Flexport is monitoring developments of the Wuhan Coronavirus as it causes more and more business interruptions. Many major airlines are canceling flights to and from China. In some cases, the cancellations are comprehensive. Others have focused on specific routes. Most of the reductions are until the end of March—well beyond the Chinese New Year holiday.

A supply contraction like this is likely to cause volatile air cargo rates on multiple trade lanes, and air freight prices are likely to climb. In terms of impact on ocean, we are beginning to see some blank sailings. More about the global trade and economic impact of the virus can be found on our blog.

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Ocean Freight Market Update

Air Freight Market Update

Freight Market News

Coronavirus Delays Cargo at Wuhan In an attempt to impede a global outbreak of coronavirus, Chinese authorities are selectively holding ships from calling at Wuhan, where the virus originated. The WSJ reports that many larger liners are calling as planned, with crews staying onboard and captains requesting masks, at this river port city that handles approximately 1.5 million containers annually.

WEF Report Identifies Vital Last-Mile Solutions The World Economic Forum (WEF) has released a report urging rapid adoption of logistics fixes — including electric vehicles, night deliveries, dynamic rerouting, and load pooling — to ease carbon emissions and congestion in cities. Supply Chain Dive highlights the report’s finding that last-mile deliveries will increase 78% by 2030.

Meanwhile, this week, Flexport Chief Economist Dr. Phil Levy noted the following economic highlights:

• US Leading Economic Indicators were down 0.3% in December, according to The Conference Board, marking the fourth decline in five months. The group still foresees 2% US GDP growth through early 2020.
  • IHS Markit reported its US purchasing managers index hit its highest level in 10 months, but the strength was largely in the service sector, with weaker manufacturing numbers.
• South Korea posted its slowest annual growth since the global financial crisis, though the growth rate picked up notably in the fourth quarter. Weak exports served as a drag on the economy.
• Japanese exports fell for a 13th straight month in December, down 6.3% year-on-year.
• Costly IMO Carbon Dioxide Targets A UK consultancy estimated a cost of $50bn per year between 2030 and 2050 to reduce ships’ carbon emissions to half of 2008 levels. The bulk of the $1 trillion cost is for new fuels and port facilities.

Customs and Trade Updates

Additional Steel and Aluminum Tariffs
President Trump announced more tariffs of 10% on certain steel items and 25% on certain aluminum items under Section 232. These tariffs will go into effect on February 8.

Fighting E-Commerce Counterfeits
The Department of Homeland Security released a report detailing how the burden of combating counterfeit and pirated goods should shift to 3rd party sellers like Amazon, Ebay, Alibaba, etc. The report, which notes the limited utility of stopping and inspecting shipments as the volume of fakes increases, lists 10 governmental actions that will be implemented immediately and 10 "best practices" for 3rd-party marketplaces.

FDA Increasing Enforcement of FSVP
To improve its Foreign Supplier Verification Program, the FDA has increased the number of notices issued and launched a public database tool to track warning letters. While importers now have more opportunity to correct possible violations, a lack of action could lead to fines and placement on the import alert list. Here is the final rule and a fact sheet for reference.

**For a roundup of tariff-related news, visit Tariff Insider.

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