Why the Panama Canal is a big, long-term prize in Trump's global trade war

The Panama Canal has spent the past few years battling extreme weather, with the El Niño phenomenon and severe drought leading to a water-level crisis.

The Panama Canal has spent the past few years battling extreme weather, with the El Niño phenomenon and severe drought leading to a water-level crisis. Now, it’s President Trump’s trade war that is threatening the global trade gateway. A critical passage for U.S. East Coast bound ocean freight container traffic, the Panama Canal is facing a potential business slump as a result of Trump’s China tariffs and a rapid decline in manufactured goods being ordered by U.S. shippers.

Forty percent of all U.S. container traffic travels through the Panama Canal every year, and in all, $270 billion in cargo annually. The U.S. and China are the top users of the Panama Canal, and its role in global shipping has increased in recent years due to the disruption of global supply chains. The Panama Canal Authority’s revenue hit $3.38 billion last year, despite drought conditions, and revenue has increased every year since 2017.

The trade war uncertainty and Trump’s 145% tariff on Chinese goods — which will start to hit goods arriving from China to U.S. ports on May 27 based on the four to six weeks it takes for ocean freight to reach the U.S. from Asia — has already resulted in a massive pause on U.S. imports bound from China. According to data from supply chain intelligence firm Project44, there has been a 300% increase in blank sailings (cancelled freight vessels) from China to the United States since Trump’s so-called “Liberation Day” tariffs announcement on April 2.

West Coast ports in the U.S. are already being hit and the impact on East Coast ports is expected to increase, with the pullback in vessels a result of the decrease in manufacturing orders for Chinese factories: less products manufactured translates into less shipping containers for ocean carriers.

A Panama Canal worker docks the Chinese container ship Cosco at the Panama Canals' Cocoli locks in Panama City in 2018.Arnulfo Franco / AP fileFor the Asia to North America East Coast trade route, Sea-Intelligence has recorded a cumulative blanked capacity of 261,822 twenty-foot equivalent units (TEUs.) over the last six weeks. This decrease in containers and vessels can impact Panama Canal revenue. The Panama Canal makes its money off of the number of vessel transits and containers moving through the waterway.

https://www.nbcnews.com/politics/economics/panama-canal-trump-global-trade-war-rcna204704

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