President Donald Trump has been in office for a little over a year and in that time he has reversed many Obama-era Executive Orders affecting business. 
       He has been aggressive in stemming terrorism, secured a budget with massive military spending increases to modernize and resupply the U.S. military, focused on deporting criminal illegal aliens, proposed extensive U.S. immigration policy reforms, and passed both individual and corporate tax relief to increase consumer spending and improve the U.S. investment environment.

       As a result, recent economic indicators show increased job creation, a historically low unemployment rate of 4.1 percent, and record consumer confidence.
       In my first few articles I covered the Trump effect on the U.S. passenger and cargo airlines, demonstrating how his administration’s accomplishments in 2017 helped the industry thrive even in the face of the well-known pilot shortage. 

       President Trump’s priorities are clear—we can expect increased spending on U.S. infrastructure, serious immigration reform, a renewed focus on cyber security, and serious movement on international issues. The Trump diplomatic plan has the potential to help reduce or resolve global conflicts; his unprecedented move to deal directly with Kim Jong Un raises the possibility of a denuclearized North Korea, while his firm leadership can both stabilize the Middle East and improve relations with China and Russia, America’s only rivals.

       In addition to the security benefits that come with these achievements, the U.S. can also expect to improve its terms of trade through Trump’s get-tough approach, but there may be pain before those gains can be realized.
       I stated in my first article on the “Trump Effect” that if this administration uses trade restrictions as a negotiating tool the air cargo industry may suffer in the short-term as other countries retaliate.

       Today it appears that the process is underway with steel and aluminum tariffs, as well as the threat of further restrictions on imports from China. 
       China immediately retaliated with a 25 percent tariff on certain U.S. goods, primarily manufactured in states that supported Trump in the elections.
       The President is also actively renegotiating NAFTA with Canada and Mexico. 
       Given the low interest rates producing a weak U.S. dollar, these tariffs will have a double effect.
       President Trump’s campaign promised to “Make America Great Again” through improving trade deals struck by past administrations and ending the theft of intellectual property from American firms, which will have real consequences for the air cargo industry.

       American’s trade imbalance has continued to worsen at the cost of American workers. The numbers since 2009 (listed in billions of USD) have continued to be dangerously negative since 2009:

       •2017: ($568.4)
       •2016: ($504.7)
       •2015: ($500.4)
       •2014: ($490.3)
       •2013: ($461.8)
       •2012: ($536.7)
       •2011: ($548.7)
       •2010: ($494.6)

       We must ask if the President’s challenge to China, Canada, and Mexico, three of its top trading partners, will reduce America’s trade with those countries, and will that hurt the U.S. air cargo industry? 
       When you factor in the near-doubling pilot costs even with the weak dollar, it is unclear if U.S. airlines can be competitive offshore with their foreign counterparts when and if trade shifts from the U.S. 
       These questions need to be thoroughly analyzed by the U.S. Administration.
       The U.S. non-schedule charter carriers, which make up most of the American non-integrator all-cargo aircraft fleet, have been using a strategy of long-term leases for their wide-body freighters with companies like Amazon and DHL, and that will somewhat protect the big carriers until the market settles. 

       But smaller cargo charter airlines are at risk, just as we saw at the turn of this century, with some facing liquidation.
       We don’t know how this will play out—who will be the first to fall, and will the result be a market consolidated with near-total control by bigger carriers? 
       The consequences for such a major shift go beyond the commercial market to affect security policy, with the CRAF program affected particularly since it relies on smaller carriers.

       As the Trump administration continues to move aggressively on trade, it cannot lose sight of the second- and third-order effects of its policies across different economic sectors, and air cargo in particular.
       An America that is truly great needs a great air logistics industry both for its economic health and its long-term security.
Bill Boesch

To Read Part 1 of This Series, Click Here
To Read Part 2 of This Series, Click Here
To Read Part 3 of This Series, Click Here
To Read Part 4 of This Series, Click Here
To Read Part 5 of This Series, Click Here
To Read Part 6 of This Series, Click Here
To Read Part 7 of This Series, Click Here
To Read Part 8 of This Series, Click Here
To Read Trump Effect—India Walks Softly Carries Big Stick, Click Here
To Read Trump Effect—Implications Of A Trump Trade War, Click Here
To Read Trump Effect—Trump Across The Pacific, Click Here