18 SEPTEMBER 2025
In late 2020, a sudden surge in global shipping costs proved to be a harbinger of the major inflation shock that was to come.
Higher producer prices (PPI) and consumer prices (CPI) soon followed suit, culminating in the worst inflationary episode since the 1970s and a series of coordinated Central Bank rate hikes that shook financial markets.
The chart below suggests the environment is less threatening this time around, with the cost of shipping a 40ft container from China to Europe continuing to fall towards a multi-year low.
Looking at the supply side more generally, the US trade war clearly poses a near-term threat to the becalmed inflation backdrop, but there are mixed views over how inflationary the Trump tariffs will be.
US input prices are starting to inch higher, but companies are unlikely to pass all of the cost increases onto the end-consumer. This suggests the bigger impact may be on corporate margins. The US Congressional Budget Office (CBO) recently warned the tariffs would raise US average inflation by 0.4% in both 2025 and 2026.
If this transpires to be the case, such a benign outcome would be unlikely to derail the prevailing bull market in risk assets, but a return of inflation concerns could well amplify market volatility going forward.
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