The Daily View: The wrong kind of trade disruption
Your latest edition of Lloyd’s List’s Daily View — the essential briefing on the stories shaping shipping
THE meme of Donald Trump spinning a game-show wheel to set tariff levels captures the uncertainty faced by supply chain players, but not how tariffs are actually set. It’s not chance. It’s the decisions of one person — Trump — which are constantly changing in a way that’s as unpredictable as the spin of a wheel.
First, Canada and Mexico tariffs were threatened, then retracted, then enacted for two days, then retracted for two weeks, then reinstated with large exceptions.
Reciprocal tariffs were enacted at very steep levels that no one predicted, based on a trade-deficit formula, not trade barriers. Then, after the bond market balked, Trump put reciprocal tariffs to all countries except China on hold for 90 days, while retaining a 10% global tariff.
Incremental tariffs on Chinese goods went from 10% to 20% to 30% to 125% to 145%. Then Chinese smartphones, laptops and other tech products were suddenly given a 90-day reprieve, with tariffs brought down to 20%.
According to “The Art of the Deal”, Trump’s negotiating strategy boils down to: “aim very high and just keep pushing”; “keep a lot of deals in the air because most deals fall out”; “sometimes part of a deal is denigrating your competition”; and “wear everyone down” until opposition “melts away”.
The historically chaotic first three months of Trump 2.0 point to a US tariff strategy that is evolving on the fly, fraught with acute uncertainty, and directed by one person who’s still following the same playbook he did in real estate, but now on a global stage.
Shipping has a proven track record of finding its way around disruptions, and most disruptions are positive for rates. But not all of them.
At one end of the spectrum are disruptions like the closing of the Red Sea, the Panama Canal drought, and the Ukraine-Russia war. Demand wasn’t destroyed, so tonne-miles rose as cargo rerouted.
Trump’s tariffs are at the other end of the spectrum: they are demand destructive, not just in the US, but globally, due to overwhelming uncertainty and tariff-inflated cargo costs. There will be new trade flows, but tonne-miles will fall because the drop in tonnes will ultimately exceed the rise in miles.