Chennai, 4 Nov 2020:
Who’s in the hot seat post the November US presidential election will have a significant impact on the role the US will play in terms of supporting shipping demand.
If Trump remains in power the playbook will remain largely the same as the last four years with protectionism still front and centre on the agenda and a continued push on fossil fuels exports.
Biden’s stance on protectionism is also not as strong as that of Trump, which would take out some of the demand uncertainty witnessed over the last four years.
Whether Donald Trump has been good or bad for shipping will largely depend on the shipping sector in question. A protectionist policy restricts trade between countries by taxing imported products, thereby pushing consumers to buy domestically.
A good example is the current spate of uncertainties and speculations surrounding President Trump’s plans to impose taxes on international trade, and its impact on international shipping.
With 90% of the world’s trade carried via ocean, the passage of these proposals could result in disruptions as well as price increases which may ultimately alter demand for business.
“Blue Wave,” the potential for a unified government outcome, particularly a Democratic one, are high, and this could become more reactive in anticipating a Democratic sweep.
On the macro side, a Democratic sweep may result in demand-side stimulus policy, which could have a meaningful multiplier effect for the blue economic growth.
The voter skepticism about China has been rising on a bipartisan basis for many years. Given policymaker actions on both sides of the aisle, the report questions the notion that a Biden win would ultimately bring meaningful change to U.S.-China policy. Undoubtedly, fossil fuel production and exports have been given a shot in the arm by the Trump administration with a deregulatory agenda supporting US energy production.
Since 2017 the US has become the world’s number one oil producing nation and has emerged as the fastest growing producer of LNG. This has in large been beneficial for shipping, as US exports have displaced cargoes on shorter haul trades.
At the start of 2017 the US was only exporting crude to around 20 countries, the total number of trading partners has more than doubled over the course of the Trump administration, with volumes tripling over the same period.
US crude exports have been further supported by the re-imposed and tightening sanctions on both Iran and Venezuela, along with any company involved in oil trades out of these blacklisted countries.
This has caused a gap in crude flows which the US has, in part, been able to step in and fill, boosting the tonne mile component of tanker demand. LNG exports have played a central role in Trump’s trade policy and he has actively promoted US LNG with foreign governments and heads of state.
Trump has also, during the Covid-19 pandemic ordered the Interior Department and other agencies to scale back on environmental reviews in order to speed up infrastructure projects associated with gas exports such as terminals and pipelines.
In some cases, relative proximity to demand centres would be negative but for other commodities re-establishing old trade routes would boost demand. Returning sanctioned tonnage to the international trading fleet would likely be net negative.
While politics may seem detached from economic considerations, the reality is that shipping industry cannot afford to ignore political factors which often shape the external environment of shipping sector.