The global container sector is under severe pressure, with a record number of ocean vessel cancellations in the coming month. As many as 80 container ships have changed or completely cancelled their scheduled routes, an unprecedented situation that has thrown the industry into chaos. The cause: the new import tariffs imposed by the US government on goods from China.
This situation has far-reaching implications worldwide, resulting in severe disruption of supply lines between China and the United States. The Trump administration's latest levies, which came into effect on 9 April, raise tariffs on Chinese products to 145%, while goods from other countries face a 10% levy. As a result of these drastic measures, bookings for container ships from China to the US fell by as much as 60% in the first three weeks after the introduction.
Effects already visible
According to John McCown, an expert in container logistics, China still accounted for about 40% of containers imported to the US in March. The economic impact is already evident, and pressure on ports is expected to increase further in the coming months, peaking in May for the US West Coast and June for the East and Gulf Coasts.
Hapag-Lloyd, one of the largest container shipping companies, reported that 30% of shipments from China to the US have been cancelled. This has led to a huge increase in demand for shipments from other countries in Asia, such as Thailand, Cambodia and Vietnam. The impact on world trade may be more far-reaching than expected, with an expected 20.5% drop in May import volumes and possibly an even bigger drop in June.
Implications for World Economy
The drastic drop in container bookings has serious economic implications, not only for the United States, but for world trade as a whole. Ryan Peterson, founder and CEO of logistics company Flexport, warned that the US imports as much as $600 billion worth of goods from China every year, 95% of which are transported via container ships. These goods represent a retail value of about $2 trillion. The introduction of the new tariffs could lead to severe shortages, especially in the summer months.
Craig Fuller, CEO of FreightWaves, highlights the potential impact on consumer product supplies. With the back-to-school period ahead, a disruption in supply from China will lead to product shortages, which could be felt as early as August.
The industry is also concerned about the possible impact of the so-called "bullwhip effect," in which the sudden change in supply could lead to an erratic increase in demand, which could push prices up again. It is possible that container prices could again reach the levels of the corona crisis, when container prices rose as much as $20,000 each.
Call for swift action
Experts in the container industry are calling on the US government to act quickly and reconsider the new tariffs to prevent further damage to global trade. 'The only solution is a de-escalation of tariffs,' McCown said. Despite indications that tariffs may be reduced in the future, time remains short. As Fuller puts it, 'There is still time to avoid a crisis, but the clock is ticking.'
The situation in the container sector could well turn into one of the biggest disruptions to global trade since the COVID-19 pandemic, with possible consequences beyond US-China trade. The world is therefore watching the coming months anxiously as the full impact of these new trade barriers becomes apparent.
Impact on global trade and Europe
Disruption of global shipping lanes
As the US and China are two of the largest trading blocks in the world, the disrupted trade between these countries affects global shipping routes. Container shipping companies have to reschedule their ships and adjust routes, affecting other markets, including Europe. This can lead to delays and higher costs for shipping.
Increased pressure on European ports
The drop in US imports from China may result in a reallocation of containers to other markets, including Europe. This may lead to an increase in cargoes to European ports, putting pressure on logistics capacity there. At the same time, the disruption of regular shipping lanes may cause additional delays in container handling, especially impacting the timely delivery of goods to European businesses and consumers.
Change in trade flows
European companies dependent on goods from China may face longer waiting times and higher costs for imports. As some goods that were originally supposed to go to the US may now be diverted to other markets, shortages may occur in certain product categories in Europe. This is particularly true for sectors such as electronics, consumer goods and industrial products.
Increased logistics costs
If shipping companies have to adjust their capacity due to cancellations of sea voyages, this could lead to higher prices for container transport. This increases costs for companies in Europe that rely on international supply chains, which may be passed on to consumers.
Influencing European exporters
On the other hand, European companies exporting goods to the US may face a decline in US demand due to increased import duties. This could hurt their sales, especially in sectors where the US is an important market, such as the automotive and engineering sectors.
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Sources: gCaptain, Nieuwsblad Transport, FreightWaves