The Impacts of the US/China Trade Wars on the US Shipping Industry The US/China Trade War has certainly made headlines over the past year, highlighting the insecurities that the manufacturing and freight transportation industries now face. The Journal of Commerce reports that slower volume and capacity on the trans-Pacific trade route are keeping the market on edge while many industry leaders wait with anticipation as new trade talks progress. While the United States and China have yet to strike a new trade deal, the shipping industry is attempting to assess how both the negative and positive impacts will shape the future of their industry and businesses. The Negative Impacts While the shipping industry relies on imports and exports as part of their business model, a trade war can significantly enable a series of negative effects. Maritime shipping accounts for around 90 percent of all trade across the globe, so many industry insiders are thinking of how lowered shipping volumes will affect their bottom lines. CNN suggested that around 7 percent of U.S.-Asian trade could be at risk, as well as one percent of all global trade. Building materials like flooring, screws, hammers and household appliances were targeted with increased tariffs. Other goods like cars parts, electrical machinery and metal manufactures are also significantly impacted. Peter Sand, the chief shipping analyst at Baltic and International Maritime Council (BIMCO) says, “There is no doubt that a trade war between the US and China and any other countries for that matter is outright bad for shipping.” Air and Ground World Transportation is one leading freight forward, logistics and customs brokerage that is anticipating how the trade wars will affect business abroad. The company’s Director, Dan Gomez, says that if the trade wars continue it will cause an abundance of suboptimal resources and it could affect the industry’s
bottom line, especially because the freight shipping sector is known for supporting prosperity on a global scale. The Positive Impacts However, freight markets depends on various factors, not all of which are affected by a trade war, says Dan Gomez. Among the positive impacts, a trade war could stimulate growth in domestic transportation markets. While foreign shipping may see the negative impacts, domestic shipping may see a windfall. As we rely on creating our own domestic goods, the United States will need better ways to transfer products from coast to coast. There’s potential for it to create a whole new industry of shipping that is unprecedented. The goal of the war is to target a foreign country’s infrastructure, rather than its consumers, so some products will continue to be transported without increased duties. However, a lot of the parts and fabrics that are used in the consumer products are already getting hit with additional duties, which in turn costs consumers more to purchase the finished products. AGWorld Transportation says that another factor to acknowledge is foreign trade zones. Many companies with zone status may be able to avoid new tariffs and with nearly 200 foreign trade zones in the United States it could be a lifesaver for the shipping industry. As Barron’s reports, China could stick to their proposal of establishing free trade zones to help companies who manufacture high-tariff items prosper, but eventually China could become more focused on its need to selfmanufacture critical technology components, making US tech manufacturers seek other territories to expand their markets within or helping to develop a more reliant domestic shipping industry.
Outlook for the Shipping Industry
The industry is staying cautious in a time of uncertainty as they await adjustments to the pending plan. Right now, companies like AGWorld Transportation are preparing for uncertainty. Dan Gomez says that with China and US making up 4 percent of global commerce, it’s likely that the war will have strong consequences in both directions for the global trading patterns as it continues. While it’s unclear to guess how the trade war will end, uncertainty is certain as the trade war escalates. For now, those in the shipping industry will have to find different routes to maintain their success. One thing that’s clear about these trade wars is that change will come for both businesses and shipping industry professionals in both countries as the trade war proves to be unlike any other in history.