There has been much noise about the US President-elect’s policy promises on trade. Donald Trump has been emphatic about his desire to impose tariffs on many of the US’ trading partners, making it a central element in his manifesto for the American economy.
However, a key figure in Donald Trump’s administration is likely to be Scott Bessent, an investment manager who has been nominated to be Treasury Secretary, a post of considerable influence. Certainly, Scott Bessant has spoken in favour of the imposition of tariffs, arguing in an article that “for too long, the conventional wisdom has rejected the use of tariffs as a tool of both economic and foreign policy. However, like Alexander Hamilton, we should not be afraid to use the power of tariffs to improve the livelihoods of American families and businesses”. However, whilst this statement clearly embraces a policy of tariffs, it implies that tariffs are not an objective in themselves. In an interview he clarified this with the assertion that “we are at a key geopolitical moment. I see the need for a grand economic reordering. Something going back to Bretton Woods or the Treaty of Versailles”. This strongly suggests that Scott Bessent at least is looking to the wider objective of restructuring the patterns of global trade.
What are the implications of these policies for logistics markets? If the patterns of world trade do change then it is inevitable that sectors such as air and sea freight will feel the effects. For example, since the late 1990’s, trade into and out of China has been the dominant operation within container shipping. Although the pattern of shipping out of China has changed over the past two years with greater cargo volumes into South East Asia, the implication of Trump policies is to shrink trans-Pacific volumes. Another strong implication is that container traffic generally will become more balanced, as trade deficits in the US shrink. Air freight will possibly be hit even more violently as highly price sensitive e-retail trades are crushed by huge tariffs. As freight transport around the world changes, then it seems likely that the market for warehousing will have to adapt.
It is clear that Donald Trump and his government are intent on transforming how the economies of the world change. His policies are likely to be as significant as the entrance of China into the World Trade Organisation. It would be honest to admit that this latter policy has become non-viable, and trading relationships between many other economies have become more strained in recent years. The question that every logistics service provider trading at the global level should now ask themselves is, what will these policies look like and what will be the implications for logistics?
Source: Ti Insight
Author: Thomas Cullen