ODDSMAKERS have significantly hiked the probability of a second presidential term for Donald Trump following Saturday’s assassination attempt. While still very hypothetical, pundits are now taking a more serious look at how proposed Trump 2.0 policies could affect markets — including shipping.

“There is absolutely no question that this helps President Trump in a race that he was already winning. The road for the Democrats from here is much more challenging,” wrote Evercore ISI chief political affairs strategist Sarah Bianchi on Monday, referring to “the weekend’s tragic events”.

The current take on shipping impact is that a Trump presidency will ultimately be negative for container shipping due to tariffs, but positive for rates in the near term due to a pull-forward of imports; positive for oil tankers and LNG; and potentially negative for dry bulk due to retaliatory tariffs. 

Container shipping

Trump has proposed a 60% tariff on all imports from China and a 10% tariff on imports from other countries.

In an earlier research report, Bianchi said this proposal would lead to “an overall US weighted average tariff rate of nearly 17%, the highest since the 1930s Smoot-Hawley era”.

“There are several reasons to think the campaign proposals might be scaled back, but even under a scaled-back hypothetical alternative, tariffs would still increase significantly — potentially to the highest levels since the 1940s,” she said, noting that “Trump 2.0 proposals go far beyond Trump 1.0”.

During the Trump presidency, the tariffs, which were largely focused on China, had a significant effect on import timing and spot container freight rates.

Importers pulled cargoes forward in the second half of 2018 to beat tariff deadlines, leading to temporarily higher spot rates. The inventory overhang subsequently put a damper on rates in 2019.

The same pull-forward dynamic could lead to increased rates in 2025 in the wake of a new Trump presidency, followed by a decline in 2026.

In an interview with Lloyd’s List last week, Jason Miller, a freight economist and professor of supply chain management at Michigan State University, predicted that if Trump wins and tariffs are implemented, “we will see front-loading like we have never seen before in 2025. There would be a massive pull-forward of demand as everybody rushes to bring in long-life inputs and goods from tariff countries, especially China.”

Miller does not believe importers are already pulling goods forward due to fears of Trump tariffs, but other market watchers believe this may have already begun.

Paul Bingham, director of transportation consulting at S&P Global Market Intelligence, said in an interview in March: “You don’t need to wait until November, let alone 2025, to have some of the supply chain management folks say: ‘OK, we’ve learned our lesson. If this is going to happen, what’s our Plan B?’

“Once you’re convinced the probability is fairly high and you’ve looked at the cost implications of building inventory early, you may say: ‘Let’s pull forward.’ Because you’ve lived through this before. This is not one of those situations of a politician just saying something in the campaign. This is a case — unusually — where you have the credibility to say: This is not an idle threat. He has been in office before and it happened before.

“You wouldn’t wait until the January 2025 inauguration and for executive orders to start to flow. You’d start to prep as soon as you could and take whatever actions you need to in advance. Because if you suddenly face accelerated, expanded, broad-scale import tariffs, that’s going to be at the top of your risk-management list.”

As shown in 2018-2019, the pull-forward of imports affects rates positively in the near term and has negative consequences thereafter.

Ben Nolan, shipping analyst at Stifel, highlighted the negative consequences for container shipping in a research note on election impacts.

“For containers, a win by Biden, or whoever the Democratic candidate ends up being, is a modest positive, while a Trump win would have negative implications, given the likely escalation of tariffs,” he wrote on Sunday.

Oil and gas shipping

Trump has pledged to facilitate oil and natural gas drilling on federal lands and provide tax relief to US energy producers. President Joe Biden’s “pause” on liquefied natural gas project approvals would also be reversed.

According to Nolan, “LPG [liquefied petroleum gas] would probably have a neutral impact from a Biden win and a modest positive from a Trump win. LNG, on the other hand, would likely have a more substantial and direct impact given the highly publicised pause on new LNG project approvals.

“But while the shares might move — down for Biden, up for Trump — the real impact is likely to be many years away.”

For crude and product tankers, “a Trump win likely means a more elongated push toward peak oil, meaning more oil for longer and a positive for the tanker market”, he continued.

That said, the US export trade for crude tankers has been at all-time highs during Biden’s administration.

“Interestingly, the Biden administration has not been particularly restrictive on this front, so the real impact is probably more perception than reality,” said Nolan.

According to the Energy Information Administration (EIA), the US exported an average of 3.6m barrels per day of crude during the Biden administration period (through April), 54% more than during the Trump presidency.

Dry bulk shipping

US farmers were hard-hit by retaliatory Chinese tariffs on grain exports during Trump’s presidency.

According to a study on tariff impacts by the Peterson Institution for International Economics, “The Chinese government retaliated against Trump’s tariffs with tariffs that harmed various industries, including agriculture. Consequently, the Trump administration expanded subsidies to farmers, spending much of the tariff revenue on handouts to exporters that were harmed by retaliation.

“One analysis found that newly authorised spending on farmer subsidies in 2018-2020 nearly equalled the size of tariff revenues on Chinese imports over that period,” said the Peterson Institute.

“There were also important long-term effects, as Chinese imports set up contracts with other sources,” it added.

China shifted more of its soybean sourcing to Brazil during the Trump presidency, and has since increased sourcing of Brazilian corn. That is not necessarily a negative for bulker demand; voyage distance from Brazil to China is over 10% higher than the voyage distance from the US Gulf.

“Dry bulk is where things get more complicated,” said Nolan.

“Increased tariffs under Trump would be a negative for trade broadly, and likely be the deciding factor in share price movement. However, Trump would also likely be less supportive of renewable energy and helpful to things like coal, which could be helpful to dry bulk.”