WAFM - Geopolitics and its impact in trade

Geopolitical uncertainty is a significant source of risk and can severely impact firm resilience. Such instability poses unique challenges to multinational corporations, necessitating strategic responses. Our study investigates the sourcing containerized capacity strategies by multinational corporations in the seaborne U.S. import market under geopolitical uncertainty. Our study shows that higher uncertainty in export (global) and import (U.S.) markets weakens resilience, while procuring containerized capacity through larger and relational interdependent suppliers strengthens resilience. Although these sourcing strategies can only partially counteract the implications under uncertainty, such approaches can lessen the adverse consequences. The results indicate that geopolitical uncertainty is a persistent challenge to multinationals, stressing the need to select suppliers strategically to address vulnerabilities. Similarly, the results underline the importance of aligning sourcing strategies with a firm's risk profile, providing guidance for building resilient global supply chains amid growing uncertainty.

The Red Sea crisis, as a significant geopolitical disturbance, has disrupted global shipping networks, yet quantifying its impact on port efficiency remains understudied. In this paper, we measure port efficiency through vessel turnaround times derived from global AIS data to examine how the Red Sea crisis affects container ports. We employ a regression discontinuity difference-in-differences (RD-DID) framework to isolate and estimate the causal effects of the crisis on port waiting times, revealing that the Red Sea crisis impairs port efficiency. Subsequently, an event study is conducted to validate parallel trends and to assess time-varying spillovers. The empirical findings indicate a substantial increase in turnaround times after the onset of the crisis, with Asia, Europe, and Oceania experiencing the greatest impact, whereas Africa and South America remain largely unaffected. Moreover, a port-size analysis shows that high-ranked ports in Asia and Europe bear much of the congestion, whereas even smaller ports in Oceania encounter substantial disruptions. These results highlight the vulnerability of global container shipping routes under geopolitical tensions, and we offer suggestions to enhance ports' responsiveness and flexibility in similar crises.

The bulk shipping sector is highly susceptible to various shocks, yet limited studies have systematically examined their impacts on freight rates and transport costs. These fluctuations have significant implications for maritime stakeholders, as understanding and predicting them are crucial for effective decision-making and risk management. This study addresses this gap by analyzing the impact of eleven identified shocks on freight rate volatility within the bulk shipping sector, focusing specifically on the Baltic Exchange Dry Index (BDI), Clarksons Average Bulker Earnings ($/day), and Average Weighted Earnings for All Bulkers ($/day). Utilizing data from the Clarksons Shipping Intelligence Network up to the Fourth quarter of 2023, this study applies descriptive and comparative statistical methods to examine earnings fluctuations and their responses to external shocks. The results reveal varied impacts: some shocks caused substantial disruptions to freight rates, while others had more moderate effects. These findings highlight the uneven sensitivity of the bulk shipping market to different external events and underline the importance of context-specific responses. The implications of these findings are multifaceted. Maritime stakeholders, including shipowners, operators, and policymakers, can leverage this analysis to enhance strategic planning, improve market resilience, and develop proactive measures to mitigate the effects of disruptive events. While this study fills a research gap, it also identifies key areas for future research.

The Red Sea crisis, emerging in late 2023, caused significant disruptions in global maritime logistics, leading many vessels that normally transit through the Suez Canal to reroute around the Cape of Good Hope. This study focuses on analyzing the pre-crisis conditions of 2023 and the post-crisis state of 2024, where changes induced by the crisis have persisted. Automatic Identification System (AIS) data was analyzed to quantify changes in vessel traffic patterns, revealing a sharp decline in Suez Canal transits during the crisis and sustained adjustments in routing in 2024. Container ship schedule data was also utilized to examine how the network structure of shipping routes evolved across these periods. Furthermore, the global maritime container shipping network simulation (GMCS-NS) model was applied to assess shifts in maritime container cargo flows on the detailed global liner service network. The findings illustrate how global logistics networks adapted to the crisis and stabilized in its aftermath, offering valuable insights and strategic recommendations for strengthening the resilience of global shipping routes against future disruptions.