It’s no surprise that the constant back and forth between the US and China have raised concerns with the rest of the world. If you stop to think about it, there are many potential impacts on the shipping industry that have been caused by the US and Chinese tariffs, along with Europe thrown into the chaos. In this blog, we look at what these potential impacts on the so shipping industry are.
To give a little insight into the China-United States Trade War, it began last year in 2018 via the increase of US and Chinese tariffs amongst other things. The background for these disputes comes to the fact there were several disagreements with the Trump administration that preceded to what the US is now calling defensive measures. The imposition of tariffs on Chinese goods was said to be a result of the so-called unfair Chinese trade practices over the course of several years. This includes tariffs set for over 1,300 Chinese products. Thereafter, China responded by imposing tariffs on nearly 130 US imported products.
These were followed by different trade talks whereby in August of 2018, exactly one year ago, China made a formal complaint to the World Trade Organisation whereby the tariffs imposed on Solar Panels will destabilise the international market for solar related products. However, during the G20 Osaka Summit, the Chinese government stated that they would call a truce on the trade war with prior tariffs remaining in place but no future tariffs will be applicable with negotiations restarting. During this time, the Trump administration allowed US companies to deal with Huawei but the company will remain blacklisted. However, earlier this month, Trump went on twitter to declare that a further 10% tariff will be levied on the balance $300 billion of goods, and the Treasury has declared China a Currency Manipulator, which has then resulted in China ordering state-owned companies to put a halt in purchasing US agriculture products.
When the US and Chinese tariffs first came to effect in July 2018, there was a positive reaction as it ended the uncertainty that the global market was expecting. However, by early August, China was the first to experience the fallout by stepping down to the third largest market capitalisation player. Thereafter in December of 2018, the Dow Jones Industrial Average fell declining by 600 points. There were potential impacts to the shipping market caused by the trade war especially when it came down to the import of products to China, with shifting their focus from the US to Brazil for their import of soybeans (which had a 25% tariff).
Despite the imposed US and Chinese tariffs, China declared a record high annual trade surplus ($323.32 billion), whereas in March 2019, the US declared a record high trade deficit of $621 billion; the highest since a decade ago. China also hit back by reducing tariffs for non-US exporters thus putting the United States at a competitive disadvantage due to the US and Chinese tariff trade war.