[HONG KONG] Chinese shippers may see an outsized hit on earnings as the latest tariffs from US President Donald Trump risk hammering global trade.
Container liners such as Cosco Shipping Holdings that focus primarily on Chinese exports will probably see a disproportionate impact, according to Bloomberg Intelligence (BI) analyst Kenneth Loh. “Chinese exports are set to be hit not just harder than other countries’, but even harder than most had expected.”
The US imposed an additional 34 per cent tariff on almost all Chinese products last week – a move China returned swiftly – affecting most of the half-trillion US dollars worth of goods Chinese firms exported to the US in 2024.
In his latest salvo, Trump further upped the ante by threatening an additional tariff of 50 per cent on Chinese goods, adding that talks with China will be terminated unless it withdraws its retaliatory levies.
The tit-for-tat measures are prompting concern that transpacific volumes and shipping rates could fall. “We see downside to earnings as President Trump pushes ahead in an attempt to reduce US trade deficits,” Citigroup analysts, including Amy Han wrote in a note.
The latest measures – excluding the vowed but not yet imposed 50 per cent – bring average US tariffs on all Chinese products to as high as 65 per cent, according to economists. That factors in existing tariffs from Trump’s first term that were maintained by the Biden administration.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
The Trump administration will also end the so-called “de minimis” tariff exemptions on May 2, which currently allow packages from China and Hong Kong worth US$800 or less to enter the US duty free. Airlines too, including Cathay Pacific Airways and Taiwan’s China Airlines, face increased risks given their higher exposure to e-commerce cargo revenue.
Adding to the disruption is Trump’s desire to punish Chinese-built ships, seeking a levy of at least US$1 million each time a Chinese-operated or Chinese-built ship enters a US port, saying China’s dominance in ship construction was achieved unfairly and harms American interests.
Cosco Shipping signalled it’s getting prepared, Citi analysts, including Kaseedit Choonnawat wrote after the group’s earnings call last month, adding that details are limited. The Shanghai-based company also warned of changes in global cargo flow patterns as policies related to tariffs could impact geopolitical issues. Its shares are down 22 per cent so far this year.
Warning signs
Peers Orient Overseas International and China Merchants Port Holdings also warned of trade uncertainties amid intensifying geopolitical tensions during their 2024 results, even as profits grew from the year before. Elsewhere in the industry, Danish shipping giant AP Moller-Maersk said tariffs are not “good news for global economy, stability and trade”.
Right now, shipping companies are starting to look more seriously into ways to better navigate the rapidly evolving landscape of trade protectionism under Trump, according to BI’s Loh.
“There’s talk of exporters assessing options that might attract lower levies relating to their shipments,” Loh said. “We are also hearing that shipping companies are showing interest in pivoting towards non-Chinese shipyards when planning new ship orders.”
China, meanwhile, is mulling front-loading stimulus, which may include subsidies for some exports and potentially alleviate some of the pain for Cosco Shipping, Orient Overseas and China Merchants. BLOOMBERG
