[010120.EN.BIZ] US-EU Trade War Threat Looms Over Transatlantic Trade, Says Drewry

A SLOWDOWN in US new car sales and the threat of trade war between the EU and America means trouble for transatlantic container trade, according to London's Drewry Maritime Research analysts.

After expanding 5.4 per cent in the first half of 2019, westbound transatlantic container shipments only increased 0.5 per cent in the third quarter - the lowest quarterly growth since the last three months of 2016, reports American Shipper.

However, a pickup in demand at the start of the fourth quarter saw the trade enjoy record year-to-date growth of 3.7 per cent through October, with US, Canada and Mexico imports up 4.4 per cent, 1.5 per cent and 2.8 per cent respectively, compared to 2018.

One reason for the slowdown during the second half of the year was a drop-off in shipments of motor vehicle components to US plants, with American new car sales still in retreat from the 2015 record of 17.5 million purchases.

"Despite a strong economy, falling unemployment and rising consumer confidence, there has been a gradual decline in numbers sold and this year the figure is likely to total 16.9 million," said Drewry.

"One explanation for this trend is that after many years of strong sales, many American consumers are now driving vehicles that do not need to be replaced so often. Newer vehicles tend to be more durable and hold up longer than cars made even a decade or two earlier."

The demand outlook on the transatlantic headhaul trade is also being muddied by the threat of an escalating trade war. At the beginning of October, the World Trade Organisation (WTO) authorised the US to apply new tariffs of 25 per cent on US$7.5 billion of EU imports following a 15-year dispute over illegal aircraft subsidies granted to Airbus, the European aerospace company.

"The new tariffs went into effect on October 18 and thus between the WTO's decision and application date there was precious little time to fast-forward any shipments, unless it was by air freight," said Drewry.

The analyst believes tit-for-tat tariffs could continue in 2020. It notes that the US had originally sought permission to apply the tariffs to $11 billion of goods, which would have affected items ranging from "wine, cheese, yoghurts and olive oil to fine wool suits, jumpers, bed linen and even women's nightwear".

Moreover, the EU has threatened to retaliate against US goods. "The WTO is expected to decide sometime next year on what tariffs can be imposed against the US for its subsidies to Boeing," noted the analyst.

Source : HKSG / Illustration : 123RF.com.