Magdy Sadek, Editorial Supervisor of the portsmagazine.com opinion about Trump’s tariffs and the shipping market
Magdy Sadek, Editorial Supervisor of the portsmagazine.com
Magdy Sadek, Editorial Supervisor of the portsmagazine.com writes: Trump’s tariffs and geopolitical chaos will cause problems in the shipping market Will shippers change supply chains during Trump’s next term? This is a question asked by Xeneta analyst Peter Sand, but the answer will cost ocean shipping millions of dollars.
How will geopolitics and epidemics change supply chains that have become “endemic” since “Covid-19”? The ocean shipping market has already changed dramatically, with the impact of the Red Sea crisis and the Russia-Ukraine war.
We already saw major changes in global shipping after the escalation of the US-China trade war in 2018. That was during Trump’s first term as president; average freight rates rose by more than 70% for major trade from China to the US West Coast.
On the day of his inauguration, Trump announced that he was “considering” imposing 25% tariffs on imports from Mexico and Canada starting February 1. And so it happened. Signs of a trade war began to intensify by the day.
Current spot rates from China to the US West Coast are $5,104 per TEU, up 24% from 12 months ago, largely due to the Red Sea conflict. If prices rise by the same amount as in 2018, the market would reach an all-time high, surpassing the previous record set during the COVID-19 pandemic.
Canada and the US – symbiosis or war of economies
Every day, $2.5 billion worth of goods and services flow between Canada and the United States. This amounts to almost $1 trillion per year for Canadian companies. In the United States, almost 8 million jobs are linked to trade with Canada. The United States sells more goods to Canada than any other country, and Canada buys more American goods than China, Japan, France and the United Kingdom combined.
These are important facts about the interconnectedness of the North American economies. Canada is the leading recipient of goods exported from the United States. More than half (50 of 97 product categories) of all goods produced in the United States are exported to Canada. Canada is the largest export market for 36 of the 46 largest US states. Canada accounts for 73% of US exports of trucks and 36% of fruit and vegetables.
American industry depends on Canada. About 70% of Canadian goods are exported to the United States. Canadian products are used in the production of other American goods. The tariffs imposed on Canadian goods will hurt both Canadians and Americans. They will raise the cost of living for consumers, threaten thousands of jobs and weaken North America’s competitiveness in the global economy.
Trump has said that he loves the Canadian people. But he doesn’t like Trudeau, the Canadian prime minister. The decisions to raise tariffs have already been made, while agreeing to “immediately suspend” tariffs on Mexican goods. This was after a “very friendly” conversation with the country’s president, Claudia Sheinbaum, and a one-month delay in the implementation of the decision.
Political rhetoric and global shipping
Zenit economic analyst Peter Sand says: “You can’t base your shipping strategy on political rhetoric, and tariffs on US imports are on the horizon. But we don’t know when, where or what goods they will affect.”
“Geopolitical risks, both known and yet to come, will continue to wreak havoc on supply chains and disrupt global trade,” Sand predicts.
Xeneta warns: “Stay calm. It could take years for trade patterns to develop as geopolitical risks come and go, and within four years the White House could have a new occupant. With a different trade policy than Trump.”
The question facing the Oval Office in Washington is: Will we see geopolitical chaos? The threads that are being woven now, and the ambitions here and there, present different challenges for the maritime and logistics sectors. Does it bring us back to square one?