Shipping Industry Braces for Chinese Trade War

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The shipping industry might lose a lot in a potential trade war between the US and China. Millions of jobs and the bottom lines of major maritime shipping companies, which account for 80% of all global trade, depend on goods traversing the oceans, reports ActionNews Now.

Thin profits for shippers

Even in times of robust trade, shipping industry profit margins tend to be slim – about 3%, according to Simon Heaney, senior manager of container research in London for Drewry, a maritime research consultancy.

China and US threatens on swapping 25% tariffs on a range of goods worth a total of about $100 billion, which has left the maritime industry worried about the shipping volume that will fall along with profits.

Higher risk on shipping

Tariffs could put up to 7% of Asia-to-US shipping at risk and impact 1% of total global shipping, according to Heaney. Shipping revenue in 2017 totaled $210 billion.

Last year, US shipped nearly 57,000 containers worth of soybeans to China, but now with a 25% tariff looming, it’s unclear if as many soybeans will travel down the Mississippi and through the port of Louisiana heading to China.

American labour at stake

Restrictions on other products would hit America’s busiest port cities, like New York, Los Angeles, and Long Beach, California. While few Americans work on the ships themselves, nearly 10 million Americans work in the industry, according to the Bureau of Labor Statistics. Occupations include aircraft cargo handlers, truck drivers, ship engineers, hoist and winch operators and more.

Vulnerable companies

Scott Group, a ship analyst, had identified the companies with the most to lose in a trade war with China.

Expeditors International of Washington, Inc., a logistics company that purchases cargo space from ocean shipping and airlines and resells it to customers, will take the lion’s share of damage. Group said that 31% of that company’s revenue came from China last year.

The next most exposed company, according to Group, is Atlas Air Worldwide Holdings, a cargo airline from New York, which does a lot of business with Asian countries.

He said that FedEx and UPS could also be affected as 6% of FedEx’s revenue and 5% of UPS’ revenue are from US-Asia trade.

UPS spokesman Matt O’Connor told CNNMoney that “UPS does not expect to be measurably impacted based on the currently proposed tariffs, while FedEx declined to comment.”

Rail companies could also be impacted, even though they might not do direct business with China. Union Pacific Corp. has 13% of its revenue driven by trade with China because of its trains carrying goods inland from the ports.

Other big players in the shipping industry are Covenant Transportation, Daeske and Werner Enterprises.

Chris Rogers, an international trade analyst with Panjiva, a research firm that monitors global trade, said much of the effect on shipping will depend on the willingness or ability of American consumers to pay higher prices for basic goods, or the flexibility of Chinese manufacturers to shift their production to other countries, in a policy called “country hopping.”

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Source: CNN