The Tribune

By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian consumers and businesses were yesterday warned to brace for “an extraordinary level” of increase in the price of US imports as a result of Donald Trump’s trade war with China.

Michael Maura, chief executive of the Nassau Container Port’s operator, told Tribune Business that the escalating tit-for-tat tariff battle between the world’s two largest economies - and key Bahamian trading partners - would almost inevitably translate into price rises and an inflation increase.

The Arawak Port Development Company (APD) head said The Bahamas had little choice but to ride out the storm until the US and China resolved their differences, given that the former accounted for around 75 percent of physical goods imports coming into this country.

The US president unexpectedly raised tariffs from ten percent to 25 percent on $200bn worth of Chinese goods earlier this month after he became frustrated over Beijing’s reluctance to address his trade-related concerns. China retaliated with tariffs on $60bn of US imports and The Bahamas, with its import-dependent economy and a regressive tax structure concentrated on consumption, cannot escape the fall-out.

“To place the impact of these tariff increases in context we should note that China is the US’ largest trading partner,” Mr Maura said. “And it is important to be reminded that approximately 55 percent of US imports are parts and components used in a US-based manufacturing process.

“As I understand it just about all of the Chinese products will be affected to some degree by these new tariffs. Wal-Mart has advised that it expects its retail prices to increase on those items affected by the increase in tariffs. Everything from hardware, toys, flooring, tuna fish, laptops, furniture, automotive and marine parts, clothing, baby formula and much more being impacted.”

As to the consequences for The Bahamas, Mr Maura said the increased tariffs on Chinese imports would raise the price of US-manufactured goods that employ them as components in the finished product. With this nation importing around $3.5bn in goods from the US annually, such cost increases will be ultimately passed on to local businesses and consumers in higher prices.

“The United States in the Bahamas’ largest trading partner with no close second,” the APD chief told Tribune Business. “A factor that may mitigate the cost increase in goods purchased by the Bahamas is the competitive environment between Wal-Mart and Amazon.

“While both will see their costs increase, they are likely more concerned with market share today. This competitive environment will serve the end consumer. It, however, does not apply to all US suppliers to the Bahamas, and Bahamian businesses will very likely see their US origin product costs continue to rise at an extraordinary level until the US and China resolve their differences.”

The fall-out from the Donald Trump-inspired ‘trade war’ is especially ill-timed for Bahamians, who are already facing ‘cost of living’ increases due to the VAT rate rising to 12 per cent and the ongoing international oil price volatility.

Mr Maura, who is perfectly placed to observe the impact as the head of New Providence’s sole commercial shipping port, pointed out that the continued tension between the US and Iran, together with the political crisis in Venezuela, could produce further increases on top of the “marginal” oil price increase seen over the past few months.

He added that forecasts from the International Monetary Fund (IMF) and other agencies “suggest that the US and China will both continue to experience a slowdown into 2020. The US CPI (consumer price index) as forecasted by the IMF, while it increases compared to prior years, does not show an alarming increase.

“It is important to note that the IMF forecast does not consider the recent tariff increases announced by the US and China. These increases will undoubtedly place upward pressure on US CPI and, by extension, the Bahamas CPI (inflation),” he added.

Despite the external pressures, APD’s net income for the first nine months of its financial year was just $12,737 behind the BISX-listed operator’s own internal projections, coming in at $5.6m for the period to end-March 2019.

“The Nassau Container Port’s TEU (twenty-foot equivalent unit) container volumes are presently same as prior year with our strong tourism industry helping to drive container volumes,” Mr Maura added. “Without the healthy tourism showing we may have been looking at a moderate reduction in TEU volumes.”

Total TEU volumes, both entering and exiting the Nassau Container Port, were just 406 behind where APD projected them to be for the first nine months, coming in at 97,926 in total. Vehicle imports, though, were some 10,641 behind forecast.

However, Mr Maura said dry bulk imports were 69,359 tons over-budget for the period to end-March 2019, finishing at 211,859. “We had budgeted approximately 190,000 tons for fiscal year 2019 so we have exceeded that forecast,” he revealed. 

“As previously discussed this segment is heavily influenced by 30,000 ton individual deliveries, and while we will finish the year ahead we do not expect the trend to continue to this extent.”

While APD’s revenues for the first nine months were some $763,509 behind forecasts at $22.61m, this was partially offset by expenses coming in $491,953 lower than expected at $13.176m.

“The revenue reduction was due to the shortfall in TEU and vehicle volumes as well as significant reductions in storage attributable to improved container management by the ocean carriers, but had the benefit of the 69,359 in dry bulk tons,” Mr Maura explained.

“Expenses were primarily influenced by the reduction in volumes and continued fiscal constraint in other expenses, while net income was heavily influenced by the shortfall in storage and vehicle income but benefited from the over plan in dry bulk tons and general expense management.

“We continue to await Government’s approval for the development of the 15 acres which, as previously explained, will support improved port border controls and offer greater trade facilitation by way of the vehicle terminal.”