Monday, August 14, 2017

Logistics Interests Ask Is a Trade War About to Start Between the US and China?

Trump's Announcement of Theft of Intellectual Property Investigation draws Communist Party Ire
Shipping News Feature
US – CHINA – Officials in the American government have announced that they are considering launching an investigation into possible Chinese theft of US technology and intellectual property. The suggestion has caused concern amongst logistics interests plus a flurry of protests and criticism from the Chinese government and press, who have called on the Americans, and President Trump in particular, to not start what they describe as a 'trade war'. In a statement Hua Chunying, a foreign ministry spokeswoman, said:

"There is no future and no winner in a trade war and both sides will be the losers. As we have emphasized for many times, the nature of China-US trade relations is mutual benefit and win-win.”

The rapid reaction from the Chinese is a sign of how seriously they take the issue. Although it remains to be seen whether this is simply a way for the US to put more pressure on the Chinese to help with the Korean predicament, or whether Trump is going to start making good on some of the threats he made during his presidential campaign, it certainly shows how the world economy is beholden to sudden fluctuations in the current period.

So should such an event pan out, what will it mean for the freight industry? As US/Chinese trade is valued at $600 billion per annum, and represents the major global trade route, any substantial sanctions that the US places upon Chinese goods could hit tonnages between the two countries. The question would be how much of that trade will be taken up by other countries in Asia, who will no doubt be more than happy to absorb as much of the slack as possible. However, such disruption could affect US inflation and lead to an increase in prices, causing consumers to buy less and reducing freight levels.

In terms of Chinese retaliation, that will probably take the form of sanctions on American companies operating in China. This will be bad news for manufacturers like Apple, who may have to face the possibility of moving their manufacturing base to other countries if their punishments are too punitive. It will may also see embargoes on American farm produce, which has seen a huge increase in recent years as more affluent Chinese consumers have been purchasing large quantities of American foodstuffs. This would affect the US west coast ports particularly.

Eight year’s ago we saw President Obama take action on the import of cheap Chinese tyres which the US felt was ‘dumping’, whilst the Chinese saw it simply as a product at a lower cost than the native market could match, but, as already pointed out, it remains to be seen whether this latest rhetoric is part of a more significant ploy, or a way for the embattled President to alleviate the pressure off himself and his administration. What is certain is that times remain, and no doubt will continue to be, 'interesting'.