So, the era of let market forces work to deliver a competitive environment appears to be fast disappearing.
The T word is big in newly elected US President Donald Trump’s vocabulary and on March 3, as PS goes to press, the White House released a statement confirming that: “President Donald J. Trump is proceeding with implementing tariffs on Canada and Mexico under the Emergency Economic Powers Act (IEEPA) to combat the extraordinary threat to U.S. national security…..posed by unchecked drug trafficking.”
The basis on which these measures is being implemented is interesting….not to undermine the seriousness of the issue but does it really justify such draconian measures? And what will these new tariffs contribute to providing remedies? It will be interesting to see if the effect on illegal drug supply is measured and precisely what it is if this is the case.
Such measures are seemingly good political statements, especially under the slogan of America first, but ultimately they promise to come at a cost to business and the man in the street. When the latter happens, it impacts opinion polls and proves the old maxim “actions have consequences.” Both Canada and Mexico plan to implement their own tariffs in retaliation to US imposed tariffs. China has imposed tariffs of up to 15% on a range of US farm products, including key exports to China, and blacklisted over 20 companies. A trade war with China looms and is also on the cards for Canada and Mexico.
The shipping sector generally also promises to be hit by Trump Administration initiatives – the US Trade Representative (USTR) is leading an attack on China’s dominance in shipbuilding with the Wall Street Journal reporting that a planned executive order possesses 18 measures including fees of up to US$1.5m per port call for Chinese vessels, US$1m for operators of Chinese built ships plus mandatory US-flag shipping requirements.
Soren Toft, CEO of the world’s largest container line, speaking at TPM in Long Beach, pushed back on such a programme noting that Xclusiv Shipbrokers suggest in a recent report that the USTR’s proposals are likely to create significant disruptions, particularly in the tanker and container vessel segments, by leading to higher freight rates, which could fuel inflation and raise logistical costs for US businesses. He further raised the prospect of many shipowners bypassing the US altogether to avoid costs.
Then there is the nonsense spoken about by Trump regarding the Panama Canal – see p37. Hutchison Port’s just announced exit from the ports sector, other than in China and in a minority stake context outside China, is doubtless timely as established world trading patterns come under attack. A signpost to others who may want to dodge the Trump bullets?
