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Trump vs. Biden: How the winner could affect ocean shipping

This post does not endorse any political candidate and is a report from one of our news sources: https://www.freightwaves.com/news/trump-vs-biden-how-next-president-could-affect-ocean-shipping

The outcome of the U.S. election will steer stimulus spending, energy policy, trade relations, geopolitics and environmental regulation — and consequently, ocean freight rates — for years to come.

With just three weeks to go, financial analysts are weighing in on potential fallout.

On one end of the spectrum lies a relative status quo. On the other, a “blue sweep,” in which Joe Biden defeats Donald Trump for the presidency and Democrats retain the House and take a slim lead in the Senate.

“All told, the fate of shipping could come down to who wins the presidency, along with all the other macro factors that drive demand,” said Jon Chappell, shipping analyst at Evercore ISI.

Stimulus spending

Stimulus has already artificially and prodigiously inflated container-shipping demand. Among the big benefactors: ocean carriers, trucking and intermodal rail. China-West Coast spot container rates were still above $3,800 per forty-foot equivalent unit (FEU) per day on Tuesday. That’s the same stratospheric level they’ve hovered around since mid-September.

As Jefferies Chief Economist Aneta Markowska put it during a conference call on Oct. 1, “The labor market took a massive beating during COVID. But fiscal stimulus was so massive that it more than offset it. Personal income was up 4.7% year-on-year in August. Fiscal policy essentially erased the recession if you look at just total personal income.”

To put it another way: The federal government’s use of debt to subsidize consumer spending is indirectly subsidizing earnings of transport companies (including non-U.S. companies). Stimulus funding has waned in recent weeks. The election outcome will determine the timing and amount of future indirect U.S. government subsidies to the transport sector.

Containers are flooding California ports, courtesy of government stimulus (Photo: Jim Allen/FreightWaves)

“We believe Democrats would pass a massive fiscal stimulus in response to COVID-19,” said Evercore ISI political policy analyst Sarah Bianchi.

“This is likely to mark an important contrast to what a Republican administration would pass in 2021. Senate Republicans have already shown in the latest round of negotiations that they are running out of patience for big-spending packages. With a Republican Senate and president, the fiscal spending will likely dramatically decline.”

Democrats are also much more likely to raise taxes to pay for stimulus than Republicans. But this is of little concern to ocean shipping companies, which are overwhelmingly non-U.S. entities that pay little or no U.S. tax.

Ocean shipping’s taxation worry relates to future consequences for economic growth. Particularly given that U.S. money-printing cannot go on forever.

US oil production and exports

The energy team at Morgan Stanley led by analyst Devin McDermott predicted that a Democratic sweep could lead to more stringent permitting versus a Trump administration for U.S. pipelines, a decreased ability to frack on federal lands, regulatory limitations of methane emissions and flaring and other heightened oversight. All of which “could hamper domestic oil growth.”

At the same time, Morgan Stanley believes a Bide