BREAKING NEWS Manhunt underway after Springfield murder Full Story
SEVERE WX : Winter Storm Warning View Alerts

Shipping industry braces for Chinese trade war

The shipping industry has a lot to lose in a potential trade war between the US and China.Millions of jobs and...

Posted: Apr 5, 2018 6:59 PM
Updated: Apr 5, 2018 6:59 PM

The shipping industry has a lot to lose in a potential trade war between the US and China.

Millions of jobs and the bottom lines of major maritime shipping companies, which account for 80% of all global trade, depend on goods traversing the oceans.

Even in times of robust trade, shipping industry profit margins tend to be slim - about 3%, according to Simon Heaney, senior manager of container research in London for Drewry, a maritime research consultancy.

Now that China and the US have threatened to swap 25% tariffs on a range of goods worth a total of about $100 billion, the maritime industry is worried that shipping volume will fall along with profits

"I think the ocean carriers are very nervous; they're coming out of some lean years," said Heaney. "This is clearly a concern for anyone involved in the shipping industry."

Tariffs could put up to 7% of Asia-to-US shipping at risk and impact 1% of total global shipping, according to Heaney. Shipping revenue in 2017 totaled $210 billion.

Related: US businesses to Trump: Don't go ahead with tariffs

"It's going to hurt container lines," said Mark Szakonyi, executive editor for the Journal of Commerce. He warned that container ships sailing from the US to China could get stuck with partially empty hulls and move "air back to Shanghai."

Last year, for example, the US shipped nearly 57,000 containers worth of soybeans to China, but with a 25% tariff looming it's unclear if as many soybeans will travel a well-worn route down the Mississippi and out the port of Louisiana headed for China.

Restrictions on other products would hit America's busiest port cities, like New York, Los Angeles, and Long Beach, California. While few Americans work on the ships themselves, nearly 10 million Americans work in the industry, according to the Bureau of Labor Statistics. Occupations include aircraft cargo handlers, truck drivers, ship engineers, hoist and winch operators and more.

Related: China punches back with 25% tariffs on planes, cars and soybeans

"A trade war with China is a bad thing for pretty much all transports," said Scott Group, shipping analyst with Wolfe Research, in a note at the end of March, when the tariff rhetoric was heating up. He identified the companies with the most to lose in a trade war with China.

Expeditors International of Washington, Inc., a logistics company that purchases cargo space from ocean shipping and airlines and resells it to customers, will take the lion's share of damage. Group said that 31% of that company's revenue came from China last year.

The next most exposed company, according to Group, is Atlas Air Worldwide Holdings, a cargo airline from New York, which does a lot of business with Asian countries.

He said that FedEx and UPS could also be affected as 6% of FedEx's revenue and 5% of UPS' revenue are from US-Asia trade.

UPS spokesman Matt O'Connor told CNNMoney that "UPS does not expect to be measurably impacted based on the currently proposed tariffs."

FedEx declined to comment.

Rail companies could also be impacted, even though they might not do direct business with China. Group said that Union Pacific Corp. has 13% of its revenue driven by trade with China because its trains carry the goods inland from the ports.

Other big players in the shipping industry are Covenant Transportation, Daeske and Werner Enterprises.

Related: Trump plans to hit China with tariffs

Chris Rogers, an international trade analyst with Panjiva, a research firm that monitors global trade, said much of the effect on shipping will depend on the willingness or ability of American consumers to pay higher prices for basic goods, or the flexibility of Chinese manufacturers to shift their production to other countries, in a policy called "country hopping."

Oregon Coronavirus Cases

Data is updated nightly.

Cases: 153645

Reported Deaths: 2162
CountyCasesDeaths
Multnomah31669515
Washington20962209
Marion18246282
Clackamas13260170
Lane10096122
Jackson8198108
Umatilla760081
Deschutes589358
Yamhill373962
Linn354455
Malheur333658
Polk300642
Klamath276554
Douglas237551
Josephine228849
Benton227816
Jefferson193427
Coos138518
Union126919
Columbia123221
Wasco121825
Lincoln112320
Hood River106029
Morrow103613
Crook77118
Clatsop7706
Baker6397
Curry4106
Tillamook4062
Lake3746
Harney2726
Grant2221
Wallowa1424
Gilliam531
Sherman520
Wheeler221
Unassigned00
Eugene
Partly Cloudy
34° wxIcon
Hi: 48° Lo: 34°
Feels Like: 30°
Corvallis
Mostly Cloudy
34° wxIcon
Hi: 46° Lo: 31°
Feels Like: 30°
Roseburg
Clear
37° wxIcon
Hi: 52° Lo: 33°
Feels Like: 37°
North Bend
Partly Cloudy
39° wxIcon
Hi: 50° Lo: 35°
Feels Like: 39°
KEZI Radar
KEZI Temperatures
KEZI Planner

LATEST FORECAST

Community Events