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Trade Policy Change Implications for U.S. Container Trades

December 7, 2017

As the U.S. shifts its international trade policy preferences towards bilateral agreements and away from multi-lateral agreements, there are consequences for U.S. container trades. U.S. trade partner countries aren’t passive when it comes to trade policy themselves and they dislike new bilateral trade deals replacing prior multinational agreements.  Overseas businesses also react to perceptions of increased risks to U.S. trade by looking more to other trade partners.

 

These factors combine to increase competitive threats to U.S. trade growth, especially exports. Less-competitive U.S. exports leads to worsening container trade imbalances, adding financial strains on carriers and port operators, with more empties to reposition for little revenue.

 

The Trump Administration moved quickly to withdraw the U.S. from the Trans-Pacific Partnership (TPP.)  However that didn’t stop the other 11 TPP countries from trying to salvage the negotiations for the remaining countries. Most U.S. exporters compete with other country exporters, including frequently those in Canada, Australia and other countries party to the TPP.  Those countries now will have an advantage trading amongst themselves compared to trading with the U.S., leaving the U.S. on the sidelines unless and until equivalent bilateral deals are negotiated.

 

Potential and prior retaliation against the U.S. for violating terms of existing agreements such as NAFTA have been noted widely before. Receiving less attention are the implications from withdrawal from anticipated trade deals before they take effect.  Reversing decisions made in anticipation of a trade agreement can act as retaliation too, and can be as impactful as retaliation for not observing existing trade agreements.  We are seeing some of that already with the TPP withdrawal, and can expect more if NAFTA is terminated.

 

U.S. containerized exports to countries in the TPP are already being affected.  Japan went ahead with a free trade pact with the European Union in July and raised tariffs on some imports from the U.S. (an example being the 11.5% increase in their tariff on U.S. frozen beef imports.) U.S. trade growth is weaker this year already as a consequence and further U.S. trade policy changes should be expected to face more retaliation, further impeding container trade growth.

 

 

 

Paul Bingham is a Director at Hackett Associates.  He can be reached at paul@hackettassociates.com

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