The surprisingly announced 90-day tariff pause in the trade war between the US and China could destabilize global maritime trade more than the tariff increases imposed so far.
Trade Paralysis
A new report from the Complexity Science Hub (CSH), Supply Chain Intelligence Institute Austria (ASCII), and Delft University of Technology warns of a potential “rebound effect” in trade between the US and China, which could lead to severe disruptions in global maritime transport.
The report’s key findings indicate that while the initial tariff shock significantly hampered trade between the two largest economies, causing a drop in trade volumes at US ports of up to around 60%, there is now a threat of an abrupt increase in demand, potentially up to 150%. This anticipated surge could lead to:
- Price increases: Higher costs for goods due to increased demand and logistical challenges.
- Logistical bottlenecks: Strain on the infrastructure supporting trade, such as ports and transportation networks.
- Congestion: Overcrowding at ports, particularly on the US West Coast, leading to delays.
- Delays in maritime transportation are similar to the disruptions experienced during the COVID-19 pandemic.
The authors of the report emphasize that their simulation model reveals the severe impact of recent trade conflicts on global shipping and highlights the critical need for the global economy to prepare for this impending recovery phase. They warn of a potential destabilization of global trade, with particularly drastic consequences for maritime transport, given that approximately 90% of global trade relies on sea transport. Shifts in capacity and rising freight costs could strain supply chains worldwide, with noticeable repercussions for European companies.
Peter Klimek, a CSH researcher and ASCII Director, stated, “While the abrupt tariff increases were drastic but calculable, the current recovery is being met with unresolved structural bottlenecks and a lack of preparation. The now sudden threat of an increase in US-China trade could drive up global shipping costs as capacity is shifted to clear backlogs. This in turn could lead to higher export and import costs for European companies.” He concluded, “The next weeks will be a litmus test for the resilience of global maritime trade and could be accompanied by bottlenecks like during the COVID-19 crisis.”
Rebound Effect Looming
A recent report highlights that the current suspension of tariffs between the US and China could have a more drastic impact on global shipping than the initial tariff shock itself. The report suggests that this tariff pause might prompt US companies to replenish their stocks at an unprecedented pace and reorder backlogged supplies on a large scale. This “catch-up effect” could lead to a dramatic increase in shipping traffic, potentially overwhelming entire ports.
Conversely, the report also considers a scenario where companies might delay restocking due to uncertainty about finalizing deals within the 90-day tariff pause. In this case, the subsequent rebound in demand could be even larger. The authors project a 150% increase in deliveries to the U.S. Specifically, the number of ship arrivals in Long Beach-Los Angeles could surge by 73%, equivalent to approximately 19 additional ships per day. Increases of 61% are expected in Oakland and 56% in Tacoma.
Overall, US container traffic is anticipated to increase by almost 19%. This surge will likely be offset by small declines in almost all other regions of the world, particularly Japan, Korea, and the EU, which could subsequently lead to an increase in shipping costs along these routes due to capacity shifts.
Peter Klimek, a CSH researcher, explains that “The expected resurgence in trade—especially towards the U.S.—could lead to logistical bottlenecks and port congestion, as was the case during the COVID-19 pandemic—with corresponding risks of delays and congestion.” He recalled that during the COVID-19 crisis, some ships had to wait more than 20 days to be unloaded off the US west coast. Klimek warns, “There is a similar risk of congestion now if no countermeasures are taken. The congestion of ports and logistics networks could massively disrupt supply chains and lead to significant price increases.“
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Source: Phys
