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Trade war is changing the shipping industry

Everyone is familiar with the tweets and threats which commenced after America’s tariffs on all imported washing machines and solar panels, imposed on January 2018 and, since then, have been escalated into a trade war mainly between USA and China; two of the three largest economies in the world.

While (for now) a trade war between the USA and Europe has been avoided the last minute with a bilateral deal, no-one is certain that such a war will not be expanded between more countries and affect the current global economic growth. At the time that the trade war between USA and China is taking place in the form of tariffs on billions of dollars of goods as well as fighting talks, the maritime community is watching all developments nervously, trying to evaluate their possible impact on shipping.

The current situation (as of July 2018) is pictured in the below timeline of BBC.

How the tariffs battle has escalated this year

 

On March 2018 the USA imposed tariffs on imports of steel and aluminum (25% and 10% accordingly) except those coming from Brazil, Argentina, Australia, and South Korea. After failed negotiations with China, USA announced that will impose 25% tariffs on 50 billion worth of Chinese imports, while a further threat for tariffs on the 200bn worth of imports was announced during June.

From the announced USA measures worth 50 billion, the first package of the 34 bn was put into effect on the 6th July and it includes tariffs mainly on electronics and machinery.
The second package of 16 bn will enter into force in a future date and includes oil products, plastics, and other commodities which are expected to affect more container shipping rather than the bulk.

From its side, China responded to the initial US tariffs on April 2018 with tariffs on imports from the USA worth 3 billion which refer mainly to food and beverages as well as steel and iron products. Furthermore, China took retaliation measures to the 50 billion tariffs of USA. From the 50 billion, the first part of 34 billion entered into effect on 6th July. From these tariffs, the most important is the ones imposed on soybeans. Other than that, Canada and Mexico have also reacted by imposing retaliatory tariffs of 12.6 billion and 3 billion accordingly. At the same time, a trade war with Europe has been avoided after a bilateral agreement has been reached.

The future remains uncertain since the measures are still ongoing and the threats are exchanged between the parties on a daily basis. So, no one is really sure how the opposite parties will move and where this game will end. The increased tariffs do not necessarily negatively affect the bulk shipping since, in each case, we have to estimate how elastic demand is and what is the best replacement. In some cases, the increased ton-miles might have even a positive impact on bulk shipping.

However, an escalation of the trade war between more countries and/or more products, even if on the short term it may have a neutral or positive effect on global trade, in the long term it can negatively affect the world economy as well as the economies of the countries involved, something which will definitely make their trade activity less prosperous and the shipping markets more vulnerable.

During the last 10 years ,our economic environment has become rapidly changing. New threats, new challenges, sanctions, bankruptcies and consolidations – all these changes require a new approach with modern tools in order to hold current customers and attract new ones via expanding channels. Such a modern tool and expanding channel for getting new customers in shipping is the common ship chartering marketplace. That’s why we created OpenSea which is already popular among over 4000 chartering professionals from all over the world.

 

 

 

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