Since July 2018 China and the United States of America have been locked in a battle of an escalating trade war.
The dispute has seen the US and China enforce tariffs on hundreds of billions of dollars worth of one another’s commodities. To be exact the US has imposed tariffs on more than $360bn of Chinese goods, and China has hit back with tariffs on more than $110bn of US goods.
Because China is the world’s biggest manufacturing centre, the ongoing trade war has created a new trading landscape that has complicated supply chains, which will have a huge impact on logistic companies. IHS Markit currently predicts a drop in the global real GDP by 1.4% in 2020 — numbers that lurch on the threshold of a global recession.
Because of the impact causing a potentially dramatic reshaping of the shipping and logistics industry, companies are being recommended to diversify their sourcing base elsewhere. Vietnam, Bangladesh, and Cambodia are gaining market, Myanmar, Kenya, Madagascar and Egypt are also emerging as hubs for production of mass market and high-volume goods.
Higher tariffs mean less shipments from China, but consumer’s need for goods will push manufacturers to go elsewhere for production. This means stricter short-term capacity, greater supply chain costs, and longer wait times for deliveries. Higher tariffs have also pushed shippers into overstocking inventory in domestic warehouses ahead of tariff hikes. Which has put domestic warehousing at a premium over the last year, causing rate hikes in that division of transportation logistics supply chain in the US.