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The October 2019 announcement of a pending trade deal is offering some hope that the escalating trade war between the United States and China will soon end. President Donald Trump initiated the dispute in March 2018 by proposing a tariff on $50 billion in Chinese imports.

China responded a few weeks later by levying $3 billion in tariffs on U.S. imports, including food and beverage products, steel and iron. It also took some retaliatory actions to help combat the initial round of U.S. tariffs. Since the start of 2018, the average tariff rate on U.S. goods has increased to 20.7%. As of November 2019, the U.S. has added a total of $500 billion onto the price of Chinese products, while Beijing has levied $110 billion in duties.

What Does the Trade Deal Cover?

While the two sides have yet to finalize the deal, the early indications are that it will affect the following goods and industries:

  • Agricultural products: China would commit to purchasing up to $50 billion in ag goods per year, nearly doubling the $25.5 billion peak that occurred in 2016.
  • Financial markets: According to the Trump administration, the deal would open Chinese markets to U.S. financial institutions such as credit card companies and banks.
  • Intellectual property: China’s misuse of U.S. intellectual property was the impetus for the trade war. Under the proposed agreement, there would be stronger protections instituted for items such as copyrights and patents.
  • Currency management: The new deal stipulates that both countries would agree not to devalue their currency to attempt to gain a trade advantage.

combined-imdg-iata-courseThe Trade War’s Impact on the Shipping Industry

If and when the U.S. and China finalize the trade deal (both sides were believed to be getting “close” as of mid-November), the hope is that it will reverse the trade war’s impact on container shipping.

According to Jonathan Roach, a container analyst for shipbroker Braemar ACM, growth in the trans-Pacific seaborne trade sector will slow to approximately 2% by the end of 2019, compared to a growth rate of 4.5% the previous year.

The fear is that if the trade war drags on and the tariffs continue to increase, it could further curtail the growth of the trans-Pacific trade sector. Container operators may limit their purchases of the extra-large box ships that have become prevalent in the shipping trade lanes.

Another concern is that the reduction in growth could result in a significant overcapacity of the ships in the water. Chinese shipping executives are feeling the effects of the tariffs, and several have stated that they have already withdrawn some container capacity.

Contact Hazmat School for Your Training Needs

Many areas of the pending trade deal remain unclear, including the effect on the shipping of hazardous goods and materials. Regardless of the outcome, you can count on Hazmat School to continue to provide the training and education courses your business needs to stay compliant. Contact us to learn more about our training opportunities today.

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