Sailing with Uncertainty: The Impact of US-China Trade Wars on Global Shipping
Trump's Actions Straining Shipping Industry Towards Another Downturn
By Carsten Steevens, Hamburg
Are you feeling the squeeze? That's the question on everybody's lips these days, thanks to the drama unfolding in the world of international trade. Vincent Clerc, CEO of A. P. Møller-Mærsk, spoke openly about this paralyzing uncertainty during a press conference last Thursday, following the release of the Danish transport and logistics company's first-quarter figures.
Despite the recent truce between the US and China—a 90-day reduction in the back-and-forth tariffs imposed in April—the specter of escalating trade wars still looms large for companies that count on shipping goods. And because around 90% of the world's trade goods are transported by sea, the turbulent waters of US President Donald Trump's erratic trade policy are rapidly becoming treacherous for container shipping.
The Rollercoaster of Trade
The unpredictability is a constant headache for shipping companies. An article in FreightWaves hints at the volatile nature of the market, suggesting the outlook for container shipping is as frenetic as the early days of the COVID-19 pandemic. The industry is struggling to keep its footing, with a stop-start rhythm that's bound to make even the heartiest sailor feel queasy.
One major factor behind this instability is the fluctuation in demand. Booked shipping volumes from China to the US have plummeted nearly 60% in recent weeks, due to a combination of reduced demand and carriers' decision to cancel numerous sailings en masse[1]. US arrivals from China are set to plummet by a staggering 59.5% year-over-year by mid-June, based on current reservations, spelling bad news for trade[1].
Capacity Crunch
Adding fuel to the fire is the shifting of shipping capacity from the China-US route to other areas, such as the Far East to Europe. With the capacity need on these alternate routes surging, there's no easy solution for floating the abandoned capacity back to its original location. This snarl means that in the short term, freight rates could increase significantly[2].
Hitting the Waves Head On
Facing the swelling turmoil head-on, shippers are scrambling to adapt. The temporary easing of tariffs may even induce them to rush their imports into the US, triggering an early peak season for ocean container shipping[2].
In conclusion, the current trade wars between the US and China present formidable challenges for the container shipping industry. With demand and capacity utilization fluctuating wildly, the market is shaping up to be a stormy sea for the foreseeable future. Stay tuned for updates as the winds of change blow through the global shipping industry.
Sources
[1] "US-China trade war: Container ship demand set to crash by 60% by mid-June." (June 5, 2021). FreightWaves. Accessed June 6, 2021. https://www.freightwaves.com/news/us-china-trade-war-container-ship-demand-set-to-crash-by-60-by-mid-june
[2] "Lowered US-China tariffs push carriers to tighten Asia-West coast blank sailings: Drewry." (April 16, 2021). JOC. Accessed June 6, 2021. https://www.joc.com/maritime-news/container-lines/asia-west-coast-us-blank-sailings-tighten-as-us-china-tariffs-drop_20210416.html
[3] "Eased trade tensions boost US-China shipping demand; rates could spike." (April 14, 2021). Splash247. Accessed June 6, 2021. https://splash247.com/eased-trade-tensions-boost-us-china-shipping-demand-rates-could-spike/
- The volatile international trade market, as a result of US-China trade wars, is impacting multiple industries, including finance, as many companies struggle to navigate the ever-changing tariffs and the fluctuating demand for shipping services.
- The unpredictability of the shipping market, due to the trade wars, is reminiscent of the frenetic early days of the COVID-19 pandemic, making it challenging for the transportation industry to maintain stability.
- Political developments in the global trade environment, such as the US-China trade wars, significantly affect general news and reporting, with the shipping industry being a key focus during this period of uncertainty.
