THE NEW era of Trump tariffs officially took hold on Thursday, so there is an understandable desire from embattled chief executives such as Maersk’s Vincent Clerc to see this as a conclusion.

Clerc and his peers want certainty and stability to plan around. Sadly, they stand to be disappointed.

The US president may think that the US is “winning”, but America’s new trading order is nowhere near being a stable end-state that businesses can rely on.

What follows next is a turbulent redrawing of global trading patterns and supply chains that is far from over.

Clerc’s assertion that we have entered a different phase of globalisation, rather than deglobalisation, makes sense. And his optimism over that phase being supercharged by Chinese companies taking market share on the global stage is one part of the story. But it is only one part.

Clerc imagines a scenario involving a rebalancing of global trade, but how and over what time frame, that much is unclear.

“We are in the midst of a messy transition globally. To what, nobody can tell,” Singaporean Prime Minister Lawrence Wong warned earlier this year. It seems unlikely that he or anyone else is any clearer now that we have the tariffs in place.

The average US tariff rate now stands at just over 15%. Better than many had hoped for, but well above 2.3% last year and the highest level since the Second World War era.

The problem though is not the number, but the certainty of how long those numbers will survive.

No sane chief executive is going to make long-term investment decisions based on the numbers in front of them right now. For all the talk of resilience and adaptability in supply chains, businesses do not react immediately to these shifts; they make the best of what is in front of them while waiting for longer-term clarity.

So yes, Chinese exports are the key to what Maersk believes may happen in the fourth quarter, and for several more quarters beyond that.

But overall, the view does not change. The sharp rise in tariffs and policy uncertainty is set to weigh heavily on global growth. What follows is less predictable and tariffs continue to be inherently detrimental to economic growth, trade volumes, production costs and consumer prices.

Clerc is right about one thing though: it would be a mistake to believe that supply chains will return to where they were. This rebalancing of global trade is only just getting started.

Richard Meade
Editor-in-chief, Lloyd’s List

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