The potential trade war between U.S. and China would significantly impact the global shipping industry.
Carrying goods across the oceans aids the maintenance of millions of jobs in the maritime shipping companies because 80 per cent of the total goods transported across the world is done on ships.
Simon Heaney, senior manager of container research in London for Drewry, a maritime research consultancy says that the profit margin for the shipping industry is low – at about 3 per cent, even when there is robust trade.
However, there are now worries in the global shipping industry of lower volumes of goods for shipping because of the up to 25 per cent tariff threatened to be imposed on U.S. and Chinese goods for a wide range of products totaling $100 billion in combined value.
“I think the ocean carriers are very nervous; they’re coming out of some lean years,” said Heaney. “This is clearly a concern for anyone involved in the shipping industry.”
There could be risk of up to 7 per cent in Asia-to-US shipping while 1 per cent of global shipping could be impacted because of the tariffs, says an estimate from Heaney. The total revenues form the shipping industry globally was about $210 billion in 2017.
“It’s going to hurt container lines,” said Mark Szakonyi, executive editor for the Journal of Commerce. Container ships destined for China from the U.S. may get caught with partially empty hulls and move “air back to Shanghai”, he warned.
In 2017, about 57,000 containers filled with of soybeans was hipped from the U.S. to China. But with the planned 25 per cent tariff on the product, the number of containers carrying soybeans through a well-known route from the Mississippi to China through the port of Louisiana would become unpredictable.
The busiest of the U.S. port cities, such as New York, Los Angeles, and Long Beach, California could be hit because of restrictions on some of the other products that China wants to impose tariffs on. According to the Bureau of Labor Statistics, there are about 10 million American who earn their living in the shipping industry even though very few of them actually work on the container ships.
“A trade war with China is a bad thing for pretty much all transports,” said Scott Group, shipping analyst with Wolfe Research, in a note at the end of March. It was a time when there was heated rhetoric between China and U.S. The companies that could potentially get hit by a U.S. China trade war were also identified by him.
The lion’s share of the hit is expected to be taken by Expeditors International of Washington, Inc., which is a logistics company engaged in purchasing space for cargo on ocean shipping and airlines and then it sells them to customers. Last year, China business accounted for about 31 per cent of its revenues, Group said.
Atlas Air Worldwide Holdings, a cargo airline firm from New York w3hich is engaged in a lot of operations with Asian countries is the second on the list of the firms to be hit most by a trade war, according to Group. And because about 6 per cent of revenues of FedEx and 5 per cent of revenues of UPS is generated from business involving US-Asia trade, these two companies are also likely to be hit, he said.
(Adapted from Money.CNN.com)