CrossDock Exclusive: Trade in the Time of Tariffs 💵

They are the giants of the sea. Neatly stacked one on top of another, they move quietly across vast oceans, powering global trade and commerce, carrying the essentials that sustain daily life and the components that build modern industry.

We are talking about shipping containers. But for years, their stories were never told.

Until economist, historian, and journalist Marc Levinson forced the world to pay attention.

His book The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, published in 2006, on the fiftieth anniversary of the first container voyage, remains the first comprehensive history of the shipping container. The book's fans include Bill Gates, who called it extraordinary and added it to his 2013 reading list. 

At CrossDock, The Box holds special significance.

It was one of the early intellectual sparks behind this platform. Levinson’s ability to take something as seemingly simple as a steel container and use it to explain the history of modern commerce inspired us to look more closely at the overlooked mechanics of supply chains. The idea that complex global systems can be understood by examining the small, often ignored building blocks traces directly back to that book.

Beyond the Box, Levinson’s career reflects a rare blend of journalism and economic scholarship. He has written for Time, Newsweek, and the Journal of Commerce, and served as finance and economics editor at The Economist. He later held roles at JPMorgan Chase and the Council on Foreign Relations.

His other books include The Great A&P and the Struggle for Small Business in America, An Extraordinary Time, and Outside the Box.

In this exclusive interview with CrossDock Insights, Levinson talks about the forces reshaping global commerce, the role of tariffs, the realities of China-plus-one strategies, and the revival of U.S. shipbuilding. 

You’ve spoken and written about tariffs in your various essays. How do you view the current use of tariffs? Are they a critical component in redefining some of the trade relationships that have evolved and, in some ways, potentially disadvantaged the United States in certain strategic areas, or are they more of a geopolitical tool that has little to do with trade itself?

I think they serve both purposes. Tariffs have been used to address trade disputes for a long time. But this idea of “your country did not support our country with regard to this policy, and therefore, we’re going to put tariffs on your country” — this is new. This is something we haven’t seen. And, this is one more piece of evidence of the instability in international relations. We saw the United States announcing 50% tariffs, 25% tariffs, and 30% tariffs on different countries.

Well, it turns out that in some cases the tariffs were much lower than that. There were products that were exempted; the average tariffs were far lower than what was advertised.

One problem with this is that it opens the door to potential corruption. Because if you’re erratically changing tariffs all the time, you can lower the tariffs that affect a particular company or raise the tariffs on that company if it doesn’t do something you like. I think this is a problem that is widely seen in many countries, and one we are increasingly exposed to if trade policies around the world continue to become more erratic.

To strengthen U.S. supply chain security in strategic sectors like critical minerals and pharmaceuticals, can tariffs meaningfully serve as the first step in that effort?

Obviously. The place where we have had the most tariffs in the United States for years is the steel industry, and don’t forget that steel is a critical import. We had tariffs on raw steel, and now we have tariffs on many steel products. Are they actually going to increase steel output in the United States? Potentially, but we haven’t seen it. 

And I think one consequence of imposing tariffs like that is that domestic companies may pay a little less attention to cost control.

So you may lose some competitiveness, potentially in the international market.

We are seeing many other areas where tariffs may be part of an effort to change trade patterns. For example, during COVID, there was all of this alarm about the United States not being a major producer of active pharmaceutical ingredients, with many of them coming from India and China. Is putting a tariff on those sorts of products going to suddenly lead to an increase in production of active pharmaceutical ingredients in the United States? I think probably not.

But there are other measures that the government seems inclined to take that would redirect some of that trade here. So the tariffs may be part of the package, but they’re not the whole thing.

Do you see the increasing weaponization of supply chains as a broader byproduct of globalization, with countries bringing supply chain leverage into negotiations more deliberately?

Certainly, we have seen some of that from the United States, China, and perhaps other countries as well. However, its effectiveness is questionable because it encourages foreign competition.

If a country thinks that they are not going to be able to import products from your country that they need, they will try to make them themselves. So this is part of a treacherous slope we have seen some countries go down. You may want to punish another country, but you can end up punishing yourself if you don’t do it carefully.

We are seeing signs of the United States distancing itself from certain longstanding trade relationships. At the same time, China is diversifying its supply chains, despite U.S. pressure, and continues to expand exports to other parts of the world. Countries such as India are actively pursuing free trade agreements with Australia, the United Kingdom, and the European Union.

Do you see this trend continuing, with countries forming new trading alignments of their own? And is there a risk that the United States could become increasingly isolated as a result of the strategy it is currently pursuing?

I am hesitant to use the word bloc because a bloc implies some sort of permanence. What we have seen over the last few years is far less permanence in international trade relations. “You may belong to my trading bloc today, but not tomorrow!”

I think companies are having to deal with it. After all, businesses have to make long-term investment decisions, and how do you make long-term investment decisions when policy is so erratic and subject to change?

In manufacturing, many companies do this by establishing multiple production locations. This does not come cheap. For a while, companies were operating initially in China, and then they decided to adopt a China-plus-one strategy as a way to hedge risk. Now, some are trying China-plus-two or China-plus-three because they feel they need additional options.

They may lose some economies of scale because their production facilities might be a little smaller than they would like, but they might have some protection if there is a trade dispute they were not even anticipating.

So do you think trade relationships will increasingly be forged with a more transactional mindset, rather than being rooted in shared beliefs or shared ideals, going forward? 

We have seen in the past few years a lot of new types of trade agreements. These are agreements that were not really foreseen by the World Trade Organization. We are talking about smaller agreements between a couple of countries or a handful of countries. You’ve got agreements like this in Southeast Asia, in the Pacific, and in Europe.

But what we have not quite figured out yet is how these various agreements or entities are going to deal with disputes, which is one of the things that really hampered the World Trade Organization.

For example, the EU has a free trade agreement with the Mercosur countries. Sounds great. Terrific idea. But what happens when someone in a European country claims that someone in Brazil is unfairly exporting subsidized products to Europe? Does this agreement hold up? Is there a mechanism to address these kinds of disputes?

If not, the agreement is not going to hold together very well. And we have not yet seen, in these smaller agreements, how well these kinds of disputes and differences of opinion will be reconciled. That is going to be a crucial issue.

Several countries have positioned themselves as part of the “China-plus-one” strategy for Western supply chains, including Vietnam and India. 

What is your view of China-plus-one as a long-term strategy? Is it realistic to expect any single country to meaningfully serve as an alternative to China, or does diversification now require a broader cohort of countries collectively filling that role?

Well, certainly, we are seeing countries that may want China-plus-more-than-one, in order to have more options. But one other thing that is going on in international trade now is that government authorities are looking much more deeply into supply chains.

It used to be that when the United States imported something from India, it was considered an Indian product, and that was the end of the discussion. In general, customs authorities would treat it as an Indian product.

But now they are likely to want to know where the components came from, and where the components within those components came from. Every company and every production location is part of that supply chain.

This, I think, creates a lot of risk for companies engaged in international trade. In some cases, they don’t even know this information about their own supply chains. It is quite possible that the involvement of some country, whose participation they didn’t even know about, deep in the supply chain, could trigger objections from authorities.

I think this makes life tougher for companies managing international supply chains. It was much easier when you could simply order everything from China.

Is that why you think nearshoring in Mexico has not really worked out as many expected? While it has been something of a success story in the automotive sector, when you drill down into the components, many of those parts originate from somewhere else.

In addition, Mexico has become a location where some Chinese manufacturers have set up operations in order to circumvent trade restrictions. Is that primarily why you believe nearshoring to Mexico has not unfolded the way many anticipated?

I think that’s one reason, yes. You’ve seen a lot of foreign investment in Mexico, but much of it has been in distribution centers rather than in manufacturing facilities. Companies have been cautious about making manufacturing investments in Mexico.

I think it will probably grow in importance. But there has not been the kind of grand rush to manufacture in Mexico that a lot of people anticipated.

Do you think there is a workable framework for Mexico to succeed as a nearshoring option? Or are there viable alternatives, perhaps elsewhere in South America, that the United States could benefit from? Or is that simply too far-fetched an idea?

One of the things that weighs against this approach to nearshoring, again, is the volatility of trade policy, and in particular, U.S. trade policy. The United States, after all, has had a free trade agreement with Mexico going back to 1992, and yet we basically canceled a big piece of that agreement and put sanctions on Mexican trade.

Well, if that is going to happen, then maybe there’s not much protection for a company setting up business in Mexico under the expectation that a certain set of rules is going to apply, when those rules can be changed at any time.

That sort of thing is going to work against nearshoring. And again, we are talking about companies that, in many cases, are making longer-term decisions. The key issues here are the stability of trading arrangements and some confidence in the legal system. And if this is going to change from week to week, then that is not going to induce investment.

You recently shared your views on U.S. investment in shipbuilding, suggesting that it would be very difficult to revive maritime dominance simply by investing in the domestic shipbuilding industry. Could you expand on that?

And do you see a pathway for the United States to collaborate with allies, such as South Korea, to bring some form of revival to the commercial shipbuilding sector?

The shipbuilding industry in the United States is not in good shape. The industry has been in decline for many years. There’s certainly a need for naval shipbuilding, and the naval shipbuilding industry is not in good condition, in part because the commercial shipbuilding industry is not in good condition.

The U.S. strategy toward commercial shipbuilding has been very inward-looking. The famous Jones Act requires that ships used in domestic trade in the United States have to be built in the United States and mostly use U.S. components.

One consequence of that is that there are very few ships built in the United States, and not much domestic maritime transportation except where it is required, such as to Hawaii and Puerto Rico, for example.

There’s a lot of talk now about reviving commercial shipbuilding. The United States is way, way behind the leading shipbuilding countries in the world. The U.S. produces less than 1% of the world’s commercial shipping tonnage. The biggest container ship ever built in the United States carries the equivalent of about 3,000 twenty-foot containers. The largest in the world carries more than 24,000. So you get some idea of how far the United States is from the leading edge here.

The United States exports a lot of liquefied natural gas, but it doesn’t produce liquefied natural gas carriers. So we essentially have a very small commercial shipbuilding industry. And companies don’t buy U.S.-built ships unless they are required to use them.

So how do you deal with that?

Well, there’s talk about giving some grants to our shipyards. We can spruce up these shipyards, put in new equipment, and build some ships. The United States has welcomed a South Korean company that is taking over a U.S. shipyard and is promising to build commercial vessels there. But we are talking about shipbuilding on a very small scale.

The reality is that commercial shipbuilding is an extremely highly subsidized industry in every successful shipbuilding country.

And if the United States wants to participate in that industry, it is going to have to play the subsidy game. Let’s take the example of steel, the main component of modern ships. First of all, we would have to reimburse the companies that are building ships for the cost of steel. Steel is highly protected in the United States, and it costs twice what it costs in China and a lot more than it costs in Europe.

So you’re telling companies we want you to build competitive commercial ships, but we want you to use extremely expensive steel. That is not going to work.

You have to subsidize the shipyard to set up its operations, and then you have to subsidize the shipowner. People tend to forget about this, but it is very rare that a big shipping line takes money out of its own pocket and goes to buy a ship. They are getting financing from somebody, and it is usually either a bank loan that has been supported by the government or a loan directly from the government.

It is expensive. It costs money, and it can lead to very large losses for the lender. That is why most banks have left the ship finance business. And certainly, in a democratic country, there is going to be an uproar if the government makes big loans to build ships and then shipowners cannot service those loans. There will be budgetary consequences, and nobody wants to be in that situation.

The discussion we’re having in the United States about commercial shipbuilding is not really a very honest discussion. It is not fully confronting these extreme costs and the risks involved.

What I think is going to end up happening is that the United States will have to collaborate with other countries to create an international shipbuilding industry that competes with China’s, rather than trying to recreate a purely U.S. shipbuilding industry.

This clashes somewhat with President Trump’s notion that there should be maritime dominance, but I think the cost of maritime dominance in the commercial maritime industry is not something we are prepared to bear politically.

Is there still a case for the United States to invest selectively in shipbuilding, perhaps not in large-scale container ships, but in naval vessels or barges, and to make those segments more competitive by acquiring skills and expertise from allied countries? Do you think that approach could realistically work, or are you skeptical of spending public money in this direction altogether?

We have a successful barge construction industry in the United States. One reason is that barges are used almost entirely for domestic transport, and so they are made in the United States. There is no foreign competition in this area, and that has protected the industry. But the industry also seems to be relatively efficient because there are a number of companies doing it. It’s not just one or two shipyards building barges. So here, it’s working.

If you’re talking about ocean-going ships, it’s a totally different matter.

When Joe Biden was president, there was a complaint filed with the United States Trade Representative claiming that Chinese policies were hurting the U.S. maritime industry. This was just totally misplaced. The U.S. maritime industry has been in bad shape for several decades. Before we were complaining about Chinese subsidies, we were complaining about Korean subsidies. Before that, it was Japanese subsidies. And before that, it was German subsidies.

The reality is that it’s an expensive game to provide subsidies, and the United States chose not to. It eliminated most shipbuilding subsidies in 1981. So the amount of subsidy for shipyards or shipping companies is really quite limited in the United States now.

Yes, if we really wanted to rebuild this industry and attach priority to it, I’m sure we could do it. But it would require boatloads of cash, and I don’t really see a desire to do that.

And then, of course, there is the issue of skilled labor. Isn’t the shortage of skilled workers also a significant constraint in this direction?

That’s true. As an economist, I think labor is very sensitive to prices and wages.

If you want skilled labor, make it worthwhile for people to come work in shipyards. It may take a couple of years, but you’ll get skilled labor.

What we’ve seen is that a lot of people with these skills do not consider this a very attractive job compared to what they could do in other industries. So it’s not that there is a limited supply of skilled labor, it’s that there is a limited supply of skilled labor at the wage levels that shipyards are presently paying.

The United States has lately been very active in a number of resource-rich but politically complex countries, such as the Democratic Republic of Congo, Ukraine, Greenland, and Venezuela. Much of this engagement appears linked to securing critical minerals and strengthening supply chain security.

Do you see this evolving into a coherent long-term strategy to counter China’s dominance in these areas, or is it more reactive, driven by short-term supply pressures and political pressures rather than a sustained strategic framework?

I would not think about it in terms of long-term strategies. This is obviously a crucial difference between, say, the United States and China, where the government can think about strategy 20 years out and follow a logical path. The United States does not operate that way.

Obviously, there’s a lot of concern about the availability of certain resources. Whether we’re really prepared to follow through on that in the United States, I don’t know.

For example, there’s been a lot of talk about investment in the Democratic Republic of the Congo (DRC). Do we really want to be all that involved in a country that has a fair amount of turmoil, a relatively weak government, and a war going on along its eastern border? How much time, money, and effort is the United States going to put into dealing with Congo? And if not, then how involved do we want to get in mineral production there?

There are many countries where we’d like to have relationships with domestic producers of various things. And I think there are some countries where the cost of maintaining those relationships is going to be higher than we want, because of turmoil in those countries, hostility toward the United States, their own political factors, or other issues.

So I don’t think this is quite as simple as some people think. I’m sure there will be countries where we have good relationships and where we can have access to scarce resources. But there are also some countries where we’re probably going to have a more distant relationship.

How do you see the evolution, or even the weaponization, of supply chains in the wake of rapid developments in AI? Many observers, particularly in the technology sector, view the United States and China as the two dominant players competing in this space.

In that context, how do you see globalization, supply chains, and geopolitics evolving as AI becomes increasingly central to economic and strategic competition?

The World Trade Organization says that products related to artificial intelligence accounted for about half of the growth in international trade last year.

We’re talking here about semiconductors, servers, and the sorts of chemicals used to make semiconductors. That’s a very limited set of products where we’re seeing a lot of activity.

If you take that away, growth in international trade has not been particularly impressive.

I think it’s worth keeping in mind that there seems to be an attitude that this is a winner-take-all race. Several countries are pumping a lot of money into artificial intelligence. I’m not quite as sure as some other people that this is actually a winner-take-all race.

Is it not?

Look, I’m not, by any stretch, an expert. I’m not the technical person here. But is it really true that the first country that reaches some magical point wipes everybody else out? Or that it has an enduring advantage simply because it got to some type of AI first? I don’t think so.

I’m not convinced that there is only one country that’s going to be able to prosper from AI.

Who do you think have been the biggest winners and losers of U.S. trade policy over the last 12 months?

I think the United States has been a big loser. I think our trade policy has been very bad for the United States in the short term.

If you were appointed Commerce Secretary, what are the top three priorities you would focus on?

First of all, if I were Commerce Secretary, I would tone down the discussion a little bit.

Right now, there is a very intense anti-China sentiment. It colors everything in economic policy and in defense policy, and I’m not sure it’s justified.

For example, a couple of years ago, there was an uproar about container cranes from China, with claims that they could be used by the Chinese to shut down U.S. ports in times of conflict. As it turned out, that wasn’t quite true. The government itself conducted a serious study and concluded there was nothing unusual about those cranes. The broader issue was cybersecurity.

Is there a cybersecurity problem in ports? Yes, absolutely. But is there a specific crane-related problem tied specifically to China? Apparently not. And yet we had a major flare-up blaming China for something it probably should not have been blamed for.

I think there would be a real benefit in lowering the temperature of the discussion. Now, let me be clear. 

We do have serious trade problems with China. There is no doubt about that. China has extraordinary excess capacity in many manufacturing industries. That is something that may ultimately prove costly for China and something other countries need to take measures to counteract.

But the fever pitch, particularly toward China, has been excessive.

What is the one biggest thing to watch over the next 12 months with regard to trade policy and global relationships, particularly from a supply chain perspective?

Well, I hesitate to forecast. If you had asked me that question a year ago, I would not have guessed, and neither would anyone else have guessed, that we would be threatening war with Denmark. So the limits to forecasting are serious.

I think the main thing you can say now is that this very volatile behavior on the part of the United States is likely to persist for a while.

And that makes life difficult for every company engaged in international trade. It’s just a fact. Maybe things will calm down over time. Maybe we will have trade agreements that are more predictable and reliable. Maybe we will accept that we shouldn’t just go around slapping 10 percent tariffs here and 15 percent tariffs there because we don’t like something another country has done.

But right now, we are in a period where a lot of trade diplomacy is quite erratic, and executives have to manage that reality. It’s going to be a very difficult task.

This conversation with Marc Levinson is part of a broader series of interviews we have planned to examine the forces reshaping global trade and supply chains.

In the months ahead, we will continue to engage with economists, supply chain experts, operators, policymakers, and industry leaders to explore the depth, narratives, and competing viewpoints that define supply chains and global trade. Understanding global trade and supply chains requires sustained inquiry, and this interview is one step towards that greater effort.