7 Mar

Health of the national and global shipping economy

When President Trump delivered his first address to congress on February 28, 2017, the world watched and wondered.  The health of our national economy and indeed the global economy is predicated on the decisions that President Trump will make in the coming months.  Will the economy continue its growth and perhaps even increase growth this year?  Or will President Trump’s policies severely damage the economy, throwing it into a deep recession?

Let’s look at the facts of the shipping economy.

Much of what will happen depends on whether or not President Trump follows through with three big campaign promises.

  1. 1. Will the USA pull out of the North American Free Trade Agreement (NAFTA)?

  2. 2. Will the USA impose a restrictive 45 percent tariff on Chinese imports?

  3. 3. Will the USA impose a border adjustment tax on Mexican imports?

From a shipping industry perspective, these policies could cause a whole lot of hurt for the shipping and trade industries. If one or more of the above promises is kept, the fallout could disrupt the economy and send the USA and perhaps the entire world into another recession.

Currently, the US economy is humming along with a solid trade outlook for the year ahead. The US economy has strong fundamentals, paired with positive business and investor optimism. Some economists predict growth of 2.9 percent in 2017, which would be the highest growth reported in 6 years.  Trade has the potential to grow by 5 or 6 percent in 2017.

President Trump has also discussed the implementation of a 20 percent border adjustment tax (BAT) on imports from Mexico.  The hope is that this would reduce the flow of imports from Mexico and promote manufacturing in the United States. The problem with this approach is that this tax would inevitably be shouldered by ordinary consumers.  Big companies may win, while retailers and consumers will most assuredly lose.

Right now, the US economy is fundamentally good. The global outlook is positive.  The news of these possible policies causes uncertainty and pessimism.  Some economists are predicting container volume growth of 6 percent in 2017.  However, if President Trump takes a hard line on Mexico and China and imposes difficult country of origin restrictions on Canada, we could be facing a recession by the third quarter of 2018, caused by difficult relations with these critical trading partner nations.

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