A rise in protectionism could reverse growth in ports, adding downside risk to a sector already hindered by structural changes in the industry, according to Fitch Ratings.
In a report released Thursday, the agency noted a “recent increase in protectionist and anti-globalisation rhetoric, particularly in the US”. Fitch examined a hypothetical scenario in which the US imposed a 35 percent tariff – a number President Donald Trump has mentioned in the context of US firms relocating abroad – on imports from Mexico, China, South Korea and Taiwan while deporting one million migrants. Such a scenario would lead GDP growth to slow while seriously hampering trade.
“If restrictions that significantly hinder global trade are introduced we may revise the sector outlook for [Europe, Middle East and Africa] ports to negative,” the report noted.
Structural changes in the industry have already led to slower growth in recent years, a trend Fitch believes will continue. In the two decades leading up to the global financial crisis, a shift towards containerisation contributed to the globalisation of production, which drove rapid growth in port traffic. That trend’s maturation, the report argued, means port traffic growth can be expected at a similar rate to global GDP growth.
“Developments in emerging markets will also throttle back growth in the ports sector,” the report added. “The expansion of internal markets, particularly in China, may mean production is less oriented towards exports.”
Within the sector, increased competition is likely to have a greater impact on small and mid-sized ports than on larger facilities.