Rip in America’s economic artery
economic impact disaster in baltimore It is likely to be quite significant.
Baltimore is one of the largest ports on the East Coast of the United States.it is 5th largest port on the east coast According to the Bureau of Transportation Statistics, it is the 17th largest city in the United States by gross tonnage of cargo handled.
These numbers underestimate its importance to the US economy. Flexport CEO Ryan Peterson said the port is the 12th largest container port in the United States.it was 9th in tonnage The value of foreign cargo, according to the Governor of Maryland.
Last year, Baltimore handled 1.1 million TEUs, making it the 12th largest container port in the United States and the most important port serving the nation’s capital. It is also the busiest port for car shipments in the United States, with more than 750,000 cars expected to be handled in 2023. At least some…
— Ryan Petersen (@typesfast) March 26, 2024
it is No. 1 in sales of passenger cars and light trucks The governor’s office said in a statement last year that this includes motor vehicles (including 847,158 cars and light trucks), heavy agricultural and construction equipment, imported sugar and imported gypsum.
“About 40 vessels around the world, including 34 cargo ships, have listed Baltimore as a destination, according to marine traffic tracking company Marine Traffic, some of which have anchored in nearby waters. This includes the 10 merchant ships that dropped them.” new york times It was reported on Tuesday.
The port of Baltimore Second largest terminal for coal exportIt handled about 74 million tons of coal last year, according to Bloomberg.
“Baltimore’s major bridge collapse could halt coal exports for up to six weeks and prevent up to 2.5 million tons of coal from being transported,” said Ernie, CEO of Xcoal Energy & Resources LLC. Thrasher said, according to Bloomberg. report.
Expensive and time-consuming recovery
of Port is completely shut down In the aftermath of the collision between the Dali and the Quay Bridge and the near complete collapse of the bridge. Given the bridge’s location, it could take weeks or months for the port to return to normal. Perhaps some of the channels could be cleared faster, but that’s unknown at this point.
Even if the waterway were removed, the loss of the bridge could significantly worsen surface traffic congestion in the area. No one knows how long it will take to rebuild the bridge over the Patapsco River. Given current concerns about the environmental impact of large-scale offshore construction projects and the general reluctance of bureaucrats to approve major infrastructure projects, it will take much longer than the 1970s when the bridge was first built. It may take some time. Bids for the construction of this bridge began in 1970 after several years of planning. Construction began in 1972 and was completed in 1977.
Other ports on the East Coast could absorb some of the cargo traffic, but they don’t have the capacity to accept all the cargo that would otherwise go through Baltimore. As we have seen during the pandemic, even a small increase in expected shipments traffic jam at the port.
Flexport’s Peterson said that between the ongoing Red Sea crisis and the loss of Baltimore’s port, Shipping is likely to shift further to the West Coast. Of course, that would create potential congestion problems at West Coast ports.
This is certain to move more cargo to the West Coast, likely leading to congestion and delays. As we saw with COVID-19, even a 10% or 20% increase in volume can create a compound feedback loop of congestion and delays. Most ocean freight contracts are concluded between:
— Ryan Petersen (@typesfast) March 26, 2024
supply and demand shock
Economists call this a “supply shock.” Return of goods inflation Some items may be temporarily out of stock. Changes in shipping routes and subsequent congestion at other ports mean that even goods not intended to transit through Baltimore may be subject to restrictions. delivery delay.
“We’re probably coming out of the period of commodity deflation that we’ve had for the past six months or so,” Andrew Hollenhorst, an economist at Citigroup, said in an interview on Bloomberg TV on Tuesday.
There is also an element of “demand shock.”Clearing the waterway and rebuilding the bridge will take time You can spend human resources, materials, and time that could be spent on other projects.. Some of them will have to be put on hold. Additional demand would increase inflation, especially in an economy that has already reached full employment and whose productive capacity is nearly strained.
“I have directed my team to move heaven and earth to reopen the ports and rebuild the bridges.”
President Biden responds to Baltimore bridge collapse, saying the U.S. government should pay for rebuilding the main bridge in Baltimore that collapsed on Tuesday. https://t.co/iP0HNB6Il2 pic.twitter.com/GXWFweJCpn
— Bloomberg (@business) March 26, 2024
Funding to rebuild the bridge and open the port will likely come from the federal government. worsen the already ballooning budget deficit and increasing inflationary pressures in the economy. President Joe Biden has already The federal government pays the entire cost. Reconstruction of bridges and cultivation of ports.
Baltimore ravens fly at dusk
Some fiscal prudence prior to the catastrophe could have provided the United States with more fiscal space to respond without straining its budget. But the Biden administration’s reckless spending has made that impossible. It is said that Minerva’s owl flies only at dusk. Or in this case, baltimore wisdom crow I’ll be late.
There is a very high possibility that the bridge will collapse. Eliminate the possibility of the Federal Reserve cutting interest rates this year. While futures markets have not yet changed the probability of a rate cut, still pricing in a 64% chance of a rate cut in June, we expect the probability of a rate cut to change as Baltimore’s costs become clearer. There is.
Economists get angry when economic amateurs compare the government’s budget with household budgets. But in this case it would have been a good idea for the US to go with it. Kitchen table fiscal policy It’s important to leave some extra space in your budget in case of a disaster. If we fail to do so, there is a growing possibility that Baltimore’s physical disaster will become an economic disaster for the entire country.
