The world today is not new to trade wars and trade stand-offs between different countries. The most recent of such trade wars include the one involving the US and a host of other countries, including China and Mexico. These trade wars have unprecedented effects on the global economy by affecting many related businesses, including the shipping industry. Prolonged trade wars can slow down economic growth by affecting the flow of goods in the economy.
The shipping industry is particularly largely affected by trade wars between countries, especially those located in different continents. Shipping companies form a significant part of the transatlantic trade between Western and Asian countries. The trade war involving the US and China, for instance, has largely slowed down trade between the two countries. The imposition of trade tariffs by both countries implies that companies wishing to import products from other countries cannot do so due to the exorbitantly high prices and tariffs.
This has a direct influence on the availability of cargo to be transported by shipping companies. From an economic perspective, the reduced trade between Asia and the west implies that shipping companies will not get the prospected quota and threshold of cargo to be shipped across the Atlantic. As a result, more shipping companies are compelled to reduce their fleet due to the reduced demand for services.
In addition, trade wars have another direct consequence, especially when they are prolonged and escalated. For instance, the escalation of trade wars can directly influence foreign policies and diplomatic relations between countries. As a result, countries involved in the trade war can impose diplomatic strains by blocking certain strategic shipping routes. This may lead to shipping companies being unable to ply the shipping routes in question. If alternatives are not available within a reasonable duration of time, then the entire shipping industry is crippled with significant delays in the arrival of cargo.
The escalation of trade stand-offs between rival countries with no solution in sight, such as between the US and Iran, can also threaten other related aspects of local economies. For instance, with the reduced reduction in the volume of international trade of products such as fossil fuels, shipping companies are forced to look for alternatives in other favorable markets. As a direct consequence, this leads to the destabilization of the local markets where shortage strikes hard.