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Global Supply Chain News: Growing Trade Wars not having Much Impact on Global Logistics Yet

 

Maersk Says Impact on Global Trade almost Negligible - So Far - while Others Say Tariffs could Increase Shipping Demand

Sept. 11, 2018
SCDigest Editorial Staff

The still brewing trade wars resulting from US tariffs on goods imported from China and Europe and retaliatory tariffs back, with more on the docket, remain a big concern for many companies and economists.

Supply Chain Digest Says...

Thus far, the tariff wars have been barely a blip on the global trade or ocean shipping sector. But where do we go from here?


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But the US and global economy seem to show little negative impacts thus far (though that is not the case for individual companies). Why? It turns out that in comparison to global trade as a whole, the trade wars thus far amount to relatively small potatoes.

For example, the shipping sector's largest container carrier, Maersk Line, has estimated that global trade will be reduced by just 0.1 to 0.3% as a result of the escalating trade tensions.

That's obviously not very much.

Maersk did say its US container imports from China could be reduced by up to 4% if the trade war escalates, while Chinese container imports of US goods might be reduced by up to 6%. But most of the rest of world trade is unaffected.

"The impact of these tariffs on global trade is uncertain and depends on how much of the resulting price increase is absorbed by consumers, how much the US and its trading partners can diversify their imports, and the broader effects on business confidence, investment, and supply chains," Maersk said as part of its second-quarter earnings release.

The South China Morning Post reported that Japanese container carrier Nippon Yusen said that the demand for container shipping remained firm in its first quarter, which ended in June, but the completion of some large new ships had led to a standstill in the recovery of spot freight rates. The carrier said that shipping volumes for coal, grain and other dry bulk goods had increased.

That's probably why the Baltic Dry Index, which measures shipping rates for bulk shipping, has been on a tear, up nearly 80% since April, when trade tensions were building, ending in the first US tariffs going into effect on July 6.

The index reached a 52-week high earlier in September, even as a second round of tariffs hit.

Chinese container carrier Cosco Shipping is also maintaining an even keel, so to speak, saying last week that growing trade protectionism, including the trade dispute between the US and China, could "inhibit the growth of the global economy to a certain extent," but it expects the global economic growth to continue, helping the volume of shipping using containers.

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The Morning Post also reported that at Singamas Container Holdings, the world's second-largest shipping container manufacturer, as saying the escalating tensions have not dramatically cut into trade, but customers "are watching it very carefully," said Teo Siong Seng, CEO of the company.

So thus far, the tariff wars have been barely a blip on the global trade or ocean shipping sector. But where do we go from here?

President Trump plans to move forward with tariffs on another $200 billion of Chinese goods as early as next week, and Trump recently said he has "no time frame" for ending the dispute. China is sure to retaliate again.

That could push the impact on trade and into something that is meaningful.

Nevertheless, some observers even believe that the trade wars could be good for ocean carriers. How? Companies likely will be forced to use inefficient (meaning expensive) routes to try to get around the tariffs with new sourcing locations.

Are you surprised the tariffs have not yet had much total impact on trade and shipping? Let us know your thoughts at the Feedback section below.

 

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