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The spillover effects of trade policy uncertainty on the shipping industry

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  • Chen, Yanhui
  • Chen, Chujun
  • Fatema, Kaniz
  • Mi, Jackson Jinhong

Abstract

The United States' recent reciprocal tariffs have created great uncertainty for the global trade. This paper studies the spillover effect of trade policy uncertainty (TPU) on the whole shipping industry in quantiles and frequencies. Through wavelet coherence analysis, this paper quantifies the time lags of TPU's propagations, revealing that short-term (1–2 weeks) chaos dominates initial responses, while mid- (2–26 weeks) and long-term (>26 weeks) effects underpin market adaptation and structural adjustments. Then, the BK-frequency model further demonstrates that positive spillovers from TPU to various shipping variables, such as freight-rate indices and vessel prices, emerge after two weeks and intensify over six months. Moreover, under extreme TPU drops, the long-term (>26 weeks) spillover effect on the shipping system becomes more pronounced, highlighting the restored confidence among industry practitioners following the easing of trade tensions. Finally, considering current industry practices, the direction of trade policy after the 90-day suspension period is pivotal, as it coincides with the peak season for container shipping, potentially driving a decrease in freight rates amid new tariffs and inventory shortfalls. The research benefits industry stakeholders and policymakers in taking targeted measures to cope with the impact of trade policy changes at the right time.

Suggested Citation

  • Chen, Yanhui & Chen, Chujun & Fatema, Kaniz & Mi, Jackson Jinhong, 2025. "The spillover effects of trade policy uncertainty on the shipping industry," Research in Transportation Economics, Elsevier, vol. 114(C).
    • Handle: RePEc:eee:retrec:v:114:y:2025:i:c:s0739885925001398
    DOI: 10.1016/j.retrec.2025.101656
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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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