The Effect of Trade Wars on Shipping

It was just three short years ago when President Donald Trump tweeted, “Trade wars are good and easy to win.”

Since then, however, the scene hasn’t played out exactly as he might have guessed or wanted.

His goal upon getting elected was to reverse the trade deficit with China, but it’s only grown—to $287 billion at last count. What does that mean for the world of shipping, since China is certainly one of our biggest trade partners?

What Increased Tariffs Mean for Shipping

In May 2019, the World Trade Organization (WTO) was already voicing concerns over the impact of increased tariffs on Chinese imports. In two years, trade restrictions increased seven-fold, and 137 new measures were put in place 2017 to 2018. In dollars, that represents $588 billion of costs to global trade.

The job of the WTO is to regulate global trade, but when tariffs are enacted, there’s little the WTO can do to right matters and even the playing field.

Of course, China isn’t the only player in the game, and while many companies still source materials and goods from the East, perhaps the tariffs have opened up other doors.

Trade Wars and the Future

A 2019 report by the US Census Bureau found that Mexico is now the #1 trade partner with the US. While the trade wars definitely have had an impact on this fact, there’s also COVID-19, which has driven companies to explore other options. Given Mexico’s proximity to the US, it makes sense that some companies are looking at our Latin neighbor to fulfill their shipping needs.

This is especially true for the automotive industry, which has seen a boost by moving production to Mexico.

Cyclone Shipping’s Predictions

With decades of global shipping experience under our belts, we at Cyclone Shipping see a potentially bright future. No matter on which side of the political aisle you find yourself, a change in leadership in the White House always brings about changes. Biden is inheriting quite a legacy, with Trump having implemented $350 billion of duties on China during his time in office.

While many are encouraging President-Elect Biden to reduce some of the tariffs and ease the trade wars, others predict Republican backlash if Biden is too lenient on China. The likelihood, at least according to those who closely follow US politics, is that Biden will eventually reestablish positive relations with China, but it won’t happen immediately.

If restrictions soften and the trade wars end, there will inevitably be a price drop. And for our clients who rely on global shipping for the livelihood of their business, that’s a good thing.

One thing is for sure, no matter what the future brings: Cyclone Shipping is your advocate in the world of shipping. We keep our ear to the ground and always have plans in place to help you get product where it needs to be in the most cost-effective and efficient ways possible.

If you have questions about the trade wars or the future of global shipping, let us know. Perhaps we can cover them in a future blog post. Contact us now and let us know your thoughts!