The weakness in the global shipping industry partly stems from the severe slowing of global trade this year. Unfortunately, neither candidate for US president appears poised to approve a trade deal that would help that dismal state of affairs.
The World Trade Organisation WTO said in September that total world trade will only grow 1.7% in 2016, down from an earlier forecast of 2.8% growth. The WTO also cut its forecast for world trade next year to a range of possible outcomes ranging from 1.8% to 3.1%.
The world’s largest consumer, the US, is in an even more dismal state. In 2016, US trade in goods remains at the lowest in two years. Exports of $1 trillion are about and imports of $1.6 trillion are both about $600bn below 2014 levels.
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“From a fundamental standpoint, anything that impacts global trade negatively or positively could impact shipping, and specifically the containership market,” said Deutsche Bank analyst Amit Mehrotra.
He pointed to evidence that free trade agreements can have a significant boost for trading volumes between signatory countries.
The Trans-Pacific Partnership (TPP), which the US and 11 other Pacific Rim countries have negotiated since 2008, could lift member countries trade 11% by 2030, according to a World Bank study.
The TPP could result in greater trade in finished, containerised goods between the US and other signatories in the Pacific Rim. Southeast Asian trade lanes would have been the primary beneficiary with Vietnam and Malaysia expected to see the biggest benefits from TPP.
Although endorsed by current US President Barack Obama, TPP has become a target for both candidates. Despite endorsing TPP during her tenure as Secretary of State, Democratic candidate Hillary Clinton has since disavowed support for TPP.
She has particularly attacked TPP’s “rules of origin” provision, which may benefit non-signatories to TPP too. An example is reduced tariffs on a car built in Japan, a TPP signatory, but with parts made in China, which is not part of TPP.
Republican candidate Donald Trump has likewise signalled he will not support TPP. Similarly, he has proposed even larger walls to international trade with a proposal of a 20% tariff on imported goods.
“Both candidates, now anyway, are against TPP in some way, shape or form, so I think from a container standpoint, maybe that’s a negative,” said one shipping market source.
The US’s largest trading partner, China, has been targeted for even more punitive measures. Trump has proposed a 45% tariff on goods imported from that country.
Dry bulk shipping may also feel the effects of a continued dampening of trade relations between the US and China. The US this year has imposed tariffs of up to 500% on imports of cold-rolled steel from China, with neither candidate signalling any intention to remove those tariffs. China likewise has imposed stiffer tariffs and other limits on imports of certain types of grains from the US.
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