Location Strategy Chartbook 03.29.25

In a bid to revive America’s long-dormant merchant shipping industry, Washington has proposed putting million-dollar levies on Chinese ships docking in the US — a threat that could disrupt global trade by more than President Donald Trump’s tariffs — especially after new indications that such levies will be more targeted.

Business owners and industry officials say the proposals could be devastating for the US economy by making American goods more costly, driving up freight rates and inflation, and diverting trade away from US hubs.

John McCown, a veteran of the industry and author of a history of cargo shipping, put it starkly: “If you wanted to take a sledgehammer to trade this is what you would do. You take it all together — it’s like an apocalypse for trade.”

Consumer goods imports reached a new high

Bloomberg: The US last year imported roughly half of the vehicles sold in the country. With President Donald Trump now set to impose a 25% surtax on autos — and major parts — economists and industry analysts alike are rushing to sketch out the implications.

From a short-term perspective, the auto levy bodes for weaker growth and faster inflation. Bloomberg Economics, using a 2018 Fed frame of analysis, estimated a GDP hit of 0.2% and a bump in core price levels by 0.1%.

The bigger question is, will the 47% of the market that’s now made up of imports move onshore? This isn’t a flip-of-the-switch sort of thing. Moving final assembly, let alone full supply chains, is a multi-year process.

Even for Ford and General Motors, which, according to UBS analysts including Joseph Spak, have excess capacity in the US, the issue isn’t such a quick and easy call.

The duo could “eventually” move production of some vehicles currently made in Canada and Mexico to the use, the UBS team wrote. But, “that capacity is not tooled to make those vehicles. So, some potential capital investment might be needed for tooling, and this could take time.”

Relative to GDP, household debt has dropped for 14 straight quarters, and in the final three months of 2024 reached a two-decade low, Stanley wrote in a note this week. And households’ debt-servicing costs — the percentage of disposable income needed to stay current on debt payments — remains below 2019 levels (helped by the prevalence of fixed-rate mortgages).

That new car smell is getting rare. It’s a trend that smells like money for investors in one sector, but there are limits.

Lower and middle-class Americans have been under pressure, squeezed by rising grocery and insurance prices. Small purchases are already being foregone or downgraded.

Now it seems consumers might be even less inclined to make big ones like cars. The Conference Board said Tuesday that forward-looking expectations fell to their lowest level in 12 years. Meanwhile, tariffs on steel, aluminum and on imported autos themselves could raise sticker prices, which already were close to a record.

Keeping your car running is a high priority during tough times and those between six and 14 years old get the most TLC. It’s often cheaper to do repairs on your own or to purchase parts for a mechanic to install than having them buy it. S&P said last year that 110 million vehicles are in that age range and that their number will grow by 40% through 2028.

The other retail sector that pleasantly surprised investors during the crisis was dollar stores, which serve low-income consumers. But their shares have been scuffling: Dollar General and Dollar Tree shares are down by 45% and 47%, respectively, over the past year. They’re even cheaper than during the crisis as a multiple of revenue.

Showing how much pressure the companies are under, The Wall Street Journal reported Wednesday that Dollar Tree would sell its budget Family Dollar chain to private-equity firms. Investors fear that benefit cuts will further squeeze their customers’ budgets.

A competitive difference with auto parts is that lots of other stores sell household necessities. Walmart, which got caught flatfooted 17 years ago, has been actively courting low-income customers. So has Amazon

NY Fed: We estimate that more than nine million student loan borrowers will face significant drops in credit score once delinquencies appear on credit reports in the first half of 2025.

Median Equifax Risk Score among borrowers with a student loan in the first quarter of 2019, separately for those who had a delinquency in 2019 (gold line), those in default in 2019 (green line), and those who were current throughout 2019 (blue line) (note the initial fall for the gold line is driven by borrowers in that group falling delinquent in 2019).

The 2020 forbearance marked all delinquent (but not defaulted) loans as current, causing a jump of 74 points, from 501 to 575, in the median score between 2019:Q4 and 2020:Q4 for those borrowers who were previously delinquent but not defaulted. Since then, scores continued to rise for previously delinquent borrowers (as their negative remarks aged) while scores for previously current borrowers remained relatively flat.

Defaulted borrowers saw a gradual rise in credit scores as their negative marks aged and as some borrowers voluntarily rehabilitated their defaulted loans. However, in the fourth quarter of 2022, the Fresh Start program marked all defaulted loans as current, increasing the median score for those with a default in 2019 by 44 points, from 564 in 2022:Q1 to 608 in 2023:Q1. By the end of 2024, those borrowers with loans in delinquency or in default saw scores that were 103 and 72 points higher, respectively, than at the end of 2019. While these score increases are sizable, they were not large enough for the median score to escape subprime standing. In the overall student loan borrower population, the share of borrowers with subprime credit scores (less than 620) decreased from 36.3 percent in 2019 to 28.3 percent in 2024.

The chart below shows the shadow delinquency rate since the beginning of 2018. Prior to the pandemic forbearance, the series reached a high of 14.8 percent in the second quarter of 2018 and hovered near 14 percent throughout 2019. As discussed above, the delinquency rate fell at the start of the pandemic as loans were cured and due to the Fresh Start program. After payments resumed, the volume of past due federal loans quickly returned to pre-pandemic levels and reached a new high of 15.6 percent by the end of the on-ramp period, with more than $250 billion in delinquent debt held by 9.7 million borrowers.

It is reasonable to expect student loan delinquency to surpass pre-pandemic levels when new delinquencies hit credit reports. Although some of these borrowers may be able to cure their delinquencies—either through making up missed payments or by entering an administrative forbearance with their loan servicers—the damage to their credit standing will have already been done and will remain on their credit reports for seven years.

Using data from 2016 to 2019, we estimate the credit score impact of a new reporting of a 90 (or more) days past due student loan delinquency by borrower credit score band prior to the delinquency. The table below depicts those estimates, revealing those with superprime credit scores (760 or higher) before the delinquency saw average credit score declines of 171 points associated with a new delinquency and those with subprime credit scores (led than 620) saw average declines of 87 points.

Warehouse owners say tenants are delaying decision-making on new leases as a result of the tariffs — both enacted and proposed — as they wait for a clearer picture on how potential price hikes from retailers will affect consumer demand.

The U.S. has placed blanket tariffs of about 20% — on top of a 10% tariff put in place during his first administration — on goods from China, as well as a 25% levy on goods from Canada and Mexico, save some exceptions.

The uncertainty is blamed for ripple effects across the global industrial market, with both tenants and owners pivoting their strategy to avoid the tariff fallout.

"It's very challenging for a business today to underwrite anything," Laura Clark, chief operating officer at Rexford Industrial, said during the NAIOP event. "We’ve seen requirements come into the market, and some of those parties have said, ‘Hey, I need 30 days to try to get more visibility.' This pattern will likely continue throughout the year.”

Though projections from think tanks such as the Texas Demographic Center (TDC) estimate that in-migration to Texas is likely to slow in the coming decades, San Antonio continues to post impressive figures for population growth year over year. Over the longer term, TDC estimates that migration will be close to half its rate during the 2010s.

Sales of new single-family houses in February 2025 were at a seasonally adjusted annual rate of 676,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 1.8 percent above the revised January rate of 664,000 and is 5.1 percent above the February 2024 estimate of 643,000