Trade tariffs have been at the forefront of news in the last few months as the Trump administration increased tariffs on geopolitical allies and rivals alike. US trading partners responded in kind, and the administration has returned with additional tariffs. Since tariffs raise costs, which in principal lower demand for both imports and exports, cargo volumes in US ports will likely decline. While this is not a positive credit development for the sector, many ports, particularly large ones with broad and diverse operations, are well positioned to handle the potentially rough seas.
In August 2018, the US imposed a 25% tariff on $50 billion worth of Chinese products, including steel and aluminum. The administration also announced plans for an additional 10% tariff on up to $200 billion of Chinese goods. In response, China implemented tariffs ranging from 15% to 25% on various US exports, most notably soybeans—the top export. China also announced it could escalate tariffs to include up to $60 billion worth of US products.
The Trump administration also imposed a 25% tariff on steel imports and a 10% tariff on aluminum imports from the European Union, Canada and Mexico. Canada imposed retaliatory tariffs on $16.6 billion worth of goods, while the EU and Mexico each announced tariffs on $3 billion worth of goods. While we are hopeful that cooler heads will eventually prevail and normal trade ties will resume, these tariffs could have a real impact on the broader economy.