As befits a man who has risen to power via Hollywood, there’s been no shortage of bluster, swagger and showmanship in the opening 10 days of Donald Trump’s second tenure in the White House. Working out what the following four years hold for shipping is no easy task. However, a roundup of key announcements over the past week and a half gives readers an idea of what to expect.
Wresting back control of the Panama Canal and renaming the Gulf of Mexico were two of the shipping takeaways in the first hours following the inauguration of Trump.
The new US administration then announced a number of maritime-related policy changes. Federal agencies have been ordered to review US trade relationships, with Trump proposing 25% tariffs on imports from Canada and Mexico from February 1, while also openly mooting 10% tariffs on China, the EU and other countries. Elsewhere, an order has been issued for the US to resume processing new LNG export terminal applications. Additional federal land has also been opened up for oil and gas exploration, while there are plans to refill the US Strategic Petroleum Reserve.
A number of changes rolling back climate protection measures and green energy investment have also been announced as the US withdraws from the Paris climate agreement; the awarding of new wind farm leases has been halted, as have electric vehicle subsidies and spending on a number of green energy projects.
“Declaring a national energy emergency, Trump lifted restrictions on oil and gas drilling in Alaska and federal water. Additionally, Trump is promoting the export of American energy globally as part of his broader energy policy,” broker Braemar explained in a note to clients.
Trump has said Europe must buy more American oil and gas to avoid tariffs. Despite the rhetoric, US oil production is already at a record high and shale industry executives have said there is little financial incentive to drill.
Tariffs, a more tough line with Iran, as well as claims the war in Ukraine can be brought to a quick end are all policies very much up in the air in this second week of Trump’s return.
On Ukraine, analysts at broker Gibson note the president has threatened further sanctions and possible tariffs against Russia if a deal is not found to end the conflict. Whilst that may seem fairly light touch, it suggests the sanctions introduced by predecessor Joe Biden and the oil price cap are unlikely to be removed in the short term; and secondly, the process to end the conflict is unlikely to be swift.
In the first Trump trade war, the Chinese targeted US farmers and reduced imports of US grain. China is able to substitute this with more imports from Brazil, with minimal net tonne-mile impact.
According to data from Clarksons Platou Securities, dry bulk, particularly grain and steel products, was the most impacted from the first Trump trade war with China, followed by LNG and LPG.
Overall shipping tonne-mile growth fell 0.5% in 2018, then again by 0.5% in 2019, according to Clarksons data
“Trump’s tariff wall might be a stage in that, but like walls to keep out migrants, it is difficult to achieve much in four years,” Martin Stopford, the world’s most famous maritime economist, told Splash in the wake of Trump’s election win last November.
“Trump’s policies represent a complicated mix of favorable and adverse supply and demand shocks,” states a new report from American bank citi.
“For the rest of the world, Trump’s tariff policies are by far the largest source of concern,” citi suggested, before adding that during his earlier term, Trump was assertive in his rhetoric and policies but ultimately avoided actions that were seriously disruptive, and the economy and the markets generally performed well during his tenure.
This past weekend, the world got a glimpse of Trump’s transactional nature – and how tariffs might play out in the future. Colombia shirked at taking back immigrants from the US, at which point the American president promised punishing 25% tariffs, with his counterpart in Bogota quickly relenting – even sending a plane to repatriate the Colombian nationals.
Burak Akdemir, managing director of London-headquartered dry bulk owner Range Shipping, tells Splash Extra: “A peacemaker Trump in a second term could lead to a recalibration of US-China relations, which would significantly impact global trade. If tensions ease, it might restore confidence and boost trade volumes, potentially benefiting dry bulk trade flows tied to Chinese imports of iron ore, coal, and grain.”
Conversely, though, Akdemir warns if protectionist policies or geopolitical uncertainties persist, trade disruptions could restrain growth, shifting flows to other emerging markets.
“The dry bulk sector’s response will hinge on the balance between cooperation and competition under Trump 2.0,” Akdemir says.
In conversation with Splash earlier, Khalid Hashim, managing director of Thailand’s largest dry bulk owner, Precious Shipping, said he was sanguine about Trump and tariffs.
“Trade flows under Trump 1.0 and Biden’s continuation and increasing Trump’s 1.0 into Biden 1.0, have increased, not decreased, trade flows into the US,” Hashim said. “If the past is any predictor of trade flows, then as we have seen all such disruptions tend to have an immediate, but extremely short-term impact, before leading to increased tonne-mile and increased trade.”
“From a shipping perspective, a greater role for the US, both as a supplier and consumer of global raw materials and finished goods, is good news. If a country can sell to or buy from the US, business can skyrocket,” says Punit Oza, a well known commentator on geopolitics and shipping.
Summing up the prospects for shipping with Trump back in the Oval Office, analysts at broker Hartland Shipping wrote recently: “The most confident conclusion we can make is that the volatility and uncertainty in today’s shipping markets is only going to increase under Trump 2.0.”
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