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The Daily View: Prepare for the Trump tariff ‘wall’

 

Your latest edition of Lloyd’s List’s Daily View — the essential briefing on the stories shaping shipping

THE view on Donald Trump’s tariffs has evolved from: It’s just a negotiating tactic — he’s only bluffing — to okay, he’s not bluffing but if there is a trade war it will be short.

For shipping, it’s time to move to a base case where higher US tariffs are long-lasting and will alter ocean trade flows.

If, that is, they go ahead. Trump “paused” the Mexico tariffs for one month on Monday following Mexico’s promise to deploy troops to the border, then later in the day extended a one-month grace to Canada. But those on China are set to go ahead, with China offering its own countering tariffs.

Trump tariffs have different drivers. There are those that target non-trade issues, such as the threat to Colombia over deportation flights, and the current tariff threats against Mexico, Canada and China, which is ostensibly about drug smuggling and border security.

In the case of Canada, it could also be linked to Trump’s expansionist dream of having that country as a US state, and his earlier assertion that the US would apply economic pressure to make it happen. After signing the executive order for the 25% tariff, Trump wrote on social media, “Canada should become our Cherished 51st State. Much lower taxes — AND NO TARRIFS!”

Canada will, of course, never become the 51st state. Not before and certainly not now. The US national anthem is being booed at Canadian sporting events and US liquor is being removed from Canadian shelves.

The second category of proposed US tariffs are those designed to address trade imbalances and bring manufacturing back to America. “The way you bring it back to the country is by putting up a wall, and that wall is a tariff wall,” said Trump in a press conference.

A third category of proposed tariffs appears to have a different goal: to shift America toward an indirect consumption tax. Charging American consumers at the cash register would be politically disastrous, so the workaround is a backdoor consumption tax via tariffs, ultimately paid by US consumers, with tariff revenues offsetting tax reductions on income, business operations and investments.

It’s hard to square all this with the thinking that Trump’s tariffs will be short-lived or that they are just negotiating tactics. It seems more likely that tariffs are coming, they will be significant and long-lasting, they will affect ocean trade flows, and they will materially change the global shipping landscape in ways that will be both positive and negative for rates.

Greg Miller
Senior maritime reporter, Lloyd’s List

Click here to view the latest Lloyd’s List Daily Briefing

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