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 highest gas prices in the country are making it tougher for some gig drivers to make a living.
Gas prices have shot up amid the war in the Middle East. On average, California gas prices are the most expensive in the United States, according to data from the American Automobile Assn. The average price of regular gas in California is almost $6. The national average is a little above $4.
While Uber and Lyft drivers have concocted clever ways to cut gas consumption, they say that without some relief they will be forced to leave the ride-hailing business.
John Mejia was already struggling to make money as a part-time Lyft driver when soaring gas prices made his side hustle even harder.
“Unfortunately, it’s the economics of paying less to drivers and gas prices,” he said. “It actually is pulling people out of the business.”
Guests at The Westin St. Francis hotel get into an Uber.
(Jess Lynn Goss / For The Times)
Gig work offers drivers the freedom to work for themselves and more flexibility, but being independent contractors also means they must shoulder unexpected costs.
Ride-sharing companies say they’re trying to help, but drivers say the gas relief comes with caveats. For now, drivers say they’re being pickier about what rides they accept, cutting hours and are looking at other ways to make money.
Mejia, who started driving for Lyft more than a decade ago, said in his early days, he would sometimes make $400 in three hours. Now it takes 12 hours to rake in $200.
The San Francisco Bay Area consultant is an active member of the California Gig Workers Union, so he knows he isn’t alone. California has more than 800,000 gig rideshare drivers, according to the group, which is affiliated with the Service Employees International Union.
On social media sites such as Reddit and Facebook, gig workers have posted about how the higher gas prices are eating into their earnings. Among the tricks they are suggesting: reducing the number of times the ignition is turned on or off, avoiding traffic, working in specific neighborhoods and at times with high demand and switching to electric vehicles.
Gig drivers usually have only seconds to decide whether to accept a ride on the app, but they have become more strategic about which rides and deliveries they accept.
That means they are more likely to sit back in their cars and wait for higher fares for quick pick-up and drop-off.
“I highly recommend the ‘decline and recline’ strategy, rejecting unprofitable rides until a better one appears,” wrote Sergio Avedian, a driver, in the popular blog the Rideshare Guy.
Pedestrians cross the street in front of a Lyft and Uber driver on Wednesday. High gas prices have made it hard for gig drivers to make a living, cutting into their profits.
(Jess Lynn Goss / For The Times)
Uber, Lyft and other companies have unveiled several ways to help drivers save on gas.
Uber said drivers can get up to 15% cash back through May 26 with the Uber Pro card, a business debit Mastercard for drivers and couriers. Based on a worker’s tier, they can get up to $1 off per gallon of gas through Upside — an app that offers cash rewards — and up to 21 cents off per gallon of gas with Shell Fuel Rewards. The company also offers incentives for drivers who want to switch to electric vehicles.
“We know the price of gas is top of mind for many rideshare and delivery drivers across the country right now,” Uber said in a blog post about its gas savings efforts.
Lyft also said it’s expanding gas relief through May 26 because the company knows that the extra cost “hits hardest for drivers who depend on driving for their income.”
The company is offering more cash back, depending on the driver’s tier, for drivers who use a Lyft Direct business debit card to pay for gas at eligible gas stations. They can get an additional 14 cents per gallon off through Upside.
Drivers say the fine print on the offers dictates which card they use and where they fill up gas, making it difficult for them to save money.
“If I do the math, it’s ridiculous,” Mejia said. “They’re offering us nothing.”
Uber declined to comment, but pointed to its blog post about the gas relief efforts. Lyft also referenced the blog post and said “the gas savings were structured through rewards to maximize stackable opportunities.”
Guests at The Westin St. Francis hotel get into an Uber.
(Jess Lynn Goss / For The Times)
Gig workers have struggled with rising gas prices in the past.
In 2022, Lyft and Uber temporarily added a surcharge to their fares amid record-high gas prices following Russia’s invasion of Ukraine. This year, Uber is adding a fuel charge to its fares in Australia for roughly two months to offset the high cost of gas for drivers. Lyft said it hasn’t added a fuel charge in the U.S. or elsewhere.
Margarita Penalosa, who drives full time for Uber and Lyft in Los Angeles, started as a rideshare driver in 2017. Back then, gas was cheaper. She would easily hit her goal of making $300 in eight hours. Now she’s making just $250 after working as much as 14 hours.
Gas prices, she said, used to be less than $3 per gallon. Now some gas stations are charging more than $8 per gallon.
“Take out the gas. Take out the mileage from my car and maintenance. How much [do] I really make? Probably I get $11 for an hour,” she said.
Jonathan Tipton Meyers wants to spend fewer hours as a rideshare driver.
He already juggles multiple gigs even while driving for Uber and Lyft in Los Angeles. He’s a mobile notary and loan signing agent, a writer and performer.
Driving is “a very challenging, full-time job,” he said. “It’s very taxing and, of course, wages were just continually decreasing.”
John Mejia, a longtime Lyft and Uber driver, poses for a portrait before attending a meeting about unionizing gig drivers.
(Jess Lynn Goss / For The Times)
Even if oil continues to flow through the Strait of Hormuz, which Iran reopened Friday, it could take a while for gas prices to come down to earth, said Mark Zandi, the chief economist at Moody’s Analytics.
“There’s an old adage that prices rise like a rocket and fall like a feather,” he said. “I think that’ll apply.”
In the meantime, it will be survival of the fittest drivers. If enough of them decide to leave the apps, the ride-hailing companies could be forced to raise fares further to attract some back.
“Those who approach rideshare driving strategically, tracking expenses, choosing trips carefully, and optimizing efficiency are far more likely to weather periods of high gas prices,” wrote Avedian in the Rideshare Guy blog. “For everyone else, a spike at the pump can quickly turn rideshare driving from a side hustle into a money-losing venture.”
The proprietor of Los Angeles’ legendary Clifton’s has given up on reopening the shuttered venue.
It’s just too difficult to do business in downtown’s historic core, he says.
Andrew Meieran bought Clifton’s on Broadway in 2010 and poured more than $14 million into repairs, renovations and upgrades, adding additional bar and restaurant spaces in the four-story building. In 2018, he found that demand for cafeteria food was too low to be profitable, and he pivoted to a nightclub and lounge concept called Clifton’s Republic, featuring multiple dining and drinking venues. Meieran has tried elaborate themed environments, such as a tiki bar and forest playgrounds, and renting out the location for big events to spark more interest.
It was never easy, but during and since the pandemic, the neighborhood has grown increasingly unsafe as downtown has emptied of office workers and visitors.
Storefronts are gated up due to vandalism in the historic district in downtown Los Angeles on Tuesday.
(Eric Thayer / Los Angeles Times)
The alley behind Clifton’s Cafeteria in the downtown historic district Tuesday.
(Eric Thayer / Los Angeles Times)
Vandalism has been rampant, with graffiti appearing on the historic structure almost daily. Vandals would use acid or diamond glass cutters to deface the windows, often cracking the glass. It would cost Meieran more than $30,000 each time to replace the windows. Insurance companies either stopped offering policies that covered vandalism or raised premiums by as much as 600%, he said.
There has been continuous crime in the area, he said, including multiple assaults on people in front of his building. He last shut the venue last year, hoping things would improve and he could come back with a business that could work. Now he has given up. Someone else may take over the space or even the name of the historic spot, but he is done trying.
“We’ve lost our way,” Meieran said. “I want to get up on the tops of the skyscrapers and yell that people need to pay attention to this.”
The disenchantment of a business leader who used to be one of downtown L.A.’s biggest backers shines a spotlight on the stubborn safety concerns, rising costs and thinner foot traffic that have made it increasingly difficult for even iconic businesses to survive.
The once-popular institution dates back to 1935, when it was a Depression-era cafeteria and kitschy oasis that sold as many as 15,000 meals a day when Broadway was the city’s entertainment hub.
It served traditional cafeteria food such as pot roast, mashed potatoes and Jell-O in a woodsy grotto among fake redwood trees and a stone-wrapped waterfall reminiscent of Brookdale Lodge in Northern California.
It’s not the only once-prominent destination that has failed to find a way to flourish in today’s market. Cole’s, one of L.A.’s most famous restaurants and often credited with inventing the French dip sandwich, closed last month after a 118-year run.
“The bigger problem for us and the rest of the industry is the high cost of doing business,” said Cedd Moses, who used to operate Cole’s and has backed many other bars and restaurants in historic buildings downtown for decades. “That’s what is killing independent restaurants in this city.”
Outside of Clifton’s Cafeteria.
(Eric Thayer / Los Angeles Times)
Clifton’s Republic owner Andrew Meieran stands next to a boat on the top floor of the historic restaurant in 2024.
(Wally Skalij / Los Angeles Times)
Clifton’s opened and closed repeatedly during the pandemic and, more recently, after a burst pipe caused extensive damage. Meieran opened it for special events such as last Halloween, but it has otherwise been closed.
Police are woefully understaffed and hampered by public policy, said Blair Besten, president of downtown’s Historic Core Business Improvement District, a nonprofit that arranges graffiti removal, trash pickup and safety patrols in the area.
Businesses and residents in the area would like to see a bigger police presence, but there have been protests against that by people who are not from downtown, she said.
“People are starting to see the fruits of the defunding movement,” she said. “It has not led us to a better place as a city.”
The Los Angeles Police Department is making progress downtown, Captain Kelly Muniz said, with violent crime down more than 10% from last year.
“While we’re working very hard to solve crime, to prevent crime, there are still elements such as trash, open-air drug use, homelessness and graffiti,” she said. “We’re swinging in the right direction.”
Retailers have been opting out of downtown L.A., said real estate broker Derrick Moore of CBRE, who helps arrange commercial property leases. Brands have headed to more vibrant nearby neighborhoods such as Echo Park and Silver Lake.
“A lot of operators are just electing to skip over downtown,” he said. “They’re leasing spaces elsewhere, where they feel they have a greater chance at higher sales.”
A man walks past a pile of trash left on the street in the historic district.
(Eric Thayer / Los Angeles Times)
While some businesses are struggling, many downtown residents say their perceptions of safety are improving and that the area is regaining some vibrancy.
“A lot of people live here. I think people forget that,” Besten said. “We’re all surviving. It’s just hard for all the businesses to survive.”
A green shoot for the Historic Core is Art Night on the first Thursday of every month, when 50 or 60 locations, including permanent art galleries and pop-up galleries in unused storefronts, display art to map-toting visitors who come for the occasion.
They often end up in Spring Street bars, which more typically thrive on weekend nights but are still a draw to downtown.
“I think nightlife will thrive downtown, since bars attract people that don’t mind a little grittier atmosphere,” said Moses. “Our sales are hitting new records at our bars downtown, fortunately, but our costs have risen dramatically.”
A closed sign for Clifton’s Cafeteria.
(Eric Thayer / Los Angeles Times)
Clifton’s former backer, Meieran, says he doesn’t think things are going to bounce back enough to warrant more massive investment. He has sold the building, and the owner is looking for a new tenant to occupy Clifton’s space. He still controls the Clifton’s name.
While there is still a chance he could let someone else use the name Clifton’s, Meieran is done for now — too many bad memories.
“There was a guy who was terrorizing the front of Clifton’s because he decided he wanted to live in the vestibule in front, and he didn’t want us to operate there,” Meieran said. “He would threaten to kill anybody who came through.”
He doesn’t believe official statistics that show crime and homelessness are way down in the area, and he doesn’t want to restart a business when criminals can so easily erase his hard work.
“What business that’s already on thin margins can survive that?” he said.
Trader Joe’s customers might soon get a payout from the popular grocery chain.
The Monrovia-based company agreed to a $7.4-million settlement in a class action lawsuit that claimed customers were left vulnerable to identity theft.
Customers who purchased items with a credit or debit card from March to July in 2019 might be eligible for a payment as part of the settlement.
The plaintiff alleged that some receipts printed in 2019 included 10-digit credit or debit card numbers —double what’s allowed under the Fair and Accurate Credit Transactions Act.
Trader Joe’s “vigorously denies any and all liability or wrongdoing whatsoever,” the grocery chain said in the settlement website. The grocery chain decided to settle to avoid a long and costly litigation process.
The payout will go toward paying impacted customers as well as attorney fees and other expenses.
About $2.6 million will go toward attorney fees, and the plaintiff will receive a $10,000 incentive payment, according to the settlement. The remaining funds will be distributed evenly among customers who submit valid claims.
It’s unclear how much money each customer would get, but the payout could be about $102, according to the settlement notice.
To receive the payout, customers must have received a receipt displaying the first six and last four digits of the card number.
Some customers identified as part of the settlement class have been notified and received a class ID number to file a claim.
Customers have from now until June 6 to file a claim online or by phone.
A customer not identified in the settlement can still submit a claim by entering the first six and last four digits of the card used, along with the date it was used at Trader Joe’s.
Brian Keim, the plaintiff who brought the case, used his debit card at stores in Florida in 2019. He said some stores printed transaction receipts that included the first six and last four digits of customers’ card numbers.
The receipts did not include other personal information, such as the middle digits of the users’ cards, the cards’ expiration dates, or the users’ addresses. No customer has reported identity theft as a result of the receipts since the lawsuit was filed, the grocer said.
However, identity theft doesn’t require submitting a claim for payment.
The settlement was agreed upon by both the grocer and the plaintiff, but still has to be approved by a court. A hearing is set in August.
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