Projecting container volume for the next year has become even more challenging with the outbreak of the coronavirus in China and its spread into the rest of Asia, Europe and North America. The tariff war with China had a direct impact on trade in 2019 with US imports declining below their 2018 levels, and further tariff threats against the European Union will not help going forward. Perhaps the Phase 1 agreement with China will alleviate the downward pressure on imports, but as the agreement leaves most of the tariffs imposed over the past two years on the books the impact of the trade war is not yet over.
Add to this the unknown situation of spread of the coronavirus, particularly in China, and the next three months fog up in terms of assessing the impact on trade. One thing is certain: China’s gross domestic product is forecast to see a downward impact of at least one percent according to both China and independent analysts. Some factories have now been shut for nearly two additional weeks with Wuhan Province – both the center of the outbreak and a center for motor parts and high-tech goods – being hardest hit. With the presence of travel restrictions combined with people in marginally affected areas on both enforced and voluntary lock down in their homes, it is questionable how soon manufacturing activities will return to normal. All eyes are on if (and for how long) the Chinese government extends or expands factory closures.
We are seeing the impact on exports from China as carriers begin to cancel sailings and potentially light-loading in Chinese ports due to lack of stevedores and certain key products. US, Korean, Japanese and European motor manufacturers are reporting the beginning of parts shortages since they have run down inventories. Fortunately – unless you are in the automobile industry – the shortages come as demand for new vehicles has also dropped.
The fear of the unknown is infecting human behavior. As it spreads, the virus will also impact the manufacturing industry, putting further downward pressure on global trade. It may be that fear will be the root cause of a global decline in trade growth.
Our forecasts reflect a sharp decline in US imports, primarily on the West Coast, in February and March due to the Lunar New Year and coronavirus, with a bounce-back recovery in April and May. We continue to forecast growth for 2020.