DONALD Trump’s trade policy decisions have left ship operators bewildered and wondering what is going through the US president’s head.

Renowned financier Wilbur Ross offered his take on Trump at Marine Money Week in New York on Monday.

Ross first met the president in 1990, when Ross represented bondholders threatening to put Trump’s Taj Mahal Casino into involuntary bankruptcy after Trump failed to make a single interest payment.

Ross won that negotiation on his clients’ behalf, worked with Trump through the years (“we got friendly after that and he later hired me to clean up some other messes he had gotten into”), and impressed Trump enough to be appointed the commerce secretary in the president’s first term.

The pattern of the Taj Mahal debt negotiations 35 years ago will have a familiar ring to ship operators whipsawed by current US trade policies.

Trump started with an offer to Ross that was clearly unacceptable (20 cents on the dollar for $800m in bonds purchased six months earlier at par), then eventually settled, handing over 50% of the casino ownership to bondholders, but only after a headline-grabbing feud.

“There was very public acrimony,” recalled Ross. “That was one thing I learned about him — he likes to negotiate everything in the media. You’re seeing that in full bloom now with the trade talks and other things.”

Views on Trump 2.0 trade war

During the president’s first term, a phase-one trade deal was reached with China, and the outcome of that agreement could affect negotiations in the current term, believes Ross.

“Toward the end of our administration, we negotiated a phase-one deal with China. In theory at least, there was going to be much more purchasing of American goods by the Chinese. The only problem was: the Chinese never implemented the agreement, and when Biden came in, they didn’t see any necessity to live up to it.

“So, I think one of the conditions of any arrangement we do with China will be the enforceability of whatever is agreed, and what punishment is automatic if someone does not abide by the agreement.”

That will make an eventual US-China trade deal even more challenging. “In addition to the various other complexities, I think there will be an element that has not historically been a factor in our trade agreements, namely ensuring enforceability.”

Ross also talked about some of the latest trade moves that have surprised him, given his experience in the first Trump term.

“His current position is to be much tougher on China than anywhere else, and interestingly, to be much tougher on Asia than on Latin America. If that doesn’t change, I think you’re going to see a massive transfer of wealth from Asia to Latin America.

“Many Asian countries [were initially targeted with] tariffs of around 40%, which is pretty much saying ‘you’re not going to do business with us’, because 40% is not an absorbable tariff, whereas he’s only subjecting most Latin American countries to 10%, and 10% is absorbable.

“I was a little surprised to see tariffs being so strong on Vietnam, because the reason Vietnam is now such a major exporter to the US is that we, in effect, created them as a very logical substitute to China.

“Hopefully, they will work out some accommodation, because it would be a little strange to have positioned them to be a replacement country for China and to now punish them for accomplishing the mission.

“My guess is that there will be a deal, because Trump has no natural reason to pivot from Vietnam.”

India has also increased its exports to the US as a result of the shift from China following Trump 1.0 tariffs, and India also faces potentially onerous reciprocal tariffs once the pause ends. “I think India is a good candidate to make a deal pretty soon,” said Ross.

He also expects a trade agreement with Japan, pointing to the recent purchase of US Steel by Nippon Steel, with the US government retaining a “golden share”.

“I can’t imagine Trump would have approved the deal with the golden share unless he felt he was going to be able to make an overall accommodation with Japan. So, I view that as a very hopeful sign in terms of Japan.”

Constraints on future shipping demand

Ross, who is well-versed in the shipping industry — he was formerly a large shareholder in Diamond S and Navigator Gas — expects the new trade dynamics to be negative for future shipping demand growth.

“I think there will be something of a slowdown, longer term, in the rate of growth of the world economy, and particularly, in the rate of growth of shipping industry.

“Shipping has tended to grow somewhat faster than the world economy in general, because many countries, but mainly the US, had these very unrestrictive policies. Now, the US is clearly going on a much more protectionist stand.

“That will provoke a certain amount of reshoring and a certain amount of nearshoring, especially to Mexico,” he said.

“I think there’s another factor that will also occur. We’re not the only country that has been running a trade deficit with China. Most other countries also have trade deficits with them. How have they financed their trade deficits with China? It has mostly been through surpluses with us.

“To the degree that Trump succeeds in reducing our imports from countries other than China, those countries are not going to be able to afford to bring in as much from China as they used to,” he explained.

“That will compound China’s own internal economic problems, and will also tend to reduce, somewhat, the rate of growth in maritime transport. I think it’s going to be a constricting factor.

“I also think there’s a high probability that other countries, to protect themselves, will erect higher barriers against China, and that some of our trade treaties will probably incorporate that kind of a feature.

“Otherwise, we’ll run into what we did last time, which was that a low-tariff country on a given product to us suddenly becomes an importer from China, and serves as a conduit for transhipment. I think we will be encouraging countries to put barriers in against that, and they will probably be doing that on their own anyway.”

Ross also predicted changes for trade flows as the result of increasing geopolitical conflicts.

“It’s pretty clear that the world is heading toward defence build-ups. You see it starting to happen in Europe in a big way. You see Canada starting to do it. Asia is certainly doing it. One industry that I think will be very much a growing one is defence spending.

“We’re clearly in a more dangerous world than we thought we were a decade or two ago, so I think that’s going to change the mix of what gets exported and what gets imported. That’s another factor that will tend to constrict things.”