Impending Tariffs Threaten Equipment Demand

Impending Tariffs Threaten Equipment Demand

With the ongoing trade tensions between the United States and China, the world’s second-largest producer of containers in the world announced in late July that they had operated at a loss during the first half of 2018. Singamas Container Holdings that is based in Hong Kong says that they faced many increased costs in building containers with the price of corten steel rising substantially.

Unable To Pass Increased Costs Along

By comparison, the company showed a $16.6 million profit during the same period only a year earlier. Officials with the company said that while demand for their product kept the company operating at full capacity through the end of August, they were unable to pass the increased costs on to buyers because of the level of competition in the industry.

1,300 Products To Face Higher Tariffs

About 95 percent of all shipping containers are made in China. In April 2018, the Office of the United States Trade Representative announced a list of 1,300 products that would face higher tariffs. The tariffs were raised because of an ongoing disagreement between China and the United States about patents for intellectual property owned by companies in the United States. Among the penalized products, a 25 percent tariff was placed on material handling equipment including forklifts.

Impact On United States Firms

Two other tariffs could be passed in the near future. Cargo shipping container owners were on Capitol Hill in late July to warn lawmakers that implementing the additional tariff could hurt United States companies including J.B. Hunt Transport who owns or leases 90,000 containers from China. It is believed that Schneider National owns or leases even more. Before the new round of tariffs was passed, only 5.3 percent of imports from the country were subjected to tariffs but if these two bills pass, then about 33 percent of all products will be subjected to some form of a tariff.

Even More Tariffs May Come

President Trump has indicated his support for a plan that would place even more tariffs on products imported from China. Right now, the current plan being debated by Congress covers about $200 billion in imports, but President Trump has said he would like to see tariffs placed on all products imported from the country. Each year, the United States imports about $500 billion from the country.

Singamas Container Holdings says that any additional tariffs could have a stifling effect on their company, however, China International Marine Containers says that they expect the tariffs to hurt their company very little because they operate in a global economy.

Davenport Laroche is a leading shipping container investment agency based out of Hong Kong.

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