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Shipping faces continued fallout from US unilateralism

In January, the U.S. signed the Phase One trade deal with China and removed Chinese tanker company COSCO (Dalian) from its sanctions list. In the months ahead, President Donald Trump will be increasingly focused on the election. Does all this add up to fewer trade headaches for ocean shipping in 2020?

Absolutely not, according to speakers at the Hellenic-American/Norwegian-American Chambers of Commerce (HACC/NACC) Joint Shipping Conference held in New York on Tuesday. The forecast is for even more tariffs and sanctions trouble ahead.

Trade tensions could shift toward Europe

According to Thomas Joyce, managing director at Deutsche Bank Securities, “It is a mistake to think the Phase One trade deal was a significant step forward. It is a standstill agreement. I call it a giant agricultural purchase agreement — and it is not even that big.”

Furthermore, any purchases agreed to by China are contingent on economic conditions, and the coronavirus jeopardizes those conditions. The Trump administration has already admitted that the coronavirus will delay Chinese purchases.

“Among the big policy risks, the U.S.-China rivalry is at the top of the list, and the rivalry has just begun,” Joyce warned. “I fully subscribe [to the view that] Jan. 15 [when Phase One was signed] is probably the best day we’ll see for U.S.-China relations for the next decade. We should not assume that this escalation is behind us. It has only just begun.”

Joyce continued, “It is also a mistake to think that tariffs are not coming to Europe. There’s a narrative out there that this is an election year and the election will act as a guardrail precluding the president from using tariffs. I do not agree. It may convince him to not act as aggressively with Europe as he did with China last year, but it’s illogical to think tariffs are not coming to Europe.

“Europe will be reluctant to capitulate on agriculture [trade issues] and agriculture purchases are the centerpiece of trade deals, which of course feeds the president’s reelection campaign [by appealing to farm-state voters].

“If Europe moves forward with carbon taxes, the U.S. will respond with tariffs. If Europe moves towards digital taxes, which disproportionately impact large U.S. tech companies, the president has been very clear that he will respond with tariffs.”

Joyce said global economic growth “has already been hit quite hard by the trade war,” and the looming tariff threat to Europe “is a [new] concern for global growth.”

Westbound container shipping rates between Rotterdam and New York are actually up around 15% during the past year versus the prior two years. Tariffs could reverse that positive freight rate trend.

All corners of shipping network at sanctions risk

On the sanctions front, industry professionals speaking at the HACC/NACC forum highlighted the unprecedented focus on shipping by the Trump administration.

According to Gina Venezia, a partner at law firm Freehill, Hogan & Mahar, “This administration has shown that it will continue to use economic trade sanctions as a centerpiece of its foreign-policy initiatives and will continue to target both those who operate within the U.S. and those outside the U.S.

“This administration is now focused on shipping in the same way that previous administrations focused on the banking system decades ago,” she said. “There has been a defined shift in its focus towards shipping in the past 12 months. The administration is looking for everyone across the industry to be proactive and be sort of the ‘policemen’ of the sanctions world.”

Ship insurers are led by property and indemnity (P&I) clubs. According to Daniel Tadros, chief legal officer of the American P&I Club, “For once, shipping is being targeted. The administration is using sanctions as a weapon and it is impacting every part of the shipping sector.

“The U.S. government is meeting with the P&I clubs on a regular basis and putting pressure on the clubs to develop AIS [automatic identification system; ship location] programs to follow vessels, and if they go into designated areas, to alert the government.”

A meeting is being held Wednesday in Washington between administration officials and flag states, the countries that register vessels. “They’re putting pressure on the flags to have similar AIS tracking programs,” Tadros said.

The world’s second-largest flag state is the Marshall Islands. According to Meredith Kirby, general counsel of the Marshall Islands Registry, “I’ve already been to about five of these meetings hosted by the State Department, and what they’re trying to do is crack down on the whole chain. They want everybody involved in shipping to have skin in the game. What I was told by a person in State is that we [in shipping] all kick the can and [point the finger at other people in shipping]. So, they want everyone along the line to be accountable: flag, class, operators, banks, insurance, everyone.”

Kirby said the Trump administration’s “hair-trigger” sanctions stance “is definitely a game changer.”

Tadros noted that “in the maritime industry, the primary currency is the U.S. dollar and that’s the weapon the U.S. government is focusing on.” Companies that violate sanctions might be barred from the U.S. financial system.

“What they’re trying to do is change the culture of shipping when it comes to due diligence and accountability,” Tadros said. “That’s a big shift and a big ask.”

Shipping consequences of American unilateralism

Whether through tariffs or sanctions, the shift toward U.S. nationalism and unilateralism under the Trump administration has multiple consequences for ocean shipping.

Tariffs are overwhelmingly viewed as a major negative for ocean shipping, both in terms of vessel demand and equity valuations of listed owners. To the extent trade barriers do not simply redirect trade flows but reduce overall volume, it’s bad for freight rates.

Sanctions have a more complicated relationship with shipping bottom lines. In the negative column, the costs of compliance are high. Employees require special training, compliance programs must be developed and implemented, and pricey maritime lawyers must be consulted.

Another negative: Ship operators can be ensnared by U.S. sanctions through no fault of their own. If a ship owner is not given accurate information on the origin of the cargo being carried, it is left “in an absolutely untenable position,” said Matthew Thomas, a partner at law firm Blank Rome.

Tadros reported that “recently, a lot of owners have been asking for certifications of the origin for cargo, and a lot of those certificates are now turning out to be fraudulent.”

There is a positive side to sanctions, as well. By preventing certain trades from accessing the dollar payment system, the U.S. government is essentially cleaving the global fleet in two. This reduces the overall efficiency of the global shipping network, which is effectively the equivalent of reducing vessel capacity, a plus for rates.

The COSCO situation was a perfect example. When those sanctions were put in place in September, 26 tankers were suddenly removed from the market. Tanker rates immediately shot up. Those tankers were just re-injected into the market. Rates are now falling. More FreightWaves/American Shipper articles by Greg Miller 


  1. If YOU like FREEDOM , vote Democrat !

    Quote :
    “Republican lawmakers in numerous states are pushing legislation that would place restrictions on protesting rights”

    Trump suggests protesting should be illegal
    “”I don’t know why they don’t take care of a situation like that,” Trump said. “I think it’s embarrassing for the country to allow protesters. You don’t even know what side the protesters are on.”
    He added: “In the old days, we used to throw them out. Today, I guess they just keep screaming.”

    Quote :
    “President Trump has a record of attacking the rights of protesters, from suggesting that protest be illegal to praising dictators who crush any kind of dissent.”

    Quote :
    “More than 20 states have proposed bills that would crack down on protests and demonstrations since Donald Trump was elected”
    “This flood of bills represents an unprecedented level of hostility towards protesters in the 21st century”


    “Trump has also prompted cries of “dictator envy” for remarks in which he seemed to emulate North Korean leader Kim Jong Un. “He speaks, and his people sit up at attention. I want my people to do the same,” Trump told Fox News Channel in an interview after his Singapore summit with the North Korean leader.”

    If YOU dislike FREEDOM , don’t forget to vote republican , LOL !

    1. No but Bernie would fix the Trump issue , LOL !

      1. What you fail to comprehend is that capitalism requires an underclass . It is the seed of its own destruction .

        Capitalism needs to keep wages low to remain profitable . What have major carriers through their associations been doing through the dilution of the labour force ,ie; immigration ,on wages in the industry ? What about their lease on O/O misclassification tactic ? What about their advocacy for regulations ?

        How has this weighed on genuine O/O’s ?

        Now back to standing for equality and unity .

        What you are witnessing in the younger generation(millennials ) is a push towards socialism . However , this push is not limited to the younger generation .

        I firmly believe it’s the era we shall transition into from this one as the one prior(feudalism) transitioned into this one . Keep in mind that the transition from the one prior into this one was done democratically . The sticky point will be the transition into the next one . We need very wise “leaders” to prevent a harsh shock leading to opposition and retaliation versus a shrewd smooth fusing into acceptance . This is one particular reason for which I oppose labour strikes . It’s too arrogant and forceful . It engenders resistance and sometimes revenge .

        I don’t want anything from the carriers . I want drivers to unite and collectively compete in this capitalist society with those whom have taken unfair advantage of them .

        You should read The Communist Manifesto – Bourgeoisie and Proletariat


        ” Marx predicted that the continued exploitation of this underclass would create great resentment. Eventually the proletariat would lead a revolution against the bourgeoisie. The final struggle would lead to the overthrow of capitalism and its supporters.”

        End quote .

        Now reflect on what the majority of truck drivers have been expressing through their comments on freightwaves in regards to their wages ,and treatment ect in this industry by the capitalists . They have been expressing their resentment .

        What have I been advocating ? UNITY ! A form of socialism .

        I am not a “Marx” follower , for I follow none . However, what he states and suggests apparently collaborates with my stance to a certain point .

        Bernie has some good ideas . However, he’s harsh . He lacks Obama’s smoothness and suaveness . In fact I believe all the current democratic presidential candidates lack it .

        I believe Trump got in due to his arrogant way of mocking the status quo and his opponents . He played the public quite well , unfortunately . I don’t think anyone of those democrats stand a chance against him . It will be interesting to see to say the least .

        IMHO .

        1. Allow me to quote a very small part from the MCP :

          “The essential conditions for the existence and for the sway of the bourgeois class is the formation and augmentation of capital; the condition for capital is wage-labour. Wage-labour rests exclusively on competition between the labourers. The advance of industry, whose involuntary promoter is the bourgeoisie, replaces the isolation of the labourers, due to competition, by the revolutionary combination, due to association. The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie therefore produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable. ”

          Requote :
          “Wage-labour rests exclusively on competition between the labourers”

          What have I been advocating in regards to truck drivers UNITING ???


          Competing among yourselves fattens the pockets of the bourgeoisie(capitalist class ) at the peril of YOUR wages ! This is INSANITY !

          Despite this fact you stubbornly choose to remain divided ! You are your own enemy ! No wonder the bourgeoisie(capitalist class ) are so arrogantly laughing at you ! Though you want them to “respect” you ??? They’re constantly making a mockery out of YOU , and you expect them to change ??? How well has that worked out for you so far ???

          UNITE and stop slaving for them ! COMPETE with them wisely through unity ! I’ve always stated that labourers were their most precious asset , however, they won’t TELL YOU that fact . They’ll dilute your value by increasing the labour force ! Your division is their strength !

          You don’t go on strike and or shut down ! YOU UNITE & collectively slowly but surely remove them from power and take over their business(es) ! Then you are no longer slave labourers , you’re now all collectively business owners equally benefiting and sharing your gains among one another ethically . Your time is running out though . They’ll be replacing you shortly with autonomous cargo transportation vehicles .


Greg Miller

Greg Miller covers maritime for FreightWaves and American Shipper. After graduating Cornell University, he fled upstate New York's harsh winters for the island of St. Thomas, where he rose to editor-in-chief of the Virgin Islands Business Journal. In the aftermath of Hurricane Marilyn, he moved to New York City, where he served as senior editor of Cruise Industry News. He then spent 15 years at the shipping magazine Fairplay in various senior roles, including managing editor. He currently resides in Manhattan with his wife and two Shih Tzus.