A lot has been happening of late in the news regarding trade and tariffs resulting from the ongoing trade war between the US and its partners. It appears that the focus is more exclusively on China as negotiations with other partners are starting to result in new deals.
Here is a summary of some of the recent events, and the associated impact on ocean freight, that are helping to shape the trade landscape:
As recently reported in the Business Insider by reporter Bob Bryan, $16 billion in proposed tariffs on Chinese goods were placed into effect by the United States. Another $200 billion is being contemplated against Chinese goods for the next round of tariffs. [Editor’s note: The $200 billion has since been imposed.]
To mitigate the effect of the ongoing trade disputes with foreign buyers, the Wall Street Journal’s Jesse Newman and Heather Hadden report that the White House has said it will pay $4.7 billion to US farmers to offset agricultural losses.
In the Nikkei Asia Review, it is being reported that the ongoing trade war is having a heavier toll on global supply chains as countries and companies seek to avoid paying increased tariffs aimed at countries such as China. In instances where “companies make products and components exported to a third country, like the US,” businesses are seeking to minimize their exposure when such products and components come from countries directly targeted by America. Such an example is occurring in Japan, which is starting to find other sources of supply to avoid Beijing-focused tariffs. As such, an industry to pay attention to will be the auto industry, where it was reported that “the US also is considering a blanket duty on cars and auto parts, forcing companies to rethink their supply chains.”
National Public Radio’s John Ydstie reports that Mexico and the US have reached a new deal on NAFTA, but both countries still have to work with Canada to finalize the agreement.
Given all that is continuing to happen, it is no wonder that we are seeing ocean freight rates increase on the spot market. In the past several months, rates from China to the US have increased significantly–rising to their highest level since February 2017.
However, closer inspection shows that the trade war is not the only cause for the increased prices. For example, carriers are pulling containers off of trade routes, consolidating lines, and there are increasing bunker rates as a result of increasing fuel prices. This means that keeping an eye on news events that show dramatic changes in company supply chains; carrier-driven adjustments to accommodate the evolving trade landscape between the US and its trading partners; and successful negotiations between the US and its trading partners to put new trade deals in place will highlight the true nature of rate changes in the international ocean freight industry.
Mario Bruendel, the CEO of XportForwarding, an online ocean freight booking tool, is a leader in international shipping with 20 years of industry experience.