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            september 21, 2019

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Maersk says it expects choppy seas ahead for world economy


With a subtle warning about the outlook for trade and possibly weaker demand growth for containers, Danish shipping giant Maersk has warned of choppy seas ahead.
The Copenhagen-based shipping company, which controls a fifth of the globe's container fleet, said demand worldwide grew by about 2 per cent in the second quarter from a year earlier - in line with its expected full-year growth of one to three 3 per cent. Profit beat analysts' expectations.
CEO of the world largest container shipping line Soren Skou said the company is managing the trade turmoil quite well so far.
But the bad news came from US President Donald Trump's import taxes on Chinese goods and Beijing's retaliation. "The impact of the newly imposed tariff hike is expected to be significant for the US-China bilateral trade and could in isolation remove up to 0.5 per cent of global container demand in 2019 and 2020, and when US tariffs on additional US$300 billion is implemented later in the year, it could result in a reduction of up to 1 per cent in 2020," the company said.
A bite to demand of 0.5 per cent-1 per cent doesn't sound that painful unless you consider that expectation for 2019 worldwide container growth is just 1 per cent to 3 per cent.
All the unknowns about tariffs are hurting the shipping industry and the global economy more broadly, sending stocks and bond yields tumbling this week. Recession fears are rising in the US, Germany and the UK, and trade hubs like Singapore and Hong Kong are on the edge of downturns. Meanwhile, the US and China remain far apart on the substance of any deal. Beijing just announced plans to retaliate imminently against the 10 per cent tariffs on about $110 billion of Chinese imports that Mr Trump announced earlier this week.
"There is a lot of uncertainty," particularly about the US and China, Maersk's Mr Skou told Bloomberg Television. "Right now there's not much that suggests a deal will be done anytime soon. It seems to be going in the other direction."
The bottom line from Maersk's vantage point: "We probably haven't seen the worst of this storm yet."

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