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Pandemic Continues to Disrupt International Trade

Posted on April 16, 2020

Tariff relief continues to be a priority for many US companies.  Supply chain disruptions are deepening.  Containers sit empty, idle or both at ports around the world.  Export restrictions are embraced—temporarily?  And the International Monetary Fund (IMF) and WorldBank share profound concerns about the global economy.

Tariff Relief—With US companies fighting for survival and conserving cash, tariff relief could provide a much-needed financial boost.  Although tariffs on some medical goods and components coming from China have been eliminated, the White House has continued to resist demands to lift tariffs more broadly.  A 90-day tariff delay proposed last month has not been enacted.  Read more about tariff challenges.

Supply Chain—The vast global supply chains developed over the past decades have resulted in complex interdependence among producers, suppliers, distributors and end-users.  Your cell phone, your hand sanitizer bottle and your automobile all depend on internationally-sourced components.  The coronavirus has upended traditional supply chains.  Professor Nada Sanders of Northeastern University, a global supply chain expert, will talk about this and more in an AIM webinar April 30 at 11 am.  Register through the link you’ll find later in this newsletter.  Sanders recently outlined her thoughts in a Chicago Tribune article on supply chain shortages.

Containers and Freight —When the first rumblings about coronavirus came out of China, and in anticipation of expected temporary shutdowns of China factories for the Lunar New Year, many US importers front-loaded purchases from China.  Then the virus hit hard and most production in China ceased.  But product was already in transit to the US.  When the US was hit with COVID-19, demand for these imports slowed considerably.  The result?  Bottlenecks at some US ports.  Empty containers in the US that need to go back to Asia.  Full containers that can’t be delivered because businesses are closed and demand has dropped.  Shippers predict uncertain and chaotic back-to-school and holiday seasons.  Meanwhile, spot rates for air cargo charter flights from Asia are skyrocketing and nearing the $1 million mark per flight.

Export Restrictions and Delays from China—Many countries have put restrictions on exports of essential medical and pharma products.  What is not known is how long these limits will remain in place.  Despite this clamping down, the US continues to receive desperately-needed medical supplies from Asia and elsewhere.   However, today’s Wall Street Journal reports that China’s new restrictions, focused on quality control for exports, are causing delays of medical shipments destined for global markets including the US.  Read more in Forbes.

IMF and WorldBank Meetings —Leaders of the International Monetary Fund (IMF) and WorldBank are meeting virtually this week.  They released their global economic forecast two days ago.