An all out trade war?
In the pages of Sea Breezes I have written countless times about the importance of shipping to world trade, and often mentioned the impact of global political and economic trends and unforeseen events on the health of the shipping industry.
As this edition of Sea Breezes went to print, world news was dominated by concerns of a full scale trade war between the US and China, with China announcing tariffs of up to 25% on some US imports – this in response to the widely publicised tariffs on steel and aluminium announced by President Trump earlier in March.
It is still less than 18 months since President Trump unexpectedly won the 2016 US election, but it is very clear that he intends to implement some of the most controversial policy commitments he made during the election campaign. In his view, the US needed to react to unfair competition from China’s state-led economy which has eroded American jobs in some key industries. His administration is also seeking to reduce Chinese investment in the US in retaliation for what the White House believes has been years of alleged intellectual property theft, particularly in the communications and technology sectors.
China’s response to apply tariffs to US imports was almost entirely expected; and the Chinese government has made it very clear that although it does not hope to see a trade war, it is “not afraid” of engaging in one. The stage is therefore set for a trade war which could escalate dramatically, with the timing seemingly unhelpful as one would hope that these two world superpowers would be working more closely together to reduce tensions over North Korea and its alleged nuclear programme.
Over 90% of world trade is carried by sea and the China to North America route has some of the highest volumes of containerised cargo. 2017 statistics indicated over $500 billion of Chinese imports to the US, with $130 billion of exports heading in the opposite direction. As the US measures could also affect other trading partners in the Far East and South America, then the potential impact on world shipping and major ports could be significant.
We are all beginning to “expect the unexpected” under this relatively new US administration, and the next episode in this trade war may prove difficult to predict. I am sure that all those involved in the maritime sector will be crossing their fingers that the recent exchanges between the US and China do not escalate into an all-out international trade war.
HAMISH ROSS, EDITOR