The current trade based spat between the Trump administration and many of the USA’s trading partners will likely create some new challenges for freight forwarders as well as their customers. Higher tariffs and attempts to either renegotiate or exit existing trade agreements are likely to add additional turbulence to the global logistics community.
While the overall impact isn’t likely to affect the total amount of trade and material movement between different parts of the world, certain segments will undoubtedly be affected. Some examples:
- Ports and freight forwarders that depend on steel and aluminum freight might see a significant impact as companies start to sort out their procurement options.
- With tariffs as high as 25% on a wide range of goods, ocean based transportation between China and the United States could see significant impacts in volumes and profits as early as mid-year 2019.
- Trade imbalances will make it increasingly difficult to keep ships full of containers as they move from the USA to ports in China. For instance, soybean imports to China from the USA exceeded 50,000 containers last year. If China switches it’s soybean import strategy to a heavier reliance on South American soy producers, the port of Louisiana will be heavily impact while traffic between Brazil and SE Asia could increase significantly.
What this means for the global economy is yet to be sorted out with any accuracy, but many industry analysts see a negative effect on global growth.
The manufacturing sector will also go through some changes as well. Companies looking to expand or move their operations off shore will be sure to include tariffs as a consideration when deciding on future manufacturing locations. While these types of changes are slow to develop, they conversely have significant long term impact to the global supply chain model.
Business managers are notoriously risk adverse and many company leaders, as well as their bankers and investors will be reluctant to make large investments internationally while the trade picture is so unsettled.
Another negative consideration is the downstream supply chain that feeds much of China’s manufacturing. As the amount of goods flowing to the USA from China slows, regional countries, such as Viet Nam, Malaysia, and Thailand, that supply China with many of the components that go into their products will be impacted as well.
As a member of the ASEAN logistics community, Eagles Air and Sea will continue to monitor the changing global supply chain and offer advice and solutions to their valued customer base.