NO ONE knows how Donald Trump’s next presidency will affect tariffs and sanctions, and how these changes will impact shipping flows. But there is already plenty of speculation.

The election vote coincided with a flurry of quarterly results calls by listed shipowners and Trump, predictably, was a frequent target of analyst questions.

“It’s impossible for us to predict the long-term effects of the Trump election on shipping markets,” said CMB.Tech chief executive Alexander Saverys. “You can talk about this for hours and hours and hours, but right now, there’s not a lot of sensible things we can say.

“There’s always a risk that certain elements of the shipping industry — and for instance, decarbonisation — might turn backwards. There’s also an opportunity that certain things might go in the right direction.” 

Gernot Ruppelt, CEO of Ardmore Shipping, said, “As far as the product tanker market is concerned, we think the fundamentals remain very positive and they are not affected by the presidency. The supply side is not going to change, nor are the big sectoral drivers such as refinery dislocation and east-west flows. These have nothing to do with the US political landscape.”

What is generally agreed by shipping bosses is that there is more uncertainty ahead.

According to Torm chief executive Jacob Meldgaard, “With Trump’s more aggressive approach to geopolitics and trade policy, uncertainty in the tanker markets, as well as in the global economy, is likely to increase in the coming years.”

Wars in Europe and the Middle East

Geopolitical conflicts in Europe and the Middle East have been a plus for shipping tonne-mile demand, so what happens with those conflicts is a major focus of shipping analysts and investors.

Ruppelt said, “As far as the embargo on Russian refined products exports, that’s an EU embargo. And even if there was a resolution to the conflict between Russia and Ukraine, I question whether Europe would go back to depending on Russian diesel exports, considering that it has a really well-functioning and well-priced alternative trade that has been well underway for a long period of time.”

Meldgaard agreed. “Trump is likely to push for a faster resolution of the Ukraine-Russia war, however, the prospects for success in negotiating a settlement remain uncertain. What matters most for the tanker market is the EU sanctions, and we do not foresee a quick abolishment of these or a full return to pre-war oil trade between the EU countries and Russia.”

Commenting on how Trump could impact geopolitics in the Middle East, and end the Houthi attacks on shipping, Ruppelt said, “With the situation in the Red Sea, I doubt there’s going to be an immediate resolution allowing ships to safely go through. I think a lot would have to happen first.”

Thus, the tonne-mile upside from rerouting around the Cape of Good Hope should persist.

Sanctions outlook and oil supply

According to International Seaways chief executive Lois Zabrocky, “The impact [of Trump] on oil tankers could be more sanctions, reducing some Iranian flows and squeezing out some of the sanctioned parties there, and potentially more sanctions on Venezuela.”

There is also a new theory making the rounds in shipping circles involving Russian sanctions: that the Trump administration could unilaterally tighten sanctions on Russian export flows, targeting buyers in India and China, as part of a negotiating tactic to force the end to the Russia-Ukraine war. Trump deployed market-shaking sanctions during his first term, designating Chinese tanker owner Cosco Dalian for carriage of Iranian oil in September 2019.

The Biden administration has specifically sought to keep Russian crude flowing because to stop those volumes via secondary sanctions on Indian and Chinese buyers would ultimately lead to higher at-the-pump prices in the US.

The G7 price cap was designed to allow Russian exports to continue moving after the EU banned crude and products imports from Russia. In contrast, US secondary sanctions on Chinese and Indian buyers of Russian crude would hike US fuel pricing.

According to Ruppelt, “In general, any incoming president, regardless of which party, has no interest in seeing prices at the pump go up. That would suggest that [Trump] has no interest in restricting oil. As a matter of fact, it should mean more refinery output, and with that, more trading activity and a higher need for transport.”

Meldgaard said, “We believe that Trump’s presidency is likely to imply less restrictions on the US oil industry and with potentially stricter sanctions against Iran, that will be a supportive factor for the crude tanker market. And it obviously remains to be seen, but we expect US oil to be shielded from potential tariffs.”

Mads Peter Zacho, chief executive of Navigator Gas, also expects Trump to put more US oil in circulation.

“His campaign emphasised the need for the US to grow production and exports. ‘Drill baby drill’ is the catchphrase. We believe this should bode well for NGL [natural gas liquids] production and exports.

“In addition, the Trump campaign has focused on the need to reduce the US trade deficit with its trading partners, China in particular. We think this will result in China buying more commodities from the US, including LPG [liquefied petroleum gas], ethylene, ethane, and eventually, clean ammonia,” said Zacho.

Tariff consequences on commodity shipping flows

That’s not what happened during the first Trump presidency.

In that period, Trump tariffs on Chinese containerised goods led to retaliatory action by China targeting US LPG, liquefied natural gas and grains. Those bulk commodity cargoes didn’t go to China, although they did reflow with limited tonne-mile effects, in the case of US LPG to South Korea and Japan.

John Wobensmith, chief executive of Genco Shipping & Trading, described the same “reflowing” effect in dry bulk shipping during Trump’s first term.

“When we look back at what happened in 2018, our opinion is that there won’t be any substantial impact [in the new Trump presidency] in terms of tonne-miles,” said Wobensmith.

“There are unintended consequences when you start putting tariffs in place. Global trade starts to get disrupted. But in general, goods continue to move. They may move in a less efficient way, so it is possible to see a little increase in terms of tonne-miles.

“When we look back on what happened in 2018, China placed tariffs on US grains, so we saw more coming out of Brazil.

“If you look at Russia, when the Europeans banned Russian coal, we saw greater tonne-mile expansion, with Russia sending coal to China and India.

“So, our view overall is that there will be no substantial impact in dry bulk. Goods find a way to move and to get where they ultimately need to be.”

Wobensmith did cite one possibility for dry bulk upside as a result of the Trump’s election: Chinese stimulus.

Dry bulk rates have not received support from recent Chinese stimulus (which is not focused on construction and steel use) and the market has become increasingly sceptical that it will again, but it remains theoretically possible.

“The Chinese could up their fiscal stimulus spending if they feel that tariffs are going to be disruptive and they need to boost domestic spending. We’ll know that in fairly short order,” said Wobensmith, pointing to the start of China’s National People’s Congress later this week.

Download the Lloyd’s List App — the essential tool for staying ahead in the maritime industry, anytime, anywhere! Available now on the App Store and Google Play. More information here