Advancing Time: Tariffs Are Hitting Global Supply Chains And Shipping

Advancing Time: Tariffs Are Hitting Global Supply Chains And Shipping: Tariffs are affecting supply chains and shipping big time. The point of this post is shipping matters and already the first real volley in...

Tariffs Are Hitting Global Supply Chains And Shipping

Tariffs are affecting supply chains and shipping big time. The point of this post is shipping matters and already the first real volley in the trade wars is hitting the shipping sector. American companies front-loaded by purchasing a large amount of goods before tariffs went into effect. This has created a situation where new orders are scarce and shipping is entering the dull-drums. 

This does not mean I'm against tariffs or Trump's attempt to alter the trade rules we have with other countries. If a country does not stand up for itself, it is not uncommon to find it is treated unfairly when it comes to trade. America has been facing trade imbalances that are not sustainable. A recent article on AdvancingTime titled; Tariffs Are A Way Of Putting A Finger On The Scale. took the stand that tariffs are simply a way to level the playing field.

It appears we will witness a whiplash in rates and activity at ports that will play out over time. This volatility will also be an issue for the trucking industry. The costs of moving products and disruptions in the distribution of parts and finished goods flow into the economy.  The far bigger story, however, which I will get to below, is the undeniable impact on China.

Sal Mercogliano, a maritime historian at Campbell University and former merchant mariner recently did a video where he discussed the impact of the tariffs set by the Trump Administration on global shipping and in US ports, with a focus on Los Angeles and New York/New Jersey. 

Supply chain and shipping are issues ripe for mainstream news manipulation. They can mislead us by taking the stand the problems are widespread, dramatic, and massive contributors to inflation and economic hardship. Yes, there will be some companies that get hard hit as this unfolds but others will profit. Overall, I do not view the Trump tariffs now hitting China as creating a major supply chain crisis like some industry and economic watchers claim.

For those of us trying to keep on top of global news, Sal Mercogliano presents in-depth, well-informed shipping information. He exercises due caution in interpreting these statistics and does not sensationalize the numbers to attract clicks and panic viewers. More on the canceled sailings can be seen by going to the Drewery canceled sailings tracker.

Clearly, there has been a steep drop in Chinese freight ship traffic to the busiest U.S. ports. Where this is being felt the most is in China where factories are shutting down and many may never reopen. Try as it might, China being an export-driven economy with a weak domestic consumer base is undergoing considerable economic difficulty. In short, this is a bigger problem for China than it is for America. 

(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)

Advancing Time: The Eurodollar Market Has Little To Do With Europe

Advancing Time: The Eurodollar Market Has Little To Do With Europe: The subject of the dollar's strength and its ability to remain the world's reserve currency has been a subject of much debate. When ...

The Eurodollar Market Has Little To Do With Europe

The subject of the dollar's strength and its ability to remain the world's reserve currency has been a subject of much debate. When thinking about the dollar it is important to note two things, first, it is often described as the cleanest dirty shirt in the closet. This simply means all other fiat currencies are worse or have more problems. Second is that there are more dollars outside the US than inside it, these are referred to as eurodollars.  

 

 

The term "eurodollar" refers to unsecured U.S. dollar-denominated deposits at foreign banks or overseas branches of American banks. These dollars that are held outside the United States, are not subject to regulation by the Federal Reserve Board or regulations relating to reserve requirements.

 

In short, despite the name, eurodollars have nothing to do with the European Union or the euro currency. The name, a post-World War II moniker simply refers to the massive use of dollars in the global financial system outside of the United States. This means much of the debt in the world is based and must be repaid in dollars. The eurodollar plays strongly into what is happening across the world.

 

This is why global strategist Michael Every of Rabobank takes the stand the dollar is going "nowhere" or to clarify, it is solidly entrenched for now. He claims there may be ten times more dollars floating around outside of America than inside and much of the global offshore debt is owed in dollars. 

 

The kicker here is that a trade war and tariffs have the potential to result in fewer exports to America. This translates into less dollars for those in other countries to pay back this debt. Logically this means a stronger dollar outside of America as creditors are forced to pay more for dollars needed to pay back existing obligations. It also sets up a potential liquidity squeeze for those finding themselves owing dollar-denominated loans. The eurodollar market is key to Brent Johnson's  Milkshake Theory of a stronger dollar in the future.

 

Four and a half minutes into the Every video linked above he makes a strong case that the current forces flowing around us are a game changer. He also addresses the future of the bond market and U.S. dollar dominance. This has major implications for investors navigating the macrogeopolitical and economic news coming out every day. 

 

As a Global Strategist, Every puts forth an expansive and thought-provoking conversation on the tectonic shifts shaping our world. This includes the collapse of the architecture based on a US-protected world. He makes it clear that the post-WWII order is changing, due to what he calls the rise of economic statecraft.

 

This is all happening at a time when we are witnessing the emergence of a multi-polar world and Europe is turning toward a Kenseane expansion of economic growth based on building a strong military complex. This is rooted in the questionable notion that Russia is about to attack and Europe must defend itself. Whether such a static can halt the decline of the Eurozone is questionable. 

 

This approach by warmongers is also not conducive or reassuring to those wishing to achieve peace in Ukraine. The recent decline in the dollar may be overdone and the result of a combination of factors. Consider the possibility that the dollar's recent fall is the result of a blatant anti-Trump attack by the Eurozone and UK to destroy America's dominant global position in an effort to reestablish them as world powers. This includes dumping US Treasurys and pulling money back across the pond.

 

Uncertainty has been the word of the month, clearly, there is good reason to be cautious and move forward with a "buyer beware" attitude before listening or taking to heart any of the opinions being floated about by all the experts. In all honesty, there is little consensus on anything. A big part of Every's reasoning is based on the idea reality is rapidly changing and not everyone has updated their stand.

 

Footnote; For the latest on the Milkshake Theory see the following link. In the video, Johnson points out there is also something he calls the "dollar carry trade."   https://www.youtube.com/watch?v=lbIQ-CFnSgo

 

(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)

Advancing Time: Businesses Closing, The Impact Has Yet To Be Felt

Advancing Time: Businesses Closing, The Impact Has Yet To Be Felt: If your area is anything like mine, a large number of stores and small businesses have closed in recent months. Generally, there is a lag or...

Businesses Closing, The Impact Has Yet To Be Felt

If your area is anything like mine, a large number of stores and small businesses have closed in recent months. Generally, there is a lag or delay before the full negative effect of businesses closing is felt. Mass layoffs, and dropping retail sales are a glaring sign that the possibility of a recession is on the rise. Yes, we must add flagging retail sales to the growing list of signs of economic problems ahead.

The Reality Of Businesses Closing Has Yet To Be Felt!

The bailout of the auto industry following the 2008 financial crisis was based on the fact we simply had the ability and were producing too many vehicles. It was a thinning of the herd. Sadly, we are again in that situation. The oversupply of new trucks and cars has not brought down prices but instead created auto companies that face falling profits and a difficult future.

This situation of oversupply is not limited to the auto industry. After the sun had set on Sunday, as I drove the two miles from my office to home, I saw two Amazon trucks doing deliveries. This is problematic for local brick-and-mortar businesses, especially retailers. Much of this appears to be from a fundamental shift propelled forward from people being forced to stay home during Covid. This coupled with the internet has altered the retail landscape. 

It does not help that stores forced to put many products behind locked glass to halt shoplifting has made shopping a distasteful experience. Many people decided a semi-covid lifestyle is preferable to going to and working in an office or leaving home. It is difficult to say how much this has hurt productivity but many business owners will tell you, it is a lot. Covid was a discipline killer resulting in many people losing the discipline to work without a supervisor looking over their shoulder.

Also, there is the issue of government office space cutbacks from the work DOGE is doing to reduce wasted spending. Coupled with the work-from-home movement this is also impacting communities. This does not bode well for landlords dependent on keeping space leased in order to pay their mortgages. Yes, we want to cut government spending but it is a double-edged sword in that it will impact economic growth in the short term. Sadly, that short term may last far longer than many people think. 

The Trump administration has published a list of more than 400 federal properties that could be closed or sold, including the FBI headquarters and the main Department of Education. The Department of Government Efficiency (DOGE) has also terminated leases for more than 2.3 million square feet of office space, contributing to an estimated $60 billion in savings.

The ripple effect that empty buildings have on communities tend to come across as a cancer or long term economic rot. Supply and demand for space in an area determines rental rates and when rates drop to low, facilitate and building maintenance often take it on the chin. With this in mind, prepare for Retail Apocalypse Part II. While this could be considered a continuation of a trend that started years ago the number of closures about to occur will take things to a whole new level.

While inflation may be dropping quickly, other concerning trends, including mass layoffs, have developed. QI Research founder Danielle DiMartino Booth has been calling attention to these often underreported recession signals. She highlights rising store closures and job losses saying, “There is no greater drag on inflation than job loss.” Her concerns about a recession have been rising daily as auto loan delinquencies soar. Booth points out the number of major employers laying off workers now includes Chevron, BlackRock, Boeing, Southwest Airlines, Hewlett-Packard, Kohl’s, Meta, and Starbucks. 

If consumer prices take a minor fall due to slake demand, do not expect it to help most businesses. Instead, such weakness tends to squeeze margins. Fundamentally businesses face a difficult road ahead and will not see much or any drop in overall operational costs. The removal of costly regulations coupled with gains in productivity remains their main hope. Only time will tell how large the toll of a slowing economy will be but the potential for a lot of pain does exist. 

 

(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)

Advancing Time: Gold, They Make Diamonds, Is Gold Next?

Advancing Time: Gold, They Make Diamonds, Is Gold Next?:     Never forget the power of disruptive technology. Near the end of January, the emergence of DeepSeek as an inexpensive alternative to Ch...