The trade wars must stop as we move into a post-coronavirus era.
That’s according to our panel of guests on MarineTraffic recent webinar, ‘Containers Don’t Lie: Global Trade Forecast’.
Container ships are the lifeblood of trade.
However, the recent COVID-19 pandemic has sent shockwaves through the global economy. Ships still remain idle as countries around the world tentatively wake up from their self-imposed hibernation.
Gene Seroka, Executive Director at the Port of Los Angeles, suggested to our guests that Donald Trump’s bullish protectionism should come to an end.
“70 per cent of US GDP is made up of us consumers and that’s simply not taking place today,” he said.
“But there are opportunities as the US economy looks to re-open and re-emerge.
“Just to put this into perspective, as we began to peak in 2018, we started to get hit with section by section tariffs that were implemented by the administration in Washington.
“We began to feel the affects through 2019.
“Importers began to run up inventories ahead of tariff milestones and these tariffs that we put in place were paid by no-one else but American companies who were importing goods from China…
“As these tariffs were implemented, retaliatory tariffs were put in place by China.
“This precipitated 14 consecutive months of export decline.
“Everything from agricultural to heavy-duty manufacturing – including automotive and tiered suppliers – mainframe computer systems and many other products.
“What this policy did is increase imports, decrease and exports and widen the trade gap with China. Not an outcome they wanted to see in Washington. The global economy has only recently bounced back from the financial crash caused by toxic debt over 10 years ago.
Seroka believes there are major challenges ahead if the US government doesn’t box clever. “Our outlook for the remainder of this year brings us back to pre recession levels,” he added.
Here at the port of LA, it took us over a decade after the great recession to get our volume back to where it was pre 2008.
“I’m not sure about the clairvoyant look at what this pandemic and the trade war will bring, but it will definitely be an uphill climb as consumers slowly get back to stores and restaurants.”
After the virus was discovered in the province of Wuhan, China was gradually forced to shutdown huge swathes of its economy. The rest of Europe followed suit after major outbreaks across the continent.
Judah Levine, Research Lead at Freightos, told viewers that the maritime industry scrambled quickly to adapt. He also hinted that an economic rebound could be on the cards, if the container market is anything to go by.
“As demand for Chinese imports dropped, with the lockdown in the USA and Europe, ocean carriers began cancelling or blanking a record number of sailings to reduce capacity,” Levine said.
“Match it with this low demand for freight – in order to prevent losses as much as possible for the carriers by cutting costs – and also preserve revenue by stopping prices collapsing.
“This move succeeded in keeping rates relatively stable in April and May.
“There’s been an unexpected bump in this month of June, this increase in demand met this already tight capacity and we saw rates really spiking.
“In May, 47 out of 249 sailings were cancelled. That resulted in quite full ships, utilisation was good…
“Cancellations for July and August are pretty minimal.
“Only 26 blank sailings have been announced, compared with 105 for April, May and June.
Carriers could be seeing this spike in June as the start of extended rebound.
Consumer demand is widely expected to pick up in the forthcoming weeks. Most countries in Europe have significantly reduced lockdown measures and the US has declared itself open for business.
Nevertheless, CNBC reporter Lori Ann Larocco and author of ‘Containers Don’t Lie’, believes the transition into a ‘new normal’ will be tough.
“I’ve been told by people on the ground in the USA that work with European distributors that they are still expecting outflow from China to be down 15-25 per cent in terms of volume,” she said.
“The customers that order say three times a week order 40ft containers are now only ordering one or two.
“That’s a very good forward looking indicator of the stress of the American consumer right now.”