‘Tariff War’ could disrupt shipping

Stakeholders worried about protectionism but do not fear for sector’s future

Cyprus’ shipping industry is concerned over an escalation of a ‘trade war’ between the USA and China but feel it is in a robust position to weather the storm.

With the tariff war threatening to make waves in Cyprus shipping, stakeholders have urged both sides to take a step back.

US President Donald Trump has threatened to impose tariffs on over USD 500 bln of Chinese goods – virtually all of China’s annual exports to the United States.

In retaliation, China plans to clamp down on energy i mports, mostly affecting US producers/exporters. Meanwhile, after imposing one set of tariffs on China in July, the Trump administration announced another round on a further 279 items on Tuesday.

China immediately made good on its promise to match the US dollar for dollar, wasting no time, presenting on Wednesday USD 16 bln (EUR 13.7 bln) in tariffs on 333 US products including crude oil, diesel fuel, coal, steel products and medical devices.

Washington imposed tariffs on USD 34 bln of Chinese products on July 6, a move China countered with duties of its own.

Meanwhile, the European Central Bank warned that, “risks to global growth are growing as the risk of protectionism and the threat of higher U.S. tariffs sap confidence”.

The ECB added that if all the threatened measures were to be i mplemented, the average US tariff rate would rise to levels not seen in the last 50 years.

The ‘tariff war’ between the two trading super powers has also started to take its toll on Cyprus shipping companies, as expected since China is one of the island’s main trading partners.

Director General of the Cyprus Shipping Chamber, Thomas Kazakos, said that as China and the Americas are the biggest markets, any form of instability would naturally have an impact on the international shipping industry, and of course Cyprus.

“And as 90% of global trade is conducted via the sea, all countries’ shipping industries are affected to the extent of their exposure. Cyprus has the third biggest fleet in the European Union and the 11th worldwide,” said Kazakos.

Concern over aftermath

He added the shipping industry is, as is the ‘international shipping family’, more concerned over the economic aftermath of the tariff war as unilateral action puts the entire notion of international trade at risk.

“The basic principle of trade is that more international the framework, the more productive it is for all the stakeholders involved. Any move to harden borders and attempts of regionalisation will cause a great upset in the market,” said Kazakos.

Head of the CSC said Cypriot shipping is expected to be hit by the ‘trade war’ as China is critical for Cyprus as it is the main manufacturer of ships and the biggest trading partner.

“All members of the Chamber who have any business with China are expected to be directly affected,” he said.

Kazakos also said he expects a chain reaction like the increase of prices in goods and services, putting more strain on Cyprus shipowners.

“We are not able to foresee for how long this conflict is to continue,” said Kazakos, expressing concern.

“If this war does not stop, things will get tougher on the shipping industry, and in turn this will affect consumers at the end of the day”.

He said that Cypriot companies have taken on the task of holding meetings at international level to find solutions for the risks they are facing along with the rest of the international shipping family.

“We join the international shipping family in extending our plead to the two sides to settle this conflict, so that the industry can return to normality.”

Kazakos said that currently 7% of Cyprus GDP relies on the shipping cluster, which has been the case for the past few years.

He said this is an indication of the industry’s sustainability, despite the hits it has taken from the economic crisis.

Wise members

“Our members have been wise enough not to put all their eggs in one basket. The Cyprus fleet is widely diversified carrying from dry cargo to fuel and other tankers. They are also not concentrating only on part of the world.”

One such shipping company is Intership Navigation Co. Ltd.

The company’s CEO Dieter Rohdenburg said that their business cycle is not expected to be affected significantly, despite being active in trading with China.

“Even though we do trade with China our trade is mainly the import of raw material into China, only to a lesser extent do we ship finished goods from China (i.e. wind mills). Hence we do not expect that the new tariffs will have a direct or immediate impact on our trade”.

Rohdenburg does not expect the conflict to carry on for too long as he believes that “the two sides will come to their senses”.

“Trade will not stop, or be reduced substantially, because of the tariffs, but trade will be diverted, and new trade routes will be created. This can even have a positive impact on shipping as distances may increase.”

And Cypriot officials don’t think it have a deep impact.

Deputy Minister of Shipping, Natasa Pilides, told the Financial Mirror that the Cyprus economy has a lot to benefit from the activities of shipping companies registered here.

Apart from income generated by the shipping industry for the state, shipping companies employ some 4,500 people related to ship ownership, management, chartering, catering, fuel supply for ships, as well as marine, financial and other related services.

“Some 55,000 sailors are employed on ships sailing under the Cypriot flag, while Cyprus is benefitting from income from the registration of ships, ship inspection and shipping rights and income from the charging of tonnage tax to Cypriot vessels and to companies based in Cyprus,” said Pilides.

She does not expect the comparative advantages of shipping in Cyprus to be affected by the US tariffs on Chinese products, and therefore the contribution of shipping to the GDP of Cyprus is not expected to decrease, nor its potential investor interest.

“Most shipping companies have chosen or are interested in using Cyprus as their base, because of our country’s significant comparative advantages in the maritime sector. These are the legislative and fiscal framework, well-trained human resources, our integrated maritime cluster… competitive charges and the geostrategic

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