Global trade falls as traffic through the Red Sea plummets after attacks

Global trade fell 1.3% in December month-over-month as attacks on transport ships through the Red Sea continued to cause delays and losses, according to German research institute IFW Keil.

The drop in global trade follows a decline in the number of container ships using the Red Sea in its route, falling from 500,000 containers per day in the month of November to only around 200,000 containers per day in December, according to a report from IFW Keil. Top shipping companies have diverted their routes to avoid Yemen-based Houthi attacks backed by Iran since October 7, 2023.

“The detour of ships due to the attacks in the Red Sea around the Cape of Good Hope in Africa means that the time it takes to transport goods between Asian production centers and European consumers is significantly extended by up to 20 days,” Julian Hinz, director of IFW Keil’s Trade Policy Research Center, said in the report. “This is also reflected in the declining trade figures for Germany and the EU, as transported goods are now still at sea and have not already been unloaded in the ports as planned.”

The European Union was impacted the most by the diverted routes in December, with exports falling 2.0% and imports declining 3.1%, while exports from the U.S. fell 1.5% and imports dropped 1.0%, according to IFW Keil. Exports from China rose 1.3% in December, while the country’s imports increased 3.1%.

The fact that there’s any kind of narrative on how global trade is decoupling from China is pretty baffling. After all, China’s trade surplus with the rest of the world is at record highs (black) and not even its bilateral surplus with the US (blue) is down in any meaningful way. pic.twitter.com/j0XAO2sKHv

— Robin Brooks (@RobinBrooksIIF) January 7, 2024

Many ships that would typically travel through the Red Sea are instead sailing around the tip of Africa, adding around 7 to 20 days to transport times, according to IFW Keil. Costs have increased drastically because of diverted routes, with the price of sending a 40-foot standard container between China and Northern Europe jumping from $1,500 in November to $4,000 in December.

The U.S. launched Operation Prosperity Guardian in December to combat the attacks from the Houthi rebels and protect ships from attacks like those involving missiles that have plagued the region. The defensive measures have so far been ineffective at deterring attacks, which are expected to continue until the war in Gaza ends or the U.S. launches a counteroffensive on the rebels.

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