Trump tariffs and impacts on shipping

Trump tariffs and impacts on shipping

Tariff war casts shadow on US ocean, surface freight: William B. Cassidy

Posted: October 1, 2019 | Newsletter

The trade war between China and the United States casted gloom stretching from US ports to distribution centers, truck terminals, factories, retail outlets, and, ultimately, consumers in the US heartland. Increased tariffs not only affected the price of imports and exports, but when, where, and how freight moves over the ocean, in the air, and on the ground.

For five consecutive months, US truck freight and intermodal volumes have gone downhill, the opportunity of economic reduction looked promising in the short term, even with healthy customer outlook and record low unemployment.

Trans-Pacific shipping lines hurried to lessen vessel capability, blanking sailings for June as eastbound spot rates to the US West Coast fell. Air cargo rates between Hong Kong and North America rose as beneficial cargo owners (BCOs) looked to increase speed with freight from China, but it was to no avail, as cargo had to be in transit by May 10 and arrive in the US by June 1 in order to avoid the tariff increase. The re-escalating trade war between the United States and China will hurt expansion, both directly and indirectly.

Trump prohibited US companies from supplying technology or components to Chinese telecommunications company Huawei and banned the use of Huawei equipment in the United States on May 15. China is contemplating reducing natural gas purchases from the United States.

Early this year, US imports from China have dropped massively, to some extent because of the front-loading of imports to beat higher US tariffs that firstly were expected to take effect Jan. 1 but were tardy. In the first four months of this year, shipments fell 6 percent year over year to 3.5 million TEU.

The higher US tariffs have eliminated 10 to 15 percent of trans-Pacific eastbound volume from China in the short term.

China is in no rush to resolve the US tariff battle. What does this mean? Increasing prices on consumers and decreasing transportation volumes. The trade war between the global powers was the leading uncertainty for a shipping industry facing a “sea” of uncertainties.

Those uncertainties expand to US highways and rail lines. It’s more difficult to portray a direct line between trade policy and softness in trucking or domestic intermodal rail, mainly because several domestic factors sway those modal freight volumes. But the front-loading of imports last autumn does unite with the increase of inventories that demoralized Q1 volumes.

The impact has been fewer loads moving on road and rail across the US. At least that was the case in Q1 of 2019.

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CPC Commentary:

The Trump tariffs have had a profound effect on global commerce. This has cascaded into rate shockwaves for all modes; inconsistent volumes is the main culprit reaping havoc on the capacity and demand balance. As a result, carriers are seeking customers with stable demand and are willing to offer competitive pricing and terms to acquire this business. This is a good time to assess your current program and see if there is an opportunity to reap future savings. Contact CPC now for your free assessment to see how you can seize this opportunity. Remember, there is nothing to lose and everything to gain. 





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