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Carriers hope for trade war truce before next round of tariffs

There is optimism a partial truce could soon be signed in the China-US trade dispute. If the next round of tariffs is implemented, the supply chain could see a major shake-up

Removal of seasonal, China-produced goods from tariff schedule seen as critical to re-energising transpacific trade

NEWS emerging from China last week that US negotiators had reached a “principled consensus” with their Chinese counterparts will bring some optimism to the container shipping sector.

While not yet confirmed, there are hopes that a partial trade deal, termed “Phase One” by the Trump administration, could be signed soon, bringing a de-escalation of the two countries’ trade war, which has been having a damaging effect on transpacific volumes.

“The crucial point from a container shipping perspective will be whether the US will cancel the planned December 15 (List 4b) tariffs, and remove some of the current tariffs in line with China’s demands,” said Sea-Intelligence chief executive Alan Murphy.

“If these issues are not resolved, it is very likely that the Phase One deal will collapse, although current analyst consensus seems to point towards a deal.”

Tariff List 4b is critical for container shipping, as the commodity groups covered are highly seasonal goods where China represents 92% of all containerised imports into the US.

“This means that for the List 4b goods, it is not simply a question of scaling up production elsewhere, as these goods are simply not being produced anywhere else at present, so completely new production facilities and sourcing processes would be required,” said Mr Murphy.

“If that is not enough of a challenge, the highly seasonal nature of these goods provides additional complications. We will be crossing our fingers for a trade deal, but if one is not reached, the 2020 peak season will require a complete redesign of central supply chains.

“The impact of List 4b may therefore turn out to be very different than for the other tariff implementation rounds, so carriers, freight forwarders and importers should plan accordingly.”

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