The Covid-19 pandemic that started in late 2019 seriously changed world trade and global economic balance. Power balances slowly turned into more and more uncertainty because of many developments. This increasing uncertainty in global trade has made the role of freight forwarders much more important than before, both in domestic and international transportation.
Let’s take a look at the events that caused major changes in the global economy and international transportation from 2019 until today, and their effects on global logistics.
The Covid-19 pandemic
In 2019, the Covid-19 pandemic caused supply chains to slow down and even break all around the world. Air transportation almost came to a stop. There were shutdowns at seaports and a big crisis in finding containers. Because of quarantines, deliveries were delayed, additional documents/certificates were required, and in general, transportation costs increased.
Russia’s Invasion of Ukraine
In 2022, Russia started a military attack on Ukraine, which turned into a full-scale invasion. After this, Ukrainian ports were closed or operated at very low capacity. Since a large part of the world’s grain supply comes from these two countries, this caused supply shortages and price increases. Because of embargoes on Russian oil and natural gas, trade volume between Europe and Russia dropped sharply. Many European countries turned to Asian and American markets. The global economy saw fluctuations in many sectors, from energy to agriculture.
The Panama Canal Drought
With the drought in 2023–2024, the water level in the Panama Canal dropped to a critical level. The lower water level forced ships to pass through the canal with a lower draft, which meant carrying less cargo. High-tonnage vessels had to change their routes, and as a result, transit times became longer, freight rates increased, and transportation costs went up.
The Israel-Hamas Conflict
In 2023, Hamas carried out a large-scale attack on Israel. On the same day, Israel started a military operation in Gaza Strip. When the war combined with Red Sea attacks by Iran-backed Houthis, the Suez Canal became risky. Ship traffic decreased on the Suez Canal, and vessels started going around the southern cape of Africa. This caused longer delivery times and higher freight and insurance costs.
The Taiwan Strait
The Taiwan Strait is a region where around 40% of the world’s container transportation passes through. Political tensions between China and Taiwan increased again in 2022 after the visit of the Speaker of the U.S. House of Representatives Nancy Pelosi to Taiwan, and at certain times, China’s military drills and blockade scenarios around Taiwan directly affect global trade. The lack of an alternative route to the Taiwan Strait and Taiwan’s role as a high-tech production center increase tensions between China and the U.S. If this tension grows further, it clearly has the potential to create a shock effect for global trade.
Climate Change
Because of global warming, about 40% of Arctic ice cover has already melted. More clear and ice-free seas are creating routes that ships can use. As these routes become more usable in the future, new sea lanes can open in the Arctic. The Northern Sea Route will allow Europe-Asia trade to move through this route and may offer shorter transit times and lower costs compared to the Suez Canal. The Northwest Passage could also reduce dependence on the Panama Canal.
Strikes and Labor Disputes
Workers at ports on the U.S. East and Gulf Coasts went on strike for three days starting on October 1, 2024. With a temporary agreement, the strike was stopped until January 2025, and later the crisis ended with a long-term agreement. Both before and during this period, the strike caused delays in the supply chain. Because of these delays, freight rates increased, and extra charges and long waiting penalties at terminals were applied. Importers faced major difficulties managing their supply chains and experienced unexpected cost increases due to the uncertainty.
Tariffs and Trade Barriers
As soon as U.S. President Donald Trump started his second term, he announced many new customs tariffs, and over time these became an important part of U.S. trade policy. High tariffs that first started with aluminum/steel and automobiles/auto parts were later expanded to cover almost all imports, and some rates increased even more because of reciprocal tariffs and diplomatic tensions. These high tariffs also caused many problems in the supply chain. The growth of goods trade and U.S. container import volumes dropped sharply. At the same time, customs procedures took longer and pushed freight rates and insurance costs higher.
Unresolved Issues
In addition to developments mentioned above, there are still unresolved issues that continue to affect the global supply chain, such as the following:
- The ongoing Ukraine-Russia war not reaching a permanent ceasefire and the risk of the conflict spreading to continental Europe and the Black Sea.
- Political tensions in the China/Taiwan/U.S. trilateral relationship and the danger that any further conflict could lead to military intervention.
- Conflicts involving Israel and Iran are creating greater political uncertainty in the Middle East and there is a risk of battle zones spreading to wider areas, directly affecting ship traffic in Strait of Hormuz, Red Sea, and Suez Canal.
- Political tensions, especially between China and the U.S., triggering power struggles over oil, gold, silver, and other precious metals.
- The potential of AI and chip competition to change trade balances between Eastern and Western countries, such as Chinese automotive manufacturers surpassing European and American producers in total sales.
The benefits of working with a freight forwarder such as MTS Logistics
All these global economic and political developments have made freight forwarders more important than ever. So, as MTS Logistics, what benefits do we provide while managing these complex supply chain processes for our customers? The main benefits are as follows:
- With our contracts that protect against freight rate fluctuations, we offer more stable and competitive rates, allowing our customers to manage their inventory better with predictable costs.
- Even if an importer has an agreement with any carrier, MTS Logistics provides options from multiple carriers, so our customers can choose the most suitable service.
- Together with our offices and partners worldwide, we manage the entire process from the manufacturer’s factory to the customer’s warehouse in the best possible way, minimizing extra costs and keeping our customer informed until delivery is completed smoothly.
- Unlike many other forwarders, our web applications allow customers to track every step of delivery online and manage bookings entirely through our platforms.
- With our own customs team, we handle tax and duty processes efficiently on behalf of our customers, providing timely updates, like tariff changes, so customers are always aware of potential price changes.
- Our door-to-door service ensures that customers enjoy the convenience of receiving their products from the manufacturer’s factory directly to their warehouse.
You can always reach out to us to get more detailed information about our services.
