The trade war between the U.S. and China had a significant impact on international shipping in 2018 and should continue to do so in at least the early part of 2019.

This article covers what is happening right now in the trade war and then gives 3 effects U.S. shippers are likely to see from it in the early part of 2019.

Status of Trade War

On Saturday December 1st, President Donald Trump and President Xi Jinping called a ceasefire on the trade war between their respective countries.

While this ceasefire did not end the U.S.-China trade war, it did mean agreement between the countries not to implement any further tariff escalations against each other until the completion of a 90-day period for trade negotiations.

Since the U.S. planned an increase on tariffs from 10% to 25% on approximately $200 billion worth of Chinese goods to go into effect on January 1st, the ceasefire was very timely. However, if a trade agreement cannot be reached by the ceasefire’s March 1st deadline, those tariff hikes are scheduled to go into effect at that time.

Trade negotiations are underway between the U.S. and China. Despite doubts that an agreement can be reached within the 90-day timeline, some optimism arose when China’s Vice-Premier Liu He made a surprise appearance at the first day of new talks on Monday, January 7th in Beijing, as reported by Sarah Zheng and Catherine Wong in the South China Morning Post, writing that analysts see this as “goodwill and Beijing’s commitment to reaching a deal with Washington.”

Still, the complexity of reaching a deal involving the resolution of contention over the trade gap, intellectual property practices, tariff measures, agricultural purchases, and other trade practices has analysts expecting no deal to be reached before the deadline passes. That likely means tariff increases in March.

3 Effects of the Trade War on Shipping 

(1) Increased Imports from China

It seems counterintuitive to think the trade war with China would mean more imported goods from China. However, that’s exactly what it’s likely to mean in the first couple months of 2019.

We already saw this happen in the second half of 2018. Shippers moved their imports from China up to beat tariff increases, creating a much inflated and prolonged peak season for 2018.

As most believe negotiations between the U.S. and China are unlikely to reach a satisfying conclusion before the deadline, shippers are likely to continue this trend of trying to beat the tariff increases with goods shipped from China.

While the early part of the year usually sees decreased international shipping, volumes of goods imported from China should be up significantly from their average in January and February. February could even see a very big surge as the March deadline approaches.

Steven Chiu of Seamaster Global even told Universal Cargo that there will be a cargo rush, as “it is expected that 2019-20 contract rates will increase as compared to 2018; thus, importers will move forward their shipments to enjoy the low 2018 contract rates.”

Speaking of freight rates, that brings us to…

(2) Carriers Should Maintain Higher Freight Rates

2018’s inflated and prolonged peak season combined with unusual discipline from carriers in controlling capacity meant higher freight rates than shipping lines have been able to maintain in recent years.

Actually, the trade war saved the year for carriers, which have long struggled with profitability and balancing supply and demand.

While freight rates may come down a little, the trend of carriers maintaining healthier rates is likely to continue in the first couple months of 2019, at least where westbound transpacific routes are concerned.

Don’t expect to see a big drop in freight rates from China during the early months this year.

(3) Tight Capacity

Blank sailing from carriers to maintain control of capacity, cargo being pushed up by shippers to get 2018 rates rather than 2019 contract rates, and Chinese imports rushed forward to beat the possible tariff hikes from President Trump all add up to what could be extremely tight capacity in the early goings of 2019.

Tight capacity could result in delays for some shippers who don’t get the space on sailings as they had expected.

Conclusion

While the long-term effects of the U.S.-China trade war are uncertain, the short-term effects have not been all bad for the international shipping industry. In fact, for carriers, effects have even been good.

Shippers who import from China, on the other hand, have had added stress and some additional expense to their imports through rushing forward shipments and a bit higher freight freights.

Shippers can expect more of the same in the first months of 2019, even as they hope for an end to the trade war with its escalating tariff hikes.

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