Tariffs continue to be the hot topic in the world of international trade these days. The ongoing trade war with China over trade imbalance and intellectual property theft, the recent threats of a trade war with Mexico over immigration, recent tanker attacks in the Gulf of Oman have led to increased tensions (and sanctions) with Iran, support of Britain on a hard Brexit without a formal trade deal negotiated, etc., all signal the instability that appears to be so prevalent in the international shipping industry today.
So what are all these trade skirmishes about? Is it real? It seems that when anything happens, perception quickly outpaces reality and the result it a lot of “the sky is falling” with the reality being that something much less severe actually occurs.
As I sit back and survey the big picture, I see a couple of noteworthy trends influencing trade that are worth keeping an eye on. These are:
- Hard Power Influence – When a tariff gets announced by President Trump, people seem to panic whether it is the media, US political leaders, business owners, the stock market, foreign governments, etc. Sometimes a negotiated agreement is made to resolve the issues, other times a deal is not obtained. More often than not, the outcome is actually much less severe than what was claimed. But no matter what the effect of these tariffs (or threats of tariffs), one thing is certain that they induce panic (be it real or just superficial).
- Political Misdirection – The tariffs, when threatened as a response to some perceived concern, become an excellent way to highlight a problem. What is unfortunate is that the problem highlighted ends up dominating the talking points and other topics (such as real impacts to imports, exports and the American consumer or businesses) get lost in the shuffle.
- Changing Supply Chains – When the trade war with China first started, we saw that companies started to shift their supply chains to adjust. In some cases, companies (think automobiles here) moved their supply chains out of China to other countries… like Mexico. Then, when the US announced a potential 25% tariff on Mexican imported goods, it sent these recently moved companies scrambling. Watching how companies diversify their global supply chains to minimize impacts tariffs exerted through hard power politics will be interesting to consider.
Change is never easy and accurately forecasting change can be hard. Keeping tabs on these macro-trends can help inform the pulse of the international shipping industry and ensure we stay one-step ahead of the competition.