump era. The largest U.S. marine terminal operator, Ports America, has ordered four STS cranes for Baltimore and plans the same number for the Port of New Orleans. Only two of New Orleans’ six STS cranes can handle the largest ships, the company told USTR in recent testimony.
To Reinhart, ZPMC was the only company that could produce what he needs to keep his port competitive. Only two other companies even responded to the port’s bidding announcement for the cranes: an Italian company that had no experience making such large machines and a Finnish producer that builds its cranes in China.
But to the president, ZPMC is an example of the problems with China’s state-led economy. State-owned companies generally enjoy access to cheap financing from state banks, and manufacturers like ZPMC also can capitalize on China’s excess steelmaking capacity, which makes their raw material costs hard to beat.
The tariffs will depress ZPMC’s U.S. sales. But they will also hurt American companies. Walking through the engine room atop the giant Chinese crane, Reinhart pointed out gear made by American companies such as Hitran Corp. of Flemington, N.J.; Avtron of Cleveland; and Comtrol of Irwin, Pa.
These are among the domestic manufacturers that the president says his trade policy will benefit. But at least in this case, they are likely to be collateral damage.
Back in the crane cab, Rascoe can see the dock and water by looking down between his legs. To the right, the MSC Roma, a Liberian-flagged vessel that transited the Panama Canal on its way to Virginia, is tied up at the pier. Out in the channel, dolphins frolic.
Experienced hands like Rascoe can pick up a container and put it down somewhere else about once every two minutes. As he demonstrates the crane for visitors, he was asked how it compares to earlier generations.
“Anything new is always better,” he said with a smile.
