Chokepoints Can Make Carolinians Gag

By John Hood

RALEIGH — To paraphrase the familiar line, you may not be interested in international shipping, but international shipping is interested in you.

Whether you like it or not, virtually every hour of your day involves consumption of or exposure to goods that are either imported from other countries or use imports as an input. Food, clothing, shelter, transportation, recreation and leisure, even health care and education — all are currently produced in a context of cross-national supply chains. When those chains get disrupted, the effects can be immediate and significant.

Some are obvious. The outbreak of military conflicts in the Persian Gulf and Red Sea, for example, has crimped oil exports and severely damaged refineries in the region. As a result, North Carolinians are paying much more at the pump for gasoline and, especially, diesel.

Other effects are less obvious but no less costly. Tariffs on lumber, wood products, metals, and other components, for example, make it more expensive to build houses, apartments, and office buildings. More broadly, taxing imports has made domestic investment in plants, equipment, and technology less productive and, therefore, less prevalent. A recent American Enterprise Institute study by Kyle Pomerleau, Thomas Brosy, Robert McClelland, and John Wong examined the issue in detail, using the case of President Trump’s “Liberation Day” taxes imposed in 2025 and later struck down by the U.S. Supreme Court.

They found that the tariffs in question “raised the overall cost of capital by as much as 2.7%, with the cost increase varying significantly by asset type.” That translated into a 4.2-percentage-point increase in the marginal effective tax rate on investment across the entire economy, rising by as much as 26 percentage points on equipment. “A tariff-induced tax increase on investment this large,” they concluded, “would offset the tax cut that the One Big Beautiful Bill Act (OBBBA) provided for investment.”

As for shipping itself, greater risk to running tankers through the Persian Gulf translates into higher costs for farmers in America and elsewhere — from the diesel that fuels their equipment to the fertilizers that boost their yields — resulting in higher prices at grocery stores and restaurants right here in North Carolina.

When navigable waters become chokepoints, we all gag. In a research paper just released by the National Bureau of Economic Research, economists from the Federal Reserve Bank of St. Louis, the University of Pennsylvania, the University of Oxford, Peking University, and Tsinghua University examined two cases in particular: a severe congestion of West Coast ports in 2021 and the 2023-24 attacks by the Yemen-based Houthis on shipping in the Red Sea, which forced many shippers to avoid the Suez Canal in favor of a much-longer route around the Cape of Good Hope.

In both cases, constrictions on shipping resulted in significant drops in overall economic output and consumer welfare. The authors concluded that expenditures on port infrastructure to relieve congestion and on naval protection to move cargo through perilous straits can be cost-effective investments.

Sal Mercogliano — an historian and former Merchant Marine who chairs Campbell University’s Department of History, Criminal Justice, and Politics — is a nationally recognized expert on the subject. “The concept of the blue highway is going away,” Mercogliano told the Wall Street Journal earlier this year. “We’ve created a system on the ocean geared for volume and velocity — you can move lots of goods quickly and what we’re seeing is, it’s like hitting a brick wall at 100 miles an hour.”

I admit that, here in North Carolina, policymakers have little control over such issues. They can’t repeal the federal tariffs that obstruct trade and have no role in deciding where and how military force is applied to ensure freedom of navigation. And while our ports at Wilmington and Morehead City serve key sectors, they are neither sufficiently congested nor sufficiently capacious to justify large-scale investment.

But state policymakers can press national leaders to prioritize the unconstrained shipping of goods across the high seas. North Carolinians will reap its benefits.

John Hood is a John Locke Foundation board member. His books Mountain Folk, Forest Folk, and Water Folk combine epic fantasy with American history (FolkloreCycle.com).