Political tensions between the US and China are contributing to lower container shipments between the world’s two largest economies, on top of an already-underway reshaping of global trade, a major shipping industry executive said.
“We are seeing a deleveraging of trade between the US and China,” Ocean Network Express Holdings Ltd CEO Jeremy Nixon said at the Capital Link Singapore Maritime Forum.
“Many companies in the US are looking to reduce down the amount of imports they have got coming from China,” Nixon said.
Photo: Bloomberg
The share of boxes hauling everything from cell phones to tables arriving in the US from China has fallen by about 10 percentage points over the past year, said Nixon, whose company is among the top 10 container shippers.
As a result, the US is establishing stronger ties with other trade partners including Europe, a trend Nixon said is expected to continue.
The world’s two largest economies have been steadily becoming less reliant on one another for much of the past year. That has been driven primarily by a broad-based slowdown in the global economy, and it has been particularly acute for containers as the demand boom that took place during the COVID-19 pandemic has reversed.
The decoupling is now being exacerbated by geopolitics, Nixon said.
Tensions have flared over issues from Taiwan to the alleged spy balloon that was shot down over the US. Meanwhile, US President Joe Biden is seeking to sign an executive order that limits investment in key parts of China’s economy by US businesses.
The slowdown in the China-US route has led to the US importing more from elsewhere, Nixon said.
While container freight rates across the board have slumped this year, the decline has been less precipitous in Europe, as the US imports more from China, he said.
Shipping flows into the US from the Mediterranean, India and Southeast Asia have been bolstered.
Separately, global political frictions could cause turmoil in economic growth and inflation, European Central Bank Executive Board member Fabio Panetta said.
“Geopolitical shocks may trigger persistent output and inflation volatility, with multiple spillovers,” Panetta said in a speech yesterday, cautioning that so-called fragmentation could affect European monetary policy.
“Russia’s aggression against Ukraine has, for instance, disrupted energy and commodities markets, with major implications for inflation,” he said.
Geopolitical hotspots have been multiplying, whether the war in Ukraine or the potential for conflict around Taiwan. Central bankers are increasingly concerned about the knock-on effects of deglobalization, as many countries seek to implement costly environmental policies.
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