Maersk Warns on Trade War Uncertainty
In reporting quarterly earnings this week, A.P. Moller-Maersk warned that the U.S.-China trade war could limit growth in global container traffic to the lower end of its one to three percent guidance range this year. After growth of around two percent between April and June, current and planned tariffs could cut global container demand by up to 1.5 percent.
U.S. importers have shifted imports away from China to countries such as Vietnam, South Korea, Thailand, India and Mexico. The impact of the newly imposed tariff hike is expected to be significant for the U.S.-China bilateral trade and could in isolation remove up to 0.5 percent of global container demand in 2019 and 2020. When U.S. tariffs on an additional $300 billion worth of goods is implemented later in the year, it could result in a reduction of up to one percent in 2020.
However, Reuters reports CEO Søren Skou saying: “It is not tariffs that decide how many goods are being transported, but rather how much Americans buy when they go to Walmart. Luckily for us, the U.S. consumer is still in a good mood.”
Revenue for the group grew slightly for the quarter to $9.6 billion, and underlying profit increased to $134 million from $15 million in Q2 2018.
The news comes as the World Trade Organization (WTO) indicated that the growth of world merchandise trade volumes is likely to remain weak in the third quarter of 2019. The WTO’s Goods Trade Barometer released on August 15 sits at 95.7, lower than the previous release and well below the baseline value of 100 for the index. This suggests that below-trend expansion in merchandise trade will persist in the coming months.
Sustained weakness in the barometer index was driven by below trend values in all component indices. The international air freight (91.4) and electronic components (90.7) indices showed the strongest deviations from trend, with readings well below previous releases. Indices for export orders (97.5), automobile production and sales (93.5) and agricultural raw materials (97.1) all remained below trend although they show some signs of having bottomed out. Only the index for container shipping (99.0) was close to the baseline value of 100.
Readings of 100 indicate growth in line with medium-term trends; readings greater than 100 suggest above-trend growth, while those below 100 indicate below-trend growth.