A Ripple In The Ocean
By Rebecca Keller
Senior Science and Technology Analyst, Stratfor
As we turn to the next page on the calendar, the new year will bring new challenges for the shipping industry. Consolidation and alliance formation will routinely make the headlines as the sector claws its way out of chronic oversupply and low shipping rates. Meanwhile, the industry will continue to grapple with the consequences of increased digitization and automation. But there is one place where these issues will combine with the shifting winds of geopolitics to create a perfect storm in maritime trade next year: the Asia-Pacific.
When U.S. President Donald Trump took office, he issued scathing criticisms of China’s trade practices. Had the White House made good on its threats to erect more trade barriers or declare a trade war with Beijing, the shipping industry would have foundered. So far moderation has prevailed in Washington, but as U.S. midterm elections approach, Trump will keep putting pressure on China. To that end, the administration will likely double down on the strategy it already has in place, seeking stricter enforcement of regulations and issuing challenges within and outside of the World Trade Organization. Though China may respond in kind, an all-out trade war is still an unlikely prospect. Instead, both sides will target specific sectors including steel, aluminum, technology and agriculture.
The fallout of increasingly tense U.S. rhetoric with North Korea may not be as easily contained. Within the next 18 months, Pyongyang will likely achieve the nuclear deterrent it has long desired. And as Washington’s window to intervene closes, the risk of military conflict on the Korean Peninsula will loom large.
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Though war is a less probable outcome than other forms of containment, it would have a more profound impact on global supply chains. In anticipation of conflict, reinsurance rates will probably rise. Disruptions and delays, however, will be temporary and limited unless a clash breaks out.
Across the Yellow Sea, China’s ongoing political and economic evolution will continue to reverberate around the globe. As President Xi Jinping more aggressively pushes his policies, consolidation and production cuts will hit heavy industries while the tighter enforcement of environmental laws may erode minor metal output. Exports will still fuel the Chinese economy, but in the years ahead, its competition with established high-tech producers will intensify as it climbs the value chain.
China’s One Belt One Road Initiative may alleviate some of the pressing economic and social issues the country faces, perhaps someday shaping international trade patterns in the process. Beijing’s investments in the project span the globe, encompassing traditional infrastructure like ports and rail as well as emerging high-tech and high-value sectors. But the ambitious endeavor signals an even more important change underway in Beijing’s view of its place in the global order. Hoping to become a world leader in its own right, through its own means, China will increasingly assert its presence on the international stage – a trend well worth watching in the shipping industry and beyond.
Photo credit: Shutterstock
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