Editor’s note: The views expressed in this editorial are those of Lori Ann LaRocco and not FreightWaves or American Shipper.
In recent days, global trade tensions have escalated after a series of trade threats and tariffs raised by the Trump administration. But despite numerous declarations of “winning” through the United States’ pursuit of fair trade, the flow of trade is telling a totally different story.
Trade is agnostic and works on the pure dynamic of supply and demand. Based on the tankers, cargo and containers floating on the waterway superhighways, countries like China and those of the European Union have found alternatives to the United States.
The map of the trade war launched by the U.S. is vast. All major trading partners of the United States had a trade deficit. These trading partners either have tariffs levied against them or are threatened with the imposition of tariffs. These trade wars have altered the flow of trade for years to come.
One key trade flow indicator that maritime experts and world economists examine is the volume of the eastbound trans-Pacific trade lane — the regional trade lane for ocean containers that originate in East Asia and end in the United States. This trade lane accounts for 40% of the world’s gross domestic product (GDP). The flow of these trade pipes offers keen insight into the health of trade talks.
The flow of containers in this trade lane has marked a plunge in weakening relations. U.S. exports out of the Port of Los Angeles (the end of the lane) is down 12 consecutive months. China imports have dropped like a stone. According to Alphaliner forecasts, 2019 import volumes in the eastbound trans-Pacific will decline 2% from 2018. The ripple effect of this change not only hits the maritime system but the trucking and rail systems as well because there will be less to move. Less product to move means fewer people are needed.
The collective impact of this multifront trade war and the truth behind the disjointed flow of U.S. exports is something that cannot be disproven — the movement of commodities and products tells the truth. This tangible trade is also being verified in the earnings reports of companies that operate all around the world. The lack of China’s trade promised within the trade negotiations is highlighted by the flow of trade. If discussions were really progressing, U.S. exports to China would be ticking up, not down.
Before the trade war, U.S. liquified natural gas (LNG) exports to China quadrupled from 2016 to 2017 and made up 15% of China’s LNG imports. Today it is hovering above 1%. So where did the trade flow to? Australia and Qatar, which are up 64% in the last two years.
The EU bilateral trade flow pipe, which has already been constricted with the Section 232 steel and aluminum retaliation, may be strangled even more. France has promised EU retaliation after the United States threatened trade tariffs over its digital tax on U.S. tech companies. EU retaliatory tariffs have already priced out over $3 billion of U.S. goods in the EU marketplace. One hundred and eighty types of products, including whiskey, navy beans and motorcycles, have been hit hard.
For the flow of trade to move in today’s trade war, new currents have been created as a result of the tsunami of tariffs. Trade tensions have taken a bite out of U.S. manufactured exports, but the once commanding surplus in services is shrinking, according to the latest trade numbers from the U.S. Department of Commerce. In the end, the interconnectivity of trade will always find a way to work — with or without the United States.