The trade war, the experts aver, will slow down the
current global growth if it continues; however, as for shipping, the effect is
rather limited in terms of volumes.
BIMCO’s chief shipping analyst Peter Sand has analysed
the effect of the trade war on shipping. He says,
“The trade war
adds painful uncertainty for the shipping industry, as it distorts the free
flow of goods, changes trade lanes and makes it difficult for ship operators
and owners to position ships efficiently in the market.
The dry bulk shipping industry has already been
affected by the steel and aluminium tariffs and will be hit again when further
tariffs come into force in July. However, the impact on the dry bulk shipping
industry in terms of volumes remains limited.
The same can be said for container shipping, which
although containerised goods have been and will be targeted again in July, the
number of containers impacted is in the big picture relatively small”.
The dry bulk shipping industry will by far be the most
affected in terms of volumes, both in scheduled and already implemented
tariffs. However, the dry bulk products targeted so far only represent a
minimal amount of the total seaborne dry bulk trade. Similarly, the
containerised goods affected also represent a small amount of the total
The US: effect on shipping remains limited
On 8 March 2018, the US imposed 25% tariffs on steel
and 10% tariffs on aluminium citing national security reasons. At first,
temporary exemptions were granted to seven trading partners. However, these
were revoked for the EU, Mexico and Canada as of 1 June 2018. Australia,
Brazil, Argentina and South Korea remain exempted.
Following failed talks between the US and China which
sought to avoid further tariffs, the US announced in late May, that it would
proceed with 25% tariffs on USD 50 billion worth of Chinese goods. The first
list of these goods, containing mostly machinery and electronics, worth USD 34
billion, will enter into force on 6 July 2018. The second list, considering
Chinese imports valued at USD 16 billion, contains commodities such as plastics
and oil products and is currently under review with no date given for its
possible entry into force.
The first round of tariffs targets only dry bulk
goods. In 2017, the US imported 18.8 million tonnes of the tariffed steel
commodities and 4.4 million tonnes of the tariffed aluminium products via the
sea. Together the affected steel and aluminium commodities, amounted to 0.5% of
the total dry bulk seaborne trade in 2017.
The tariffs on USD 50 billion worth of Chinese exports
to the US will affect the container shipping industry on the eastbound
transpacific trade lane. The first list, worth USD 34 billion, covers 4.7
million tonnes of containerised Chinese seaborne exports in 2017, equivalent to
470,000 TEUs (10 tonnes per TEU). This amounts to 4.2% of US West Coast (USWC)
container imports in 2017. The second list, worth USD 16 billion will add
further tariffs on Chinese goods amounting to 2.3 million tonnes, of which 1.9
million tonnes (1.7% of USWC imports) are containerised goods and 0.5 million
tonnes are oil products.
China: new trading partners but same demand
China responded to the
initial US tariffs on steel and aluminium on 2 April 2018, by targeting 128
products worth USD 3 billion. These are primarily food, beverages and iron and
steel products. China’s retaliation to the USD 50 billion planned tariffs from
the US was published 17 June 2018 and divided into two parts. Chinese imports
of 545 US commodities covering USD 34 billion were targeted with a proposal of
additional tariffs on 114 commodities amounting to USD 16 billion. The Chinese
tariffs on USD 34 billion enter into force 6 July 2018, while the USD 16
billion list will undergo further review.
The dry bulk shipping industry is in terms of volumes
the sector most affected by Chinese tariffs. The shipping of soya beans from
the US to China is the largest ‘one commodity’ cargo included, amounting to 32
million tonnes of imports in 2017, equivalent to 22% of the total seaborne soya
bean trade or 640 Handymax loads (50,000 tons). BIMCO reported in April that
the coming months will show us exactly how much Brazil can further ramp up its
exports to China to substitute the tariffed US exports. In May, Brazil exported
12.35 million tonnes of soya beans via the sea, setting a record, but far from
enough to fully substitute US exports to China.
If the proposed tariffs, amounting to US 16 billion,
are implemented, the tanker and gas shipping industries can also expect changes
to trade lanes. The industry expected to be the most effected is the US crude
oil exports, which was primarily driven by China in 2017. China was responsible
for 25% of all US seaborne crude oil exports in terms of volumes in 2017.
BIMCO’s chief shipping analyst Peter Sand comments:
“China is the centre of shipping for the dry bulk shipping industry but also
the crude oil shipping industry. The imposed tariffs will not decrease the
Chinese demand for the included commodities, but instead cause changes to trade
lanes, making distances the ones to look out for.
In the case of China going back to West Africa for
sweet crude oil, 1/3 of the sailing distance will be lost on that trade”.
EU: politically targeted products on the
The EU announced
retaliatory tariffs on USD 3.4 billion worth of US goods in response to the US
not extending its exemption. These entered into force on 22 June 2018 and
target a range of US exports from cereals and steel products, to politically
sensitive goods such as Bourbon and motorcycles.
This round of tariffs covers goods which in 2017
amounted to 1.35 million tonnes of trade between the US and the EU. In 2017, a
total of 1.24 million tonnes of the targeted dry bulk goods were exported to
the EU from the US amounting to 24 Handymax loads (50,000 tons). Agricultural
products were by far the largest part of this trade at 1 million tonnes, 90.5%
of which was maize, with steel and aluminium making up the residual.
Canada and Mexico: limited trade via the
There was an immediate reaction from the US neighbours
when their initial steel and aluminium exemptions were withdrawn. Canada
imposed retaliatory measures on US imports worth USD 12.6 billion, which apply
from 1 July 2018. Likewise, Mexico announced equivalent measures of tariffs on
US imports worth USD 3 billion, effective from 5 June 2018.
The Canadian and Mexican tariffs’ effect on shipping
remain limited, as most goods are transported via rail or truck. The largest
shipped commodity affected is the Mexican imports of US steel products, which
amounted to 200,000 tonnes in 2017, equivalent to just four Handymax loads
Peter Sand ends: “Despite
the effect on shipping being somewhat limited, the trade between the countries
becomes more cumbersome and less prosperous for the involved economies when
trade barriers are raised”