Ultimate threat to trade

Shout out: too much protesting is bad for consumer spending and consequently trade. Credit: Matthew Lenard Shout out: too much protesting is bad for consumer spending and consequently trade. Credit: Matthew Lenard

COMMENT: We live in a new global reality where diplomacy is practiced via Twitter if we are to believe President Trump and the Lithuanian Prime Minister. This is, in my view, a very sad state of affairs with Twitter driving populism globally. Today, there is truth and alternative truth; in the old days it used to be just plain lies, writes Ben Hackett.

Protesters have taken to the streets in the US, the UK and Romania just to name a few countries. The bottom line here is that if you are out protesting you do not have time to shop and therefore consumption drops.  Perhaps another economist will volunteer to work out the correlation between the two.

The other danger to trade is the growing shift from multilateral trade agreements such as NAFTA , the Transatlantic negotiations and the Transpacific Pact. The EU with its 28 members was virtually unable to sign trade agreements. With Brexit, the UK is preparing for its future as an ex-member of the trading bloc and going full speed towards bilateral trade agreements with the US. This will have an impact on other countries, including those within the EU that do not want to be left behind.

Alongside the Trumpist bilateralism we also see the rising spectre of tariff walls put in place as a punishment. It is non unimaginable that there will be tit-for-tat from US trading partners and the danger that this will spread to other countries can also not be discounted.

Unless common sense prevails there is a strong likelihood that world trade will suffer in this environment creating more years of financial pain for shipping lines of all ilk, whether it be containers, dry or liquid bulk. The repercussions will inevitably be felt by ports and they will need to decide whether they should invest in expansion for the future or just to wait and see. In times of uncertainty the latter is usually advisable.

Drawing the strands together, we should not expect global GDP to expand more rapidly this year than last. Instead, some contraction is more likely, with trade growth below global GDP growth for another year.  Financial losses in the shipping industry will also remain. In short, it is time to batten down the hatches once again.


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