Good morning,
In Tokyo, the European Union has just signed its largest trade deal ever, a pact with Japan that will slash customs duties on products like European wine and cheese, while gradually reducing tariffs on cars. The agreement will cover around 25% of the global economy, and, according to Bloomberg, by some measures the largest free trade area in the world. It is the latest in a string of efforts from the European Union either concluded or in the works with countries like Australia, Vietnam and even China.
The deal with Japan, and the others being negotiated, point to a more assertive Europe, one that is looking past the tensions with the U.S., and even the upcoming withdrawal of Britain. In recent months, E.U. leaders have voiced ever more confident rhetoric in favor of free trade, refusing to back down in the face of the threat of tariffs from Washington and instead aggressively courting new relationships.
But it will not change one economic fact of life: The U.S. remains its largest trading partner. There is no escaping the damage from tariffs against imports like cars and steel.
Did you know?
The Ambassador Bridge is the most important economic link between the U.S. and Canada, taking in an estimated $60 million in tolls alone, with more than $500 million in trade crossing daily.
Quotable:
“The United States is the one big market. The other accords are damage limitation rather than compensation.”
—Holger Schmieding, chief economist at Berenberg bank in Hamburg
In other news:
Amazon Suffers Tech Crash and Strikes During Prime Day Gala
Amazon kicked off its big Prime Day sales promotion with technical glitches on its website and app, threatening its 36-hour sales extravaganza. (Bloomberg)
Port of Oakland’s monthly volume report reflects trade war tensions
Exports are still down, while imports surge. (SupplyChain247)
As sanctions start to bite, Iran crude exports set to wilt
Iran’s oil exports could fall by as much as two-thirds by the end of the year because of new U.S. sanctions, putting oil markets under huge strain amid supply outages elsewhere in the world. (Reuters)
Total seals USD 1.5 bn takeover of Engie’s LNG business
French energy giant Total has closed the acquisition of Engie’s portfolio of upstream liquefied natural gas (LNG) assets for an overall enterprise value of USD 1.5 billion. (World Maritime News)
Class I railroads continue the longer-train trend
At any given time on Class Is’ networks, trains stretching from 10,000 to 15,000 feet long are snaking their way to a destination. Pulling well more than 100 cars, the trains are much longer than — and in some cases more than double the size of — a typical 5,000- to 6,000-foot train. (Progressive Railroading)
Final Thoughts:
The Los Angeles freight market may have found the bottom of its customary July ‘mellowing’ as inbound container rates surged on tariff fears, but there’s still very little clarity as to how big a risk more protectionism might be. This morning’s strong retail numbers suggest that the current expansion cycle still has legs; the next few weeks will tell us how strong fall will be for truckload rates.
After the July 4 holiday, the rate of turndowns outbound from Los Angeles began contracting: SONAR’s L.A. outbound tender rejection index (OTRI.LAX) fell from 18.55% to 14.59% by July 13. At that point, the turndown rate stabilized, and improved to just over 15%. The outbound tender rejection index measures the percentage of all outbound loads tendered from a certain market that are rejected by carriers. The direction and magnitude of movements in OTRI point to the balance of supply (truck capacity) and demand (freight)—the index increases when carriers reject more loads because they don’t have capacity or are trying to take advantage of higher rates on the spot market. Abrupt changes in OTRI can also be leading indicators of spot rate volatility.
Hammer down everyone!
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