US imports, exports will decline this year if trade war becomes reality.
Generally, there is some room between global politics and your supply chain. Right now, though, the two may be heading for an uncomfortable intersection, as the prospects rise for the United States becoming embroiled in an international trade war following the imposition of stiff US tariffs on imported steel and aluminum. The warning in Global Port Tracker, which is published monthly by the National Retail Federation (NRF), comes at a time when US imports are holding up relatively well during the traditional slow shipping period that follows Chinese New Year. Spot rates in the eastbound Pacific provide an indication of the strength of containerized imports. Spot rates from Asia to the US East Coast at Lunar New Year were 14.4 percent higher than six weeks prior, compared to falling 8.4 percent in 2016, according to Drewry Shipping Consultants. This indicates that imports so far this year have been strong.
But if there is a trade war that causes consumer prices in the US to increase, imports to drop, and US exports to decline as trading partners respond with tariffs of their own on American goods, shipping activity is likely to drop markedly. In addition to inviting retaliation, said Jimmy Lyons, CEO of the Alabama State Port Authority, the proposed tariffs could make US exports more costly and less competitive. This could help to mitigate prices on container shipments from Asia, but only at the cost of a global slowdown in business activity that will not serve American companies well.
"With steel and aluminum tariffs already in place, new tariffs on goods from China being threatened, and the ongoing threat of NAFTA withdrawal, we could very quickly have a trade war on our hands," said Jonathan Gold, NRF vice president for supply chain and customs policy.