Wednesday, March 22, 2023
Home > Analysis & Opinions > How Soaring Shipping Costs Raise Prices Around The World
Analysis & Opinions

How Soaring Shipping Costs Raise Prices Around The World

By Yan Carrière-Swallow, Pragyan Deb, Davide Furceri, Daniel Jiménez and Jonathan D. Ostry

The sea carries more than 80 percent of the world’s traded goods, most of which sail inside 40-foot-long steel containers stacked by the thousands atop some of the largest vessels ever built.

The shock of the pandemic underscored just how crucial the maritime container trade is to the global economy.

From Shanghai to Rotterdam to Los Angeles, the coronavirus upended supply chains. Ports lacked workers who were home sick.

Truck drivers and ship crews couldn’t cross borders because of public health restrictions. Pent-up demand from huge stimulus programs during extended lockdowns overwhelmed the capacity of supply chains.

Besides causing delays in getting goods to customers, the cost of getting them there surged. As the Chart of the Week shows, the result of those challenges was that the cost of shipping a container on the world’s transoceanic trade routes increased seven-fold in the 18 months following March 2020, while the cost of shipping bulk commodities spiked even more.

Our new research shows that the inflationary impact of those higher costs is poised to keep building through the end of this year.

Our analysis predates the war in Ukraine but isn’t isolated from it: the conflict will likely exacerbate global inflation. Studying data from 143 countries over the past 30 years, we find that shipping costs are an important driver of inflation around the world: when freight rates double, inflation.

The authors are economists, researchers and analysts at the IMF

Leave a Reply

Your email address will not be published. Required fields are marked *