Transhipping

The trade war that formalized on liberation day has put an old word back into our vocabulary: Transhipping. According to the dictionary is simply defined as “transfer (cargo) from one ship or other form of transport to another”, but in the recent context of our trade negotiations with China, it has acquired a connotation: since China is subject to higher tariffs than some of its trading partners, instead of shipping directly to the US, it triangulates to another country, such as Vietnam, and then Vietnam sends it to the U.S., arbitrating the tariffs. In the chart below you can see how exports from China to the U.S. have decreased significantly, and Vietnam has “coincidentally” increased trade with the US. You can’t transplant a factory from China to Vietnam overnight, but you can transship and see how long it will take for US customs to figure out you are filling the system. Or perhaps it’s consensual between the leaders of both countries, to be able to show the world and their constituents, they are tough negotiators on the surface while making some concessions out of the spotlight. It’s in the interest of both economies to reach a trade agreement, but nobody wants to leave the negotiating table as the weaker side. The new deadline for tariffs with China is November 10th. Transhipping may give us an indication on how close we are to an actual deal.

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