BIMCO issues statement on likely impact of US tariffs
"On Wednesday, US President Donald Trump announced a plan for new tariffs,” shipping association BIMCO noted in a statement issued yesterday. “According to the announcement, US import tariffs will increase nearly 25% on the goods impacted. When accounting for goods so far exempted from the increases, overall US import tariffs will increase by 15-20%.
"We expect that the tariff increases will hurt US businesses and consumers the most as they will see cost increases on nearly 80% of imports. Countries affected by the tariff increases will naturally also feel the effect on the portion of their export destined to the US.
"Key US trading partners such as China, South Korea, Japan and the European Union have vowed to retaliate, further increasing the cost of global trade. Again, US businesses appear likely to suffer more than businesses and consumers in the countries that may retaliate.
"In the US, the tariffs are likely to lead to increased inflation and lower economic growth. Considering the importance of the US economy, this could in turn slow down global economic growth.
"In March, the OECD estimated the impact of a possible 10% increase on non-commodity imports by the US and a 10% increase by all other countries on non-commodity imports from the US. The OECD estimated that this could cause global output to fall by 0.3% by the third year and increase global inflation by 0.4 percentage points per annum on average during the first three years. World trade volumes were estimated to decline by close to 2%.
“So far, we don’t know how US trading partners will respond but the US tariff increases obviously exceeds the 10% included in the OECD scenario. If trading partners respond in kind, the impact on the global economy and global trade would exceed the OECD estimate.
"It remains to be seen how the US consumers will react, but it appears likely that they will decrease discretionary spending, hurting the travel and service industry and potentially leading to increased unemployment in those sectors. Any reduction in discretionary spending could allow consumers to increase spending on goods which in turn could reduce the impact on shipping.
"From a shipping perspective, the container sector will be affected the most. Many tanker and dry bulk commodities have so far been exempted from the tariff increases but most goods shipped in containers will face import tariff increases. In a scenario where the tariff increases would result in zero growth in US container imports, it would reduce global container volume growth by 0.5 percentage points."
An article entitled ‘Tariff wars: when geopolitics and trade collide’, written by Dr Martin Stopford, is the cover story of the latest issue of SMI magazine.