Jason Miller’s Post

Agree with your assessment. Agricultural products are at such a tight margin, a surplus with no market to absorb it would probably result in a short term cost reduction followed by a rebalancing of supply with farmers leaving more fields fallow and a return to normal or elevated prices unless there are some subsidies to keep the farmers planting. Oil being a global commodity that OPEC could easily take action to reduce supply to elevate prices would again negate the surplus left by China. Our oil industry is not in the charity business, they would sell to another market for a higher price if it was offered and OPEC would certainly try and ensure that happens if a surplus emerges on the market. Freightwaves assessment seems to be assuming short term benefits would last for longer than they really would. Our supply chains don’t operate in a vacuum and the markets will always react to a surplus.

Such a flashback. I can almost see the cover pages of mainstream news outlets plastered with bold headlines about tariffs. It’s like being transported back to those days when every new tariff seemed to spark a ripple across the global economy, and we were all analyzing what it meant for supply chains. During my grad school years (2015-2020), we (Anna Nagurney, June Dong, and Michelle Li) studied tariff policies extensively, exploring their implications for supply chain network economics. As many economists agree, higher tariffs on imports generally lead to increased domestic prices and reduced consumer welfare. Competition is also a critical factor in these dynamics. For example, in one of our papers, we analyzed the soybean trade and its supply chain. In response to trade wars, other countries stepped in to meet demand, shifting the competitive landscape and impacting U.S. exporters. Our findings illustrate these shifts and the broader consequences of tariff policies on competitive supply chains. I am listing our papers below if you'd like to see them. Let me know your thoughts on this issue! Tariffs and quotas in world trade (EJOR) https://lnkd.in/eHNiKRjw Strict quotas or tariffs? (TRE) https://lnkd.in/eu3eH6ve TRQs in Agricultural supply chains (JOGO) https://lnkd.in/eNJZGZgR

Perhaps the tariff question I’ve been asked about the most is “what are the inflationary impacts of a 60% China and 10-20% rest of world (ROW) tariff?” Answering that question is challenging, but the Bureau of Economic Analysis does provide us some useful tools in the form of the Supply Tables from the Input-Output Accounts (https://lnkd.in/eQdPji9). One table below from the 71-industry breakout for 2023. Thoughts: •This table reports domestic production as well as imports based for commodities on what the BEA terms “basic prices” to make them comparable. The sum of domestic production and imports represents what the BEA calls “total product supply”. I’ve isolated sectors with physical goods like agriculture products; forestry, fishing, etc.; mining, crude oil and natural gas extraction; and all parts of manufacturing. •I’ve then calculated the percentage of the total product supply that is imported for each commodity type. Figures range at the high end of 82% for Apparel & Leather Products (NAICS 315 & 316) and 53% for Computers & Electronic Products (NAICS 334) to lows of 4% for Printing (NAICS 323) and 11% for Food, Beverage, & Tobacco (NAICS 311 & 312). •Whether looking at all goods or just manufactured goods, the figure we arrive at is ~25% of total product supply is imported. •Consequently, a 10% universal tariff represents a 2.5% cost shock to goods; this will be made worse because many manufacturers will respond to receiving tariff protection by raising their own prices—something previously reported in peer reviewed research (https://lnkd.in/gdTYqjDp). Implication: the BEA’s Input-Output Account data provide a good sense of the magnitude of cost shock that goods will experience with universal tariffs. One challenge with looking at costs alone is that markups also need considered, and we don’t fully know how wholesalers and retailers will respond. Regardless though, this table is prima facie evidence that universal tariffs will be inflationary for goods. Anyone who is telling you otherwise either has a political motive or doesn’t understand basic economics. #supplychain #supplychainmanagement #shipsandshipping #freight #logistics

Are Universal Tariffs Inflationary? Data from the BEA shows 25% of U.S. goods are imported, meaning tariffs (like a 10% universal one) could drive a 2.5% cost increase—or more, as protected manufacturers may hike prices too. The takeaway? Tariffs inevitably raise costs and fuel inflation. Stay tuned for deeper insights on tariffs and procurement, coming soon on Spend Matters! #procurement #tariff #risk #geopolitics #supplychain

Not about politics—but the impact of recently-chosen US policy directions on the spirits industry. 1. Expect your building and renovation costs to be higher than bid for a couple of years (at least). I oversaw CapEx during the last round of tariffs (pre-pandemic) and supply chain disruption (post-pandemic). Trust me: Assume you’ll be impacted and plan accordingly. 2. Expect cost of your packaging and other components to rise significantly, regardless of country of origin. Tariffs push up your cost of imported goods, and jockeying for the too-small-for-demand domestic suppliers will push up their pricing in turn. 3. Expect your ability to export profitably to be reduced. Retaliatory tariffs chopped US farming off at the knees in 2019 because farmers lost 60% of their Asian contracts. With tariffs promised to hit markets US spirits producers have been courting and investing in… it’s good to adjust forecasting. 3.b. Expect grain costs to be rather… unpredictable. 4. Expect costs to start rising and supply to start falling as of this week. Companies in a position to buy ahead and store inventory are already moving from plan to execution. 5. Expect lengths of contracts tied to materials costs to shorten. No business wants to promise their client costing that has been promised to increase so much within 90 days. 6. Adjust your margin expectations. 7. Think creatively, starting right now. This hits our industry at a vulnerable time, when the over-forecasting of 2021 and 2022 resulted in heavy carried inventory in 2023 and 2024… and set many on the course of banking their future on exports. These are conversations I’m having with folks this week, and convos companies across the country have been have for days (or, I some cases, months). Please have them with your own team!

Global growth in container traffic losing momentum; future US tariff policy could make this worse Global container shipments experienced a 5.9% month-on-month (MoM) decline in September, falling to 15.2 million TEU, the lowest level since April. While September traditionally sees a seasonal drop, this year’s decline was steeper than the 2.5% MoM decrease in 2023, though less severe than the 8.8% fall in 2022. Despite this, volumes were 2.3% higher compared to the same month last year, though this marked the smallest year-on-year (YoY) increase of 2024, bringing the year-to-date (YTD) growth rate down to 6.3%. Regionally, all areas maintained positive YTD growth in total liftings, with North America leading at 10.3% and Sub-Saharan Africa lagging at 1.9%. However, some regions saw YoY declines in September imports, including South Asia and the Middle East (-4.9%), Oceania (-4.2%), and Sub-Saharan Africa (-1.2%). On the export side, North America and Europe posted YoY decreases of 3.0% and 0.6%, respectively. Notably, North America stood out with a 7.6% YoY rise in imports despite a similar MoM dip. The recent US presidential election victory for Donald Trump adds another layer of uncertainty. His campaign promises of imposing tariffs on imports have raised concerns, particularly for trade with China. This has led to speculation that shippers may rush to bring forward shipments ahead of potential policy changes. However, details about the scope, magnitude, and timing of these tariffs remain unclear. Opinions are divided on whether Trump will follow through with these tariffs. While investors and business leaders view them as a negotiating tactic, voters appear more confident that he will deliver on his promises. This divide underscores the uncertainty hanging over the US container market. Further complicating the outlook is the risk of port labor disruptions on the US East Coast and Gulf in January, adding to the challenges facing the trade environment. Source: Drewry Insight, Philip Damas, Simon Heaney

Using #tariffs on foreign imports to combat #food price #inflation will almost certainly have the opposite effect: higher prices! While tariffs might seem like a way to protect certain domestic industries, they actually raise the cost of producing food at home, ultimately driving prices higher for everyone. Here’s how: Many food producers and manufacturers rely on imported inputs and intermediary goods—things like fertilizer, equipment, and packaging materials that are essential for domestic production. When tariffs are slapped on these goods, they increase costs for U.S. producers, who then pass those costs onto consumers. Instead of easing #inflation, tariffs can make food more expensive. In some cases, tariffs also reduce competition by making imports pricier, allowing domestic producers to face less pressure to keep prices down. With fewer competitors in the market, prices for consumers can rise even further. Additionally, tariffs create trade uncertainty and delays. Businesses are forced to adjust their supply chains, hold extra inventory, and navigate new regulations, all of which add to production costs. These increased costs trickle down to consumers in the form of higher prices. What’s more, some companies skirt tariffs by setting up shell entities in countries less impacted—a loophole exploited during the last trade war. This only adds more complexity to supply chains without solving the underlying issues. And let’s not forget, other countries won't sit back quietly. They will retaliate. During the U.S.-China trade war, retaliatory tariffs cost American farmers over $25 billion in lost exports to China. The U.S. government responded by providing farmers $23 billion in subsidies under the Market Facilitation Program, funded by taxpayers. The bottom line: Tariffs won't lower food prices. They can make inflation worse and end up costing both producers and consumers more in the long run. #FoodEconomics #FoodPrices #FoodPolicy #Inflation #Tariffs #Agriculture #TradeWar #Election2024

Down month for container traffic in September September saw a large seasonal decline in loaded container traffic, according to new data from Container Trades Statistics Limited (CTS), released yesterday (see charts).   Global shipments were down 5.9% MoM in September to 15.2 mteu, the lowest monthly tally since April. The month is prone to seeing such declines, with volumes down on August in every year dating back to at least September 2012, the start of the CTS series that Drewry Shipping Consultants Ltd has access to. The most recent MoM slide was steeper than the 2.5% MoM drop for the same month in 2023, but not as bad as the 8.8% fall from August to September in 2022.   While lower than the previous month, September’s global total was 2.3% higher than the same month last year, although it was the lowest annual increase for the year so far, dragging the 9-month YTD growth rate down to 6.3%.     All regions remain positive for growth YTD in terms of total liftings, but there is a significant high-low spread from North America at 10.3% to Sub Saharan Africa at 1.9%. When looking at imports, three regions posted YoY deficits in September: - South Asia and Middle East -4.9%; - Oceania -4.2%; - Sub Saharan Africa -1.2% In the export market, two regions were down YoY in the same month: - North America -3.0% - Europe -0.6% North America outshone every other region for imports in September with 7.6% YoY growth, even though there was a similar MoM decrease.   All eyes will be on this region following the resounding US Presidential election victory for Donald Trump on 5 November. President-elect Trump promised to introduce some hefty tariffs on US imports during his campaign, which is expected to see many shippers bring forward shipments.   There is, however, a significant information gap in terms of the starting point for any new tariffs, their magnitude, and how many trading partners it will apply to, although we can safely assume that China will be most affected. There seems to be a distinct divide between certain groups in terms of what election promises Donald Trump will keep. Investors and business leaders seem to think tariffs are merely a negotiating tactic, all just part of the Trump show. Voters, on the other hand, appear to believe he will actually deliver. Both cannot be right.   This situation adds to the uncertainty within the US container market, which is already bracing for more potential port labour disruption on the US East Coast and Gulf in January.   #CTS #Drewry #containershipping #forecasts

Global growth in container traffic losing momentum; future US tariff policy could make this worse Global container shipments experienced a 5.9% month-on-month (MoM) decline in September, falling to 15.2 million TEU, the lowest level since April. While September traditionally sees a seasonal drop, this year’s decline was steeper than the 2.5% MoM decrease in 2023, though less severe than the 8.8% fall in 2022. Despite this, volumes were 2.3% higher compared to the same month last year, though this marked the smallest year-on-year (YoY) increase of 2024, bringing the year-to-date (YTD) growth rate down to 6.3%. Regionally, all areas maintained positive YTD growth in total liftings, with North America leading at 10.3% and Sub-Saharan Africa lagging at 1.9%. However, some regions saw YoY declines in September imports, including South Asia and the Middle East (-4.9%), Oceania (-4.2%), and Sub-Saharan Africa (-1.2%). On the export side, North America and Europe posted YoY decreases of 3.0% and 0.6%, respectively. Notably, North America stood out with a 7.6% YoY rise in imports despite a similar MoM dip. The recent US presidential election victory for Donald Trump adds another layer of uncertainty. His campaign promises of imposing tariffs on imports have raised concerns, particularly for trade with China. This has led to speculation that shippers may rush to bring forward shipments ahead of potential policy changes. However, details about the scope, magnitude, and timing of these tariffs remain unclear. Opinions are divided on whether Trump will follow through with these tariffs. While investors and business leaders view them as a negotiating tactic, voters appear more confident that he will deliver on his promises. This divide underscores the uncertainty hanging over the US container market. Further complicating the outlook is the risk of port labor disruptions on the US East Coast and Gulf in January, adding to the challenges facing the trade environment. Source: Drewry Insight, Philip Damas, Simon Heaney

So, Professor, by your analysis, you are predicting a 2 % (approximately) inflationary spike? If so, are you also calculating the multiplier factors? For example, a 2 per cent inflationary spike may cause a 2 per cent trucking rate rise, and so on.