Impact of China-USA Trade Disagreements on Liner Shipping Industry

This report evaluates the impact of China-USA trade disagreements on the liner shipping industry. It discusses the impact of trade tariffs on the US, China, and Hong Kong shipping industry, as well as the global linear shipping industry. The report also covers the competition law and ISM code and their effects on the industry.

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Abstract
The paper through the light on the fundamental principles that contribute in offering the current
development related to the subject. The topic on which the report focuses is impact of China-
USA trade disagreements on the liner shipping industry. The findings of the report include that
trade tariffs is one of the major factor that leads to the disagreement between the countries and
create the impact on the trading through shipping. The impact is not limited to the China and US
linear shipping industry but it has also trapped Hong Kong shipping industry. In addition, it
creates a minimum level of impact on the world shipping industry. The findings reflect that the
tariffs on trade might get shifted to the customers which affect the market where companies are
dealing. In the near future, this trade war might affect shipping industry on large scale.

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Contents
Introduction......................................................................................................................................3
Impact of the China-USA trade disagreements on the liner shipping industry...............................4
Trade tariffs.................................................................................................................................4
Impact on US and China shipping industry.............................................................................6
Impact on the global linear Shipping industry.........................................................................7
Impact on Hong Kong shipping industry.................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

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Introduction
The aim of the report is to evaluate the fundamental principles and to offer a comprehensive
review of the current developments on the subject. The topic on which the report is based on the
impact of China-USA trade disagreements on the liner shipping industry. The impact which is
discussed in the report includes trade tariffs which lead to the issue in the trade through the
shipping. The rise in the tariffs by the US creates an impact on the shipping industry as there will
be reduced in the trade among the countries. The impact is not only limited to China and US but
it also includes the impact on the Hong Kong shipping industry. Hong Kong is between the US
and China route due to which it also get affected. Further, the impact of the China-USA trade
disagreements on the linear shipping industry has been discussed below.

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Impact of the China-USA trade disagreements on the liner shipping
industry
In the current era, the shipping industry is at boom because the transport of heavy products still
takes place with the help of the ships. The US-China trade disagreement leads to the impact on
the liner shipping industry. Trade negotiation between China and the US is considered an on-
going process with a certain unknown variable that can bring the change in the framework going
forward (Dupuy and Viñuales, 2018). Considering the tariffs that have been imposed till the date
and according to the previous announcement U.S.-imposed tariffs look like they are willing to
target indiscriminately all end consumer products imported from China. The linear shipping
industry faces issues like a decrease in volume and profit, availability of routes and many others
(Kuo, 2018).
Trade tariffs
The US-China trade war has yet to make the big waves for the world’s shippers that transport
everything from Soybeans to industrial machinery among the two nations (Van Marrewijk,
2017). According to the Baltic Dry Index, it has been measured that the shipping rates for the
vessel that carry bulk commodities like coal, grain and others are increasing by 80% since April
(Knowler, 2018).
The US has placed the tariffs on approx. all half of the Chinese products that are exported to the
US and president Trump has also threatened to impose nearby US$500 billion which is worth of
the annual exports (Djankov, Freund and Pham, 2010). The reason behind this is that they
pressure Beijing to stop for their claims for the unfair trade practices. On this, China has

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answered with its own retaliatory actions. According to the analysis, this is found that recent
round placed a 10% tariffs on US$200 billion worth of goods with the duties set to go to 25% on
January 1 if there will be no resolution between US and China. In the late may, the US proceeds
with the 25% tariffs on the USD 50 billion value of the Chinese products. The first list of the
goods includes electronics and machinery which is equal to the USD 34 billion has faced the
tariffs from 6th July 2018. Another list includes the Chinese import value of USD 16 billion
which include products like oil products and plastic (Sand, 2018).
(Source: Sand, 2018)
The US imported more than 18.8 billion tonnes of the tariffed steel products and approx. 4.4
million tonnes of tariffed aluminium goods through the sea. This is found that together with the
affected steel and aluminium commodities which are equal to approx. 0.5% of the total dry bulk
seaborne trade in 2017 (Sand, 2018).

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China offered a response to the US tariffs initially placed by them on steel and aluminium on 2nd
April 2018 by targeting approx. 128 products which are equal to approx. 3 billion. In addition,
China retaliation to the USD 50 billion of planned tariffs from the US that were published on 17th
June 2018 and further separated into two parts. The total Chinese imports of approx. 545 US
commodities that cover approx. USD 34 billion was majorly focused with the proposal of extra
tariffs on 114 commodities that is equal to USD 16 billion (Sand, 2018).
Impact on US and China shipping industry
China has made the heavy investment to improve the infrastructure of the overseas network
which works as a strategic advantage to China and their shipping. The shipping industry helps
the company to conduct trade from different countries including the US (Stopford, 2013).
Though, the trade disagreements due to the rise in the tariffs lead to the fear for the linear
shipping industry of China and US (Daniels, 2018). This is evident with some industry experts
who find that they face the fear that a full-blown trade war could hurt the volumes of shipping.
This includes the shipping, in turn, bottom lines majorly for container shipping lines (Bray,
2018). The chief shipping analyst at BIMCO (Baltic and International Maritime Council) said
that there is no doubt that increases tariffs lead to a trade war between the US and China. The
war among the countries matters a lot as it is outright bad for shipping. Across the globe, the
shipping industry is feeding on globalisation and also offers the prosperity (Davies, 2018). In
present, According to the BP’s Statistical review of the world energy, the impact on the tanker
business is limited due to impose of the tariffs. At just 7.7 million tonnes last year, US exports of
Crude oil to China established only 17% of the total U.S. exports of crude oil across the world
(Goh, 2018). This shows that the tariff’s has put in major effect on the container shipping
industry.

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The trade between the US and China is equal to approx. 4% global commerce. This shows that
the trade disagreement will create the consequences in the global trading patterns at some point
in the near future (Nordås and Rouzet, 2017). This is found that US president aggressive trade
strategies can be planned with the motive of the force concessions (Marle, 2018).
Competition law and ISM code
The competition law is known as the antitrust law or the anti-monopoly law. The law was also
known as the restrictive trade practice law on UK and in Australia. US, antitrust exemptions in
the maritime sector started with the Act of Shipping of 1916. This act was followed by the
Shipping Act of 1984 which allows the agreement of conference if it was not disapproved by the
Federal Maritime Commission (FMC) (Premti, 2016).
The competition law is applied to the linear shipping. The law is also present in US which might
affect the linear shopping working with China. Further, the competition rules of EU also lead to
the effects on the linear shipping. The pressure to move towards the hub and spoke leads to the
rise in the mergers and alliance can leads to the certain degree of competition in the market. To
enhance the level of external competition as when the regulatory changes takes place allow the
more flexible mechanism to the linear shipping industry such as US Ocean Shipping Act of
1998.
International Safety management (ISM) code is a standard for the safe operations of the ship and
for preventing the pollution. This safety is related to the people on board, ship and cargo with the
marine environment. This has been found that current ISM has cyber risk, considering this IMO
has given the ship-owners and managers to apply with the cyber risk management in safety of
ship and giving the industry another issues to deal with until 2021. This has been found that

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owners will face the risk of detained shop if they will not be able to include the cyber security in
the ISM code safety management of ships by the year 2021 (Wingrove, 2017). The linear
shipping industry of US and China need to follow the guidelines and non-implementation of this
will affect the shipping industry as they won’t be able to conduct their work.
Impact on the global linear Shipping industry
The escalation in the trade friction might leads to the war in a trade that could derail the
recovery, reshape worldwide maritime trade patterns with dampening the outlook. In addition,
the on-going global energy transition, the shift in the economies structure like China and shift on
the development pattern of the global value chain are considered as factors that drive the changes
in the linear shopping industry. This is true that the trade wars among the country are considered
as one of the most difficult time for the industry (Two Sigma, 2018). The world's largest
shipping lines faced the struggle with the profitability in the current quarter with the amid a
consolidation push.
Impact on Hong Kong shipping industry
In the report, this has been found that an increase in trade tension among the US and China is
probably to catch Hong Kong with its struggling shipping industry right in the middle (Lee and
Shen, 2017). The operators said that this is true that not only China and US shipping industry are
affected but the Hong Kong shipping industry also get affected. This is found that approx. 6,000
to 7,000 people are direct employees for the port of Hong Kong and approx. 200,000 people
work in particular corporate are knotted to the port (Bray, 2018). The impact on the shipping
industry of Hong Kong will create an impact on the jobs of people that are working on the port.
Levesque, managing director of Modern Terminals was unwilling to attribute that there is a
decline in the shipping volume in Hong Kong due to the trade war. Though, on the other hand, it

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was found that categories of goods that are covered in the US tariffs are imposed in July and in
August were mainly transported by air freight rather than the sea (Coşar and Demir, 2018).

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Conclusion
In the end, this can be concluded that China and US trade disagreement has taken place due to
the trade tariffs imposed by the US as this can create an impact on the liner shipping industry.
This report includes the impact on the liner shipping industry. This includes the impact on the
US and China shipping industry with the global shipping industry and Hong shipping industry as
it falls in the route of China and US. Moreover, the major impact includes reducing the demand
for the products which reduce the need for shipping and affects the industry with the profit of the
country. Similar to this, the major impacts are discussed in the paper that took place due to the
trade disagreements.

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References
Bray, C. (2018) Global shipping industry stays on an even keel despite waves of uncertainty from
US-China trade war [Online]. Available from:
https://www.scmp.com/business/article/2162210/global-shipping-industry-stays-even-keel-
despite-waves-uncertainty-us-china [Accessed on 22nd November 2018]
Bray, C. (2018) US-China trade war to turn the screws on Hong Kong’s beleaguered shipping
industry [Online]. Available from:
https://www.scmp.com/business/companies/article/2167324/us-china-trade-war-turn-screws-
hong-kongs-beleaguered-shipping [Accessed on 22nd November 2018]
Coşar, A.K. and Demir, B. (2018) Shipping inside the box: Containerization and trade. Journal
of International Economics, 114, pp.331-345.
Daniels, J. (2018) US ports from coast to coast brace for possible impact from China trade war
[Online]. Available from: https://www.cnbc.com/2018/04/09/us-ports-brace-for-possible-impact-
from-china-trade-war.html [Accessed on 22nd November 2018]
Davies, R. (2018) What would a US-China trade war mean for the shipping industry? [Online].
Available from: https://www.ship-technology.com/features/us-china-trade-war-mean-shipping-
industry/ [Accessed on 22nd November 2018]
Djankov, S., Freund, C. and Pham, C.S. (2010) Trading on time. The Review of Economics and
Statistics, 92(1), pp.166-173.

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Dupuy, P.M. and Viñuales, J.E., 2018. International environmental law. UK: Cambridge
University Press.
Goh, M. (2018) The trade war's impact on shipping has been limited so far, industry experts say
[Online]. Available from: https://www.cnbc.com/2018/07/13/trade-impact-on-the-shipping-
sector-is-limited-so-far-experts-say.html [Accessed on 22nd November 2018]
Knowler, G. (2018) Trade war impact clouding container logistics outlook [Online]. Available
from: https://www.joc.com/maritime-news/container-lines/trade-war-impact-clouding-container-
shipping-outlook_20180723.html [Accessed on 22nd November 2018]
Kuo, M.A. (2018) US-China Trade Tariffs: Impact on Shipping Industry [Online]. Available
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[Accessed on 22nd November 2018]
Lee, T.W. and Shen, M. (2017) Shipping in China. New York: Routledge.
Marle, G.V. (2018) Shipping trapped between a rock and a hard place as China-US trade war
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Nordås, H.K. and Rouzet, D. (2017) The impact of services trade restrictiveness on trade
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November 2018]

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Sand, P. (2018) Overview Of The Trade War And The Effect On Shipping [Online]. Available
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Stopford, M. (2013) Maritime economics. New York: Routledge.
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[Accessed on 22nd November 2018]
Van Marrewijk, C. (2017) International trade. UK: Oxford University Press.
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