Is a Trade War Coming, or is it Already Here?

Last week, President Trump allowed the exemptions on tariffs on US imports of steel and aluminum to lapse. What does this have to do with air cargo? First of all, after agriculture, one of the most likely targets of retaliation by other countries will be the US aerospace industry. In a one-two punch, Boeing would be paying more for the materials and assemblies that go into its airplanes, at the same time as airlines around the world reconsider their orders. However, because the aerospace supply chain crisscrosses the world, Airbus will feel some pain too.

So, when the sun rises tomorrow morning, will we wake up to discover it was all political bluster?

Maybe. After the US threatened tariffs on Chinese imports worth $50 billion, both sides sat down at the negotiating table and have toned down the rhetoric as a result. And despite snags, NAFTA renegotiations continue. However, what of the latest threat to place tariffs on foreign cars imported into the US? Such an action would hit Germany particularly hard and result in a tit-for-tat round of retaliation from the EU.

Unfortunately, for the air cargo industry, if these rattling sabers are unsheathed, world economic growth will take a hit. IATA, in its April “Air Freight Market Analysis” warned that seasonally-adjusted FTK growth has trended “sideways” for the past eight months. Although world GDP and trade would not stop growing in the face of a small-to-moderate trade war, GDP and trade would grow more slowly than forecast, and “sideways” air freight demand might begin to sound rather better.

Alan Hedge joined ACMG in 2006 as a Senior Analyst, and now serves as its Senior Director. Mr. Hedge has more than 20 years of experience in the airline industry in a variety of financial and consulting roles from fleet analysis to international regulatory and competition analysis. He started his aviation career in 1989 at American Airlines. He left in 1999 to become Research Director at The Campbell-Hill Aviation Group in the Washington, DC area. He holds a BS in Electrical Engineering from Stanford University and an MBA from the University of North Carolina.

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