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.