This has been a busy news week for macro risk watchers like us. Here’s a snapshot of our tracking dashboard – as you can see, there’s a lot of red right now.
This translates into some very busy months ahead for supply chain managers. Three issues require immediate attention, with dynamics on all changing day-to-day.
War in the Middle East. Ever since the Hamas attacks on Israel last years we have warned about the risk of escalation and a regional conflict involving Iran. That has now arrived. From a supply chain perspective what really matters here were always two things: 1. Damage to Israeli infrastructure or manufacturing capabilities that would disrupt supplies from critical industries, ranging from semiconductors to raw materials like bromide. 2. Volatility in oil markets. Thus far oil prices have been kept in check, despite the high risk of conflict in the Middle East, a bit of a historical anomaly. But Israeli strikes on Iranian oil production or Iranian disruption of oil exports of the Persian Gulf states (Saudi Arabia, UAE, etc.) would change that immediately. We could see a doubling or tripling of oil prices.
What we’re watching? Israeli retaliatory strikes and the escalation path
US East Coast Port Strike. Strikes started on October 1 and the reporting has not been nearly as extensive as the event merits. We see the dynamics as quite bad, with the wrong incentives on all sides to get to a deal (ports, ILA, and the government). It is very possible this goes on for weeks, at which point we will start to get shortages of a whole range of materials. Impacts will be felt way beyond the US too, not only will US exports be held up, but also shipping will be disrupted as ship moors of US ports and containers are not getting into circulation. Shipping has been hit repeatedly since 2020 (COVID19, Red Sea, strikes) and now it is time again.
What we’re watching? Negotiations, cascading freight rate, port and container impacts, and twin impacts alongside Hurricane Helene
US 2024 presidential election. This has long been on our list as the most significant supply chain risk of 2024. The noise of opinion polls, Taylor Swift endorsements, and debate performances has drowned out the issue that really matters - trade policy. Trump has been clear that he wants to upend US trade policy in a dramatic way. Some calculations indicate half a trillion worth of increased cost per year for US imports – a number that then needs to be doubled to account for all but certain US trade partner retaliation. This would be a much bigger shock to global supply chains than the China trade war in Trump’s first term.
What we’re watching? The latest signals on Trump policy – just in the last two weeks including hints on nearshoring policy and Russia sanctions
The next few weeks will be pivotal of how what shape supply chains will be in at the end of the year and into 2025. Time to start tracking the risks and mitigate now.