Uncertainty is biggest threat to trade in US election

As voters across America go to the polls the question being asked by analysts in the maritime sector is which regulatory regime will prevail? Will it be Donald Trump’s hard hitting, protectionist, tariff wall, or the more light touch tariff picket fence?

Xeneta chief analyst Peter Sand believes: “A swift conclusion to the election is more important than who wins in the short run, carriers and shippers will need to know who has won, rather than have a month of uncertainty.”

A contested result could mean a period of up to a month where shippers and importers will have to assume that the harshest policies will be in place and act accordingly said Sand.

“If Donald Trump wins that will be the biggest threat to global trade, but it is the rhetoric that is more problematic than the reality,” explained Sand.

With the protectionism built into Trumps policy views shippers and importers will need to react to the possibility that a tariff wall will be the result of a victorious Republican president.

“We will see more frontloading than would be the case with a Kamala Harris victory, and vessel utilisation and rates would increase as a result,” said Sand.

According to Sand the carriers have been successful at maintaining utilisation at a high level over the past year, but the current market fundamentals will see rates come down.

Related:Trump or Harris - Will it make a difference to shipping?

A November GRI was announced by the lines though consultant Linerlytica said the rate increase was lower than expected: “Carriers have pushed ahead with the 1 November rate hikes with smaller increases than initially planned but they have at least reversed the continuous declines since July that has seen the SCFI and CCFI shed 45% and 37% of their values.”

Nevertheless, the consultant does not believe that the lines will be able to achieve these increases, if the election result is taken out of the equation.

“Carriers will struggle to retain the rate hikes with cargo demand still weak in the seasonally weak November period in the absence of more capacity cuts.”

Demand according to Linerlytica is still weak and utilisation increases at the end of October were due to blanked sailings in China’s Golden Week and whether related delays in Asia.

Sand, agrees, that rates are likely to slide again by around mid-November: “GRI’s are often set at $1,000-1,500 per teu and then rises settle at around $600-800 per teu, but these increases go against the grain of market fundamentals, there are no underlying facts to sustain rate hikes.”

A Trump presidency could alter that perspective.