No upside to downward spiral of tariffs
COMMENT: In recent months, global trade projections for 2018 were being upgraded almost as quickly as they were downgraded in previous years. Confidence had returned, and consumers and industry were keen to import and export goods, writes Ben Hackett.
Then along came President Donald Trump with his “America First” mantra, announcing tariffs on steel and aluminium for “strategic reasons of national security”.
Threats of retaliation by trading partners were not long in coming, so President Trump announced further tariffs on Chinese imports. In a tit-for-tat cycle, China was ready with a list of its imports from the US to the same sum. The US followed with a further list of threatened tariffs.
Trump claimed that he was not in a trade war, but if he was it would be easy to win. He seems to have missed the negative repercussions that his actions will have on the US consumer and the agricultural sector of the economy. This is what a real trade war looks like. We are on a dangerous downward spiral that has no happy ending.
President Trump said that he was acting to save jobs and help the farmers — as did Senator Reed Smoot and Representative Willis C Hawley when they signed the Tariff Act of 1930 into law, with the subsequent trade war helping neither the US nor the world.
The World Trade Organization (WTO) was set up in 1995 to help prevent trade wars via mediation and litigation. There is an exclusion allowed for national security, but nothing that has been brought into play can be deemed to fall into that category.
As with free trade agreements, the WTO is being undermined by the US President and the impact on our industry is clear: ports and their workers will suffer directly as import and export volumes drop.
Containerised consumer goods will reduce in volume and less internationally-traded bulk commodities, including wheat and soya, will also hit bulk shipping.
In an industry where there is gross overcapacity in supply, be it containerships, bulk carriers or ports, there is no way to combat declining demand caused by irrational trade policies. The direct impact will be declining freight rates and attempts to reduce port handling costs.
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