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The US-China trade war is ‘sucking the life’ out of trans-Pacific trade

Shipping containers

The U.S.-China trade war is prompting manufacturers to leave China for lower-tariff climes, not least in southeast Asia. However, in its latest container shipping analysis, Drewry argues that there are limits to how much production can be relocated, and that moving factories is neither easy nor swift.

Moreover, while the switch of some production to southeast Asia has boosted container export volumes from the region, the increase has not compensated for lower volumes out of North Asia which have been hit by thecontraction in trade between the U.S. and China this year.

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The U.S.-China trade dispute appears to have sucked the life out of the trade, beyond which even the very evident trade substitution could not hope to cover, noted the analyst

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The bearish impact of tariffs has been readily apparent in trans-Pacific spot rates for much of 2019. According to Freightos, China-U.S. West Coast rates are currently 45% lower than a year earlier, while China-U.S. East Coast prices are 31% lower year-over-year.

Drewry forecasts that with eastbound trade from Asia to the U.S. flat after 10 months of the year, and given the strength of the market in the final two months of 2018, “an annual deficit seems inevitable.”

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