Business
Shift in China-U.S. trade is hurting California, helping Texas
As if it weren’t worrisome enough for California that more highly skilled, highly paid workers have been leaving for Texas, evidence shows that the Lone Star State has begun to siphon trade dollars and uncounted jobs away from the Southland’s ports and the distribution hubs in the Inland Empire.
And the apparent cause of the new wrinkle in the Texas-California rivalry is not some new policies or programs adopted in Texas to make it a greater magnet for economic activity that was previously in California. Instead, it’s a consequence of the U.S.-China trade war that began when Donald Trump occupied the White House and has continued with President Biden’s efforts to reduce American dependence on China, especially for high-tech products that involve national security and other issues.
To get around the U.S. tariffs and trade restrictions, Chinese companies have sharply stepped up investments into Mexico and been moving products into the United States by truck instead of shipping by sea through the massive port and distribution systems in Southern California.
The ports of Los Angeles and Long Beach are the busiest in the nation and handle about 40% of all ocean cargo from Asia. But last year the number of 20-foot-equivalent containers from China entering the San Pedro ports complex fell a combined 12.5% from 2022, to the lowest level in at least a decade, according to data from S&P Global Market Intelligence.
“If we’re doing less business, it means fewer jobs, quite simply,” said Gene Seroka, executive director of the Port of Los Angeles. He said that every four containers translate into one job. “Economically, where all of us spend our money, if we don’t have this cargo coming through, it will be less — and there will be choices to be made.”
China’s share of all containers entering the Port of L.A. still remains dominant, at 53% last year, although that’s down from 57% in 2022. Seroka sees that percentage slipping to the mid-40s in the coming years.
The Southland’s cargo volume, overall, has picked up significantly in recent months, thanks to the end of labor contract talks and diversions to the West Coast due to military conflict and drought disrupting the Suez and Panama canals, respectively.
But longer term, Seroka said a dwindling of Chinese inbound containers has to be made up elsewhere. In addition to some 15,000 longshoremen, the two ports support hundreds of thousands of jobs in the region — in trucking, warehousing, trade finances and countless small businesses.
California’s stringent environmental regulations and high business costs add to the pressure.
To be sure, increased Mexican imports also benefit Southern California, which historically has gotten a large volume of overland trade, particularly electronic products coming up the San Diego border. But the biggest entry point for Mexican goods is Laredo, Texas, just north of the big manufacturing center in Monterrey, Mexico, and then El Paso, close to Juarez.
“Since more and more goods are coming from Mexico, Texas is geographically and conveniently located,” said Sung Won Sohn, an economics professor at Loyola Marymount University.
Tom Fullerton, a border business economist at the University of Texas in El Paso, said a lot of things made in Mexico are intermediate components, many of which go back and forth across the border as many as a dozen times. Some 90% is transported by trucks. No wonder employment for truck drivers in Texas has been growing nonstop, while California’s has come to a screeching halt, according to the U.S. Bureau of Labor Statistics.
“Increased Chinese investment simply creates more business opportunities for firms in Texas,” Fullerton said.
At the moment, trade economies in both Texas and California face some head winds, including a slowing U.S. economy as a result of anti-inflation efforts, plus cutbacks by retailers and other buyers that overstocked merchandise even as American consumers have been shifting their spending from stuff to services, such as travel and entertainment.
“Now that we filled the house with everything, everything we could wear and use for years, they’re saying, ‘Let’s go to the movies, the ballgame,’” said Jock O’Connell, a California trade specialist at Beacon Economics. “U.S. demand for imported goods from anywhere is slacking.”
Last year U.S. imports of all merchandise from China, by ship and air, fell by a whopping 20% from 2022, to $427 billion. The Commerce Department reported Thursday that Chinese imports in January were up slightly from December, but down 6% from January 2023.
Meantime, U.S. imports from Mexico continued to rise in January and compared with a year earlier, extending the lead over China. Mexican imports jumped after the worst of the pandemic passed and reached $476 billion last year. It was the first time in more than two decades that Americans bought more merchandise from Mexico than China.
Overall, the U.S. trade deficit of all goods and services fell last year by almost 19%, the largest drop since 2009, as Americans bought less foreign oil and fewer China-made phones, toys and household goods. In January, the trade deficit increased, to $89 billion, as American exports were lower than December and year-earlier figures.
Efforts to diversify production away from China have been going on for years, in part as a hedge against political risks and rising labor and business costs in China. But the move to Mexico and some other nations gained speed after then-President Trump in 2018 slapped large tariffs on a wide array of Chinese imports.
President Biden hasn’t lifted them, and in some ways further tightened the trade screws on China. The pandemic added to the so-called reshoring or near-shoring momentum as multinationals, stung by a breakdown in transport and supply chains, sought to be closer to their markets.
Harry Moser, founder of the Reshoring Initiative to bring manufacturing back to the U.S., said the changes in trade volume by country don’t tell the full story. Although he called the drop in the American trade deficit with China last year a good thing, Moser questioned whether the U.S. is really less dependent on China.
What’s happening, he argued, is that there’s considerable rerouting of trade from China through Mexico. And he fears it could get worse, pointing to the Chinese firm BYD’s plans to build an electric vehicle factory in Mexico for export to the U.S. Even Tesla, which makes its cars in Shanghai as well as Texas, is apparently urging some of its Chinese suppliers to locate in Mexico, he said.
“It’s not time to celebrate the China news,” Moser said of the reported drop in Chinese imports to the U.S.
Apparently there’s no cause to celebrate in the Southland either.
Chinese automotive parts companies have been among the most aggressive in stepping up investments in Mexico. Thirty-three car parts suppliers of Chinese origin are now registered in Mexico, and 18 exported $1.1 billion worth of products to the U.S. last year, up 15% from 2022, said Michelle Sagrero, communications manager at INA, the auto parts industry association in Mexico. She said more Chinese investments are in the works, though she said it was too early to disclose how many companies.
Overall, Chinese foreign direct investment, while stalling in the U.S., has kept growing in Mexico and topped $2.5 billion in 2022, a fivefold increase from 2000-04, according to Red ALC-China, a nonpartisan network of academics in Mexico and other countries. The tally for Chinese investments in 2023 hasn’t been published yet, but “it’ll be substantially higher,” said Enrique Dussel Peters, coordinator for the Center for Chinese-Mexican Studies at UNAM, a university in Mexico City.
The U.S.-China trade war has undoubtedly played a big role, he said. In his study for a United Nations economic group, Dussel Peters found that in 2021, companies exporting goods from China to the U.S. paid 18.8% of the value of their shipment in tariffs and transportation costs. The comparable costs for Mexico-originated exports to the U.S. — 1.05%.
“The difference is substantial, to put it politely,” he said.
Dussel Peters said he expects more Chinese and other foreign companies to invest and set up shop in Mexico. Mexico has free trade pacts not only with the U.S. but also a few dozen other nations, and it has its own sizable domestic market too. But he noted that there is one potential hitch. Thus far, Washington hasn’t come down hard in pressuring Mexico to follow the U.S. on China trade and investments.
“There is always the threat that the U.S. becomes more serious about complying with U.S. regulations and restrictions,” Dussel Peters said. “You can’t continue with a trade war and profound conflict and have a major partner of the U.S. with a sign saying to the Chinese, ‘Welcome to Mexico.’”
The rolling robots that deliver groceries and hot meals across Los Angeles are getting an upgrade.
Coco Robotics, a UCLA-born startup that’s deployed more than 1,000 bots across the country, unveiled its next-generation machines on Thursday.
The new robots are bigger, tougher and better equipped for autonomy than their predecessors. The company will use them to expand into new markets and increase its presence in Los Angeles, where it makes deliveries through a partnership with DoorDash.
Dubbed Coco 2, the next-gen bots have upgraded cameras and front-facing lidar, a laser-based sensor used in self-driving cars. They will use hardware built by Nvidia, the Santa Clara-based artificial intelligence chip giant.
Coco co-founder and chief executive Zach Rash said Coco 2 will be able to make deliveries even in conditions unsafe for human drivers. The robot is fully submersible in case of flooding and is compatible with special snow tires.
Zach Rash, co-founder and CEO of Coco, opens the top of the new Coco 2 (Next-Gen) at the Coco Robotics headquarters in Venice.
(Kayla Bartkowski/Los Angeles Times)
Early this month, a cute Coco was recorded struggling through flooded roads in L.A.
“She’s doing her best!” said the person recording the video. “She is doing her best, you guys.”
Instagram followers cheered the bot on, with one posting, “Go coco, go,” and others calling for someone to help the robot.
“We want it to have a lot more reliability in the most extreme conditions where it’s either unsafe or uncomfortable for human drivers to be on the road,” Rash said. “Those are the exact times where everyone wants to order.”
The company will ramp up mass production of Coco 2 this summer, Rash said, aiming to produce 1,000 bots each month.
The design is sleek and simple, with a pink-and-white ombré paint job, the company’s name printed in lowercase, and a keypad for loading and unloading the cargo area. The robots have four wheels and a bigger internal compartment for carrying food and goods .
Many of the bots will be used for expansion into new markets across Europe and Asia, but they will also hit the streets in Los Angeles and operate alongside the older Coco bots.
Coco has about 300 bots in Los Angeles already, serving customers from Santa Monica and Venice to Westwood, Mid-City, West Hollywood, Hollywood, Echo Park, Silver Lake, downtown, Koreatown and the USC area.
The new Coco 2 (Next-Gen) drives along the sidewalk at the Coco Robotics headquarters in Venice.
(Kayla Bartkowski/Los Angeles Times)
The company is in discussion with officials in Culver City, Long Beach and Pasadena about bringing autonomous delivery to those communities.
There’s also been demand for the bots in Studio City, Burbank and the San Fernando Valley, according to Rash.
“A lot of the markets that we go into have been telling us they can’t hire enough people to do the deliveries and to continue to grow at the pace that customers want,” Rash said. “There’s quite a lot of area in Los Angeles that we can still cover.”
The bots already operate in Chicago, Miami and Helsinki, Finland. Last month, they arrived in Jersey City, N.J.
Late last year, Coco announced a partnership with DashMart, DoorDash’s delivery-only online store. The partnership allows Coco bots to deliver fresh groceries, electronics and household essentials as well as hot prepared meals.
With the release of Coco 2, the company is eyeing faster deliveries using bike lanes and road shoulders as opposed to just sidewalks, in cities where it’s safe to do so. Coco 2 can adapt more quickly to new environments and physical obstacles, the company said.
Zach Rash, co-founder and CEO of Coco.
(Kayla Bartkowski/Los Angeles Times)
Coco 2 is designed to operate autonomously, but there will still be human oversight in case the robot runs into trouble, Rash said. Damaged sidewalks or unexpected construction can stop a bot in its tracks.
The need for human supervision has created a new field of jobs for Angelenos.
Though there have been reports of pedestrians bullying the robots by knocking them over or blocking their path, Rash said the community response has been overall positive. The bots are meant to inspire affection.
“One of the design principles on the color and the name and a lot of the branding was to feel warm and friendly to people,” Rash said.
Coco plans to add thousands of bots to its fleet this year. The delivery service got its start as a dorm room project in 2020, when Rash was a student at UCLA. He co-founded the company with fellow student Brad Squicciarini.
The Santa Monica-based company has completed more than 500,000 zero-emission deliveries and its bots have collectively traveled around 1 million miles.
Coco chooses neighborhoods to deploy its bots based on density, prioritizing areas with restaurants clustered together and short delivery distances as well as places where parking is difficult.
The robots can relieve congestion by taking cars and motorbikes off the roads. Rash said there is so much demand for delivery services that the company’s bots are not taking jobs from human drivers.
Instead, Coco can fill gaps in the delivery market while saving merchants money and improving the safety of city streets.
“This vehicle is inherently a lot safer for communities than a car,” Rash said. “We believe our vehicles can operate the highest quality of service and we can do it at the lowest price point.”
President Trump on Friday directed federal agencies to stop using technology from San Francisco artificial intelligence company Anthropic, escalating a high-profile clash between the AI startup and the Pentagon over safety.
In a Friday post on the social media site Truth Social, Trump described the company as “radical left” and “woke.”
“We don’t need it, we don’t want it, and will not do business with them again!” Trump said.
The president’s harsh words mark a major escalation in the ongoing battle between some in the Trump administration and several technology companies over the use of artificial intelligence in defense tech.
Anthropic has been sparring with the Pentagon, which had threatened to end its $200-million contract with the company on Friday if it didn’t loosen restrictions on its AI model so it could be used for more military purposes. Anthropic had been asking for more guarantees that its tech wouldn’t be used for surveillance of Americans or autonomous weapons.
The tussle could hobble Anthropic’s business with the government. The Trump administration said the company was added to a sweeping national security blacklist, ordering federal agencies to immediately discontinue use of its products and barring any government contractors from maintaining ties with it.
Defense Secretary Pete Hegseth, who met with Anthropic’s Chief Executive Dario Amodei this week, criticized the tech company after Trump’s Truth Social post.
“Anthropic delivered a master class in arrogance and betrayal as well as a textbook case of how not to do business with the United States Government or the Pentagon,” he wrote Friday on social media site X.
Anthropic didn’t immediately respond to a request for comment.
Anthropic announced a two-year agreement with the Department of Defense in July to “prototype frontier AI capabilities that advance U.S. national security.”
The company has an AI chatbot called Claude, but it also built a custom AI system for U.S. national security customers.
On Thursday, Amodei signaled the company wouldn’t cave to the Department of Defense’s demands to loosen safety restrictions on its AI models.
The government has emphasized in negotiations that it wants to use Anthropic’s technology only for legal purposes, and the safeguards Anthropic wants are already covered by the law.
Still, Amodei was worried about Washington’s commitment.
“We have never raised objections to particular military operations nor attempted to limit use of our technology in an ad hoc manner,” he said in a blog post. “However, in a narrow set of cases, we believe AI can undermine, rather than defend, democratic values.”
Tech workers have backed Anthropic’s stance.
Unions and worker groups representing 700,000 employees at Amazon, Google and Microsoft said this week in a joint statement that they’re urging their employers to reject these demands as well if they have additional contracts with the Pentagon.
“Our employers are already complicit in providing their technologies to power mass atrocities and war crimes; capitulating to the Pentagon’s intimidation will only further implicate our labor in violence and repression,” the statement said.
Anthropic’s standoff with the U.S. government could benefit its competitors, such as Elon Musk’s xAI or OpenAI.
Sam Altman, chief executive of OpenAI, the company behind ChatGPT and one of Anthropic’s biggest competitors, told CNBC in an interview that he trusts Anthropic.
“I think they really do care about safety, and I’ve been happy that they’ve been supporting our war fighters,” he said. “I’m not sure where this is going to go.”
Anthropic has distinguished itself from its rivals by touting its concern about AI safety.
The company, valued at roughly $380 billion, is legally required to balance making money with advancing the company’s public benefit of “responsible development and maintenance of advanced AI for the long-term benefit of humanity.”
Developers, businesses, government agencies and other organizations use Anthropic’s tools. Its chatbot can generate code, write text and perform other tasks. Anthropic also offers an AI assistant for consumers and makes money from paid subscriptions as well as contracts. Unlike OpenAI, which is testing ads in ChatGPT, Anthropic has pledged not to show ads in its chatbot Claude.
The company has roughly 2,000 employees and has revenue equivalent to about $14 billion a year.
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