Interview, Statement
Global transit & trade: in rough waters
- Houthi attacks in the Red Sea are projected to likely decline within a two-to-three-month timeframe, contingent on the subsiding of the Gaza conflict following Israel's military campaign completion and the deployment of an international peacekeeping force.
- While a massive escalation is considered unlikely, Iranian-sponsored groups may implant sea mines in the Red Sea or Strait of Hormuz, prompting potential continued Western strikes on Houthi infrastructure and possible targeting of Iranian shipping or offshore assets if attacks persist.
- China is expected to participate in long-term global efforts to protect undersea infrastructure due to its trade dependence, despite current tensions, while its current 350-asset naval fleet is viewed as smaller and less experienced than the US fleet, though a combined Chinese-Russian capability could pose a challenge decades away.
- A declaration of Taiwan independence is not anticipated within the foreseeable five-to-10-year future.
- Global demand-supply balance in shipping is expected to remain relaxed through 2025 and 2026, with short-term rate spikes likely to balance out quickly once vessel circulation stabilizes after several months of extended voyage delays.
- End-to-end logistics costs are projected to rise by 10 to 20% due to longer Cape of Good Hope routes, with water transport costs specifically increasing by 30 to 40%, while severe disruptions are considered less likely despite moderate incidents.
- Urgency for air freight to replace containerized shipping is unlikely to materialize immediately, though demand dynamics are expected to shift as the year progresses into the second half of Q2.
- Global trade growth is forecast to continue aligning with global GDP, diverging from the historical 1990s and early 2000s pattern of growth at double the GDP rate.
- The Trans-Pacific trade route from China to the US is expected to remain relatively resilient under the current tariff environment, although substantial growth in this corridor has likely already taken a hit.
- Supply chain diversification via "omnishoring" is anticipated to drive a shift in final assembly manufacturing out of China to Mexico and Southeast Asia, while parts and components sourcing remains largely centered in China, creating substantial warehousing demand and potential inventory sell-outs in those alternative regions.
- The global regulatory environment for trade is expected to remain complex and fragmented with no immediate return to the multilateral trade facilitation observed in the previous two decades.