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Jul 18, 2019 7:00:00 AM

Heavier Tolls from Tariffs?

According to CNBC’s Evelyn Cheng, earlier this week reports from China emerged that GDP growth for that country was “6.2% for the second quarter,” which marked “the slowest year-on-year increase for a quarter in at least 27 years.” In parallel, it was reported by Reuters Yawen Chen and Kevin Yao that “June exports fell from 1.3% a year earlier” and “imports fell 7.3%, a sharper drop than the 4.5% expected and following a 8.5% contraction in May.”

So, what does this mean for broader shipping industry overall? The Washington Post’s Heather Long reported last week that Fed Chair Jerome Powell has been hinting that an interest rate cut in the United States “is likely at the end of July.” What is the correlation between a softening Chinese economy, a reduction in Chinese imports and exports, and a US economy that requires a rate cut? Is there a direct link or are these events unrelated?

I can see that there is potentially a direct link between the aforementioned events. There is the impact that the trade war is taking not just on the Chinese economy, but US economy too. The Washington Post reports that “uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook.” This is turn is driving the anticipated rate cut. There is also an impact to the shipping industry as transpacific imports and exports are continuing to slow, carriers are reducing vessel sailing dates, the spot rate market is going up, etc. Overall, the economic slowdown in China, interest rate cuts in the US, and an industry retraction all seems to be directly aligned.

Topics: trade war, tariffs, imports and exports, global trade, impacts to freight forwarding, global supply chains

Author: Mario Bruendel

The Xport Guide to Next-Generation International Shipping

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