- The US President announced a new metals tariff plan on March 1, 2018.
- The new plan seeks to impose 25% and 10% tariff rate on the import of steel and aluminium, respectively.
- This is going to impact the shipping industry as other players like China and EU might retaliate with their own barriers.
- The new US tariff rate has become effective from March 23, 2018
The existing tariffs on the import of steel and aluminium have changed from 23rd March. A new tariff rate of 25% and 10% are being imposed on the import of steel and aluminium respectively, as declared by the American President in the new metals tariff plan which was launched on 1 March 2018, reports BIMCO.
The Trump administration seems positive towards protectionism and that picture unfortunately became clear when the pro-trade US President Donald Trump’s chief economic adviser Gary Cohn resigned on 6 March because of the tariffs imposed on steel and aluminium. The tariffs on steel and aluminium will have a limited impact on most international bulk trades. Nevertheless, they could trigger something bigger that would negatively impact global shipping in a much wider way including container shipping trades.
Trade Restrictive vs Trade Facilitation Measures
Since 2009, implementation of trade-restrictive measures amongst global trading partners has become more widespread according to World Trade Organisation (WTO). Fortunately, trade-facilitation measures have kept up well to limit some of the damages done. Just yesterday, the African Continental Free Trade Area (ACFTA) proved to be the latest of its kind. Above all, transparency and predictability in trade policy remain vital for all actors in the global economy as the WTO puts it.
BIMCO’s Chief Shipping Analyst Peter Sand comments: “Free trade provides prosperity and peace. It’s a fundamental principle to cherish and safeguard. All trade-restrictive measures are in principle bad for shipping.
Open economies are all better off from trading, as they make use of their resources in the most optimal way. The result of a trade war is more expensive goods of lower quality and little variety. This goes for all products and commodities.”
Impact of the tariffs
Steel and aluminium tariffs may be ‘dish of the day’ and the impact on shipping is still unknown, but soon major trade action against China is also likely to come from the US. Despite the fact that there is good reason – violation of intellectual property rights – the result is the same. It is damaging for the involved countries.
The US is running large trade deficits with the EU as well as China. In addition to significant trade deficits in goods with Mexico, Japan and Canada. But starting a trade war is the wrong way to handle the situation.
Retaliation from other key players
“Overall we are seeing more trade-restrictive measures introduced. Some more high profile than others. This is a worrying trend that limits demand for shipping globally.
Even worse for shipping could be short-sighted political positions that may have lasting consequences for everyone involved in global industries like shipping if a large scale trade war emerges”, Peter Sand concludes.
In a trade war, combatants retaliate against one another. While doing so, they often set aside normal business procedures.
As steel and aluminium import barriers are set by the US, trading partners like the EU, Japan and China, may set their own import barriers against e.g. agricultural products (soybean, corn, wheat) in general or more politically targeted products like the European Commission going for Kentucky bourbon, Harley-Davidson motorcycles and Levi’s jeans – all hitting Trump’s constituency.
The international scene is quite dense at the moment and the atmosphere is full of tension. In all possibility, other key players like the EU and China will retaliate to remain viable in the market.
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Source: Bimco
