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The US China Trade War – The Impact On Shipping

What is the US China Trade War?

As an importer or exporter you have likely heard of the ongoing US China trade war. As each country takes measures to recover export deficits, two of our biggest global trade centers are locked in a battle causing escalating tension within global trade. 

The war began following the investigation of Chinese trade practices in 2017. By late 2018 a series of tariffs were introduced on Chinese imports into the US covering more than USD 250 billion worth of Chinese goods. 

Here we take a look at the events to date, the effects of the global trade market and what it means for you!

Events to Date

In March 2018 the US imposes a 25 percent tariff on all steel imports (except from Argentina, Australia, Brazil, and South Korea) and a 10 percent tariff on all aluminium imports (except from Argentina and Australia).

Causing a marked effect on China trade, by April 2018, China retaliates and introduces tariffs on US $3 billion worth of imports from the US.

Following the three rounds of tariffs introduced on Chinese imports in late 2018, both nations agreed to enter bi-lateral talks. 

The talks allowed for a 90 day truce, until March 1st where no further tariffs would be imposed. 

Negotiations continued over the next few months until 5th May 2019 when the US announced it will increase tariffs on US$200 billion worth of Chinese products from 10 percent to 25 percent, effective Friday, May 10.

In response, China announces that it will increase tariffs on US$60 billion worth of US goods from June 1, 2019.

The Numbers

As it stands today the tariffs applied have added over US$360 billion of additional costs to the industry:

Total US tariffs applied exclusively to Chinese goods: US$250 billion

Total Chinese tariffs applied exclusively to US goods: US$110 billion

The trade war began to cover a deficit of US$419 billion in the US. Since 1985, the trade gap has escalated. Demonstrated on the chart below, a review of the deficit can be read here.

trade deficit

What does it mean for you?

The ongoing US-China trade war has sent waves through markets, with wider concerns that the global market could be negatively impacted.

KPMG Australia modelling estimates the cumulative loss of GDP in Australia would be -0.5%, mirrored globally, with the largest losses seen in the US, -0.7% and China, -1.0%.

However it is not all bad news. As China is Australia’s biggest export market, should China further increase tariffs on the US it could create a pricing advantage for Australia’s agriculture businesses. 

In addition, PwC modelling reveals that the pattern of tariffs applied by China and the US, and our exemptions from US tariffs, will result in Australia benefiting from the US-China trade war to the tune of $1.7bn a year. This assumes the industry can expand in a timely manner to fill market gaps caused by tariffs.

One Last Tip

As a business operating in the global market you can stay abreast of developments in the US China trade war by following our social pages. 

Should you have any questions regarding this please contact your ICE team member on 1300 CARGO1.


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