Business

Houthi squeeze on Red Sea shipping risks enormous cost to global economy on December 31, 2023 at 11:00 am Business News | The Hill

Published

1 year ago

December 31, 2023

The Houthi rebel group in Yemen has almost completely shut down a key shipping route in the Red Sea, costing the global economy and setting up a huge challenge for the White House.

The relentless Houthi attacks on merchant vessels and commercial boats pushed several of the world’s largest shipping companies to cancel transits through the Red Sea. Oil-producing giant BP also decided to avoid the shipping lane.

Now, merchant boats are forced to take the long way around, circling Africa and the Cape of Good Hope to reach their destinations.

Nick Childs, a senior fellow for naval forces and maritime security at the International Institute for Strategic Studies (IISS), said the Red Sea threat has the potential to damage the global economy in the long term, adding the conflict points to a more unstable world that must be addressed.

“Economies have to absorb the increased costs and that will have an impact, not just on the maritime industry, but [also on] economic health more generally,” he said. “There has to be more attention paid to maritime security and maritime domain awareness.”

“But there is another problem,” Childs continued. “Navies are a lot more busy doing other things as well, including worrying about Russia-Ukraine, worrying about what may or may not be happening in the Indo Pacific.”

The Red Sea is a major shipping lane route, facilitating roughly 10 percent of the world’s commerce each year.

Sailing through the Suez Canal and down the Red Sea and Gulf of Aden offers a shortcut connecting Europe to Asia and the Pacific region; it is used by about one-third of global shipping companies.

Rerouting all the way around Africa adds some 3,000 nautical miles and up to two weeks of travel, and shipping companies are now adding the extra costs as a transit disruption surcharge or a war risk surcharge, as referred to by Israeli shipping company ZIM.

“Diverting vessels around the Cape of Good Hope to mitigate the ongoing risks of sailing through the region is a necessary step in the interest of safety, but it has ultimately brought about increased costs for carriers,” said Danish shipping giant Maersk in an advisory.

The reroutes affect 17 percent of global shipping traffic, and cargo costs for carriers are expected to soar 15 to 20 percent, according to the American Journal of Transportation.

If the problem persists, the impact on the global economy will be measurable and could trickle down to the average consumer, said Alan Deardorff, a professor emeritus of public policy and economics at the University of Michigan.

Still, Deardorff added the greater cost will be on shipping companies and their suppliers.

“They’re going to be hurt by it, absolutely,” he said, but noted there would be a limit in how much that could trickle down. “The effect on average price and the effect on inflation might be measurable, but I don’t think it’s going to be something people will correctly notice.”

The Houthis, who are backed by Iran, say they are targeting Israel-based ships or vessels headed to Israel. They are attacking ships as they cross the strait of Bab el-Mandeb, connecting the Red Sea to the Gulf of Aden.

The Red Sea hostilities are part of a pattern of Middle East attacks from Iranian-backed groups against the U.S. and Israel in response to the Israel-Hamas war. With Israel vowing to continue fighting against Palestinian militant group Hamas until it is destroyed, the Middle East region is expected to remain unstable.

More than other Iranian-backed groups, the Houthis have carried out bold tactics, sending in a helicopter team to seize a commercial boat in November and damaging another ship earlier this month with rockets. They have often launched a barrage of drones and missiles to target ships and U.S. naval assets.

The U.S. announced a new task force last week involving several nations to deter the Houthis from carrying out the attacks and protect merchant ships. But the task force simply builds on an existing team under the multinational Combined Maritime Forces, which is already deployed to the Red Sea. And the Houthis have promised to continue the attacks.

“We will make American battleships, interests, and navigation the targets of our missiles, drones and military operations,” said Houthi leader Abdul-Malik al-Houthi in a late December speech shared on an Iranian resistance group Telegram page.

The Houthis have also taunted the U.S. for firing expensive missiles to counter cheap drones in the Red Sea.

Pentagon press secretary Maj. Gen. Pat Ryder told reporters last week that the task force, called Operation Prosperity Guardian, will serve as a “highway patrol” in the Red Sea that will pressure the Houthis.

“It’s a defensive coalition meant to reassure global shipping in mariners that the international community is there to help with safe passage,” he said. “The Houthis need to stop these attacks. They need to stop them now.”

“And they really need to ask themselves if they’ve bitten off more than they can chew when it comes to taking on the entire international community and negatively impacting billions and billions of dollars in global trade, economic prosperity and international law,” Ryder continued.

Even if it fails to stop Houthi attacks, the task force could at the very least give merchant boats the protection they need to safely cross.

After announcing it would no longer transit the Red Sea, Maersk now plans to send more ships through the Suez Canal and the Red Sea, according to Reuters.

And French company CMA CGM Group is also increasing the number of ships it is sending through the Red Sea, according to a company notice this week.

But German-based shipping company Hapag-Lloyd said in an update it was frequently monitoring the situation and will resume normal transit when “it is deemed safe for our vessels, crews and your cargo on board.”

Swedish company MSC, which recently had one of its vessels attacked by the Houthis, has also not announced a change in plans, along with other companies that have paused Red Sea transits.

Childs, the expert from the IISS, said the region is facing its most persistent maritime threat since the Somali pirate threat about a decade ago.

But Childs said shipping companies were able to deter pirates by bolstering security.

The Houthis, he said, are displaying new tactics, firing anti-ship cruise and ballistic missiles, and they are a state actor, as opposed to non-state actors like Somali pirates.

“It’s a much more sensitive and complicated political arena that they’re operating in at the moment,” he said of the U.S. and its allies. Childs raised doubts of whether the new task force will deter a long-term security threat in the region.

”The question that is growing in people’s minds is you can’t be on the defensive in perpetuity if it’s not having any effects that reduces your deterrence,” he added. “So what are the alternatives?”

Defense, Business, News, Houthi attacks, Houthi rebels, Iran, Red Sea, yemen The Houthi rebel group in Yemen has almost completely shut down a key shipping route in the Red Sea, costing the global economy and setting up a huge challenge for the White House. The relentless Houthi attacks on merchant vessels and commercial boats pushed several of the world’s largest shipping companies to cancel transits through the Red Sea. Oil-producing…

Business

U.S. Adds 177,000 Jobs in April; Unemployment Holds Steady at 4.2%

Published

6 days ago

May 3, 2025

Bolanle Media Staff

The U.S. labor market demonstrated continued resilience in April, adding 177,000 jobs and keeping the unemployment rate unchanged at 4.2%, according to the latest data from the Bureau of Labor Statistics. This job growth exceeded economists’ expectations, who had forecast around 133,000 to 138,000 new positions, despite mounting concerns over the economic impact of President Donald Trump’s sweeping tariffs and ongoing policy uncertainty.

Job Gains Outpace Forecasts Despite Headwinds

April’s job creation, while slightly below the revised 185,000 jobs added in March, signaled a robust labor market even as the economy faces headwinds from aggressive trade policies and federal government cuts. The household survey, which measures employment differently from the payroll survey, showed an even stronger gain, with 436,000 more people reporting employment during the month.

Key sectors driving job growth included:

Health care: +51,000 jobs
Transportation and warehousing: +29,000 jobs, as companies rushed to import goods ahead of tariff deadlines
Leisure and hospitality: +24,000 jobs
Professional and business services: +17,000 jobs
Financial activities: +14,000 jobs

However, manufacturing and retail both saw declines, losing 1,000 and 1,800 jobs respectively, as uncertainty over tariffs and higher costs weighed on these industries.

Wages and Participation

Average hourly earnings rose by 6 cents to $36.06, marking a 3.8% increase over the past year, which aligns with the Federal Reserve’s inflation target. The labor force participation rate edged up to 62.6%, reflecting a slight increase in Americans either working or seeking work.

Broader Measures and Revisions

A broader measure of unemployment, which includes discouraged workers and those working part-time for economic reasons, fell to 7.8%. Meanwhile, revisions to February and March payrolls subtracted a combined 58,000 jobs from previous estimates, suggesting some moderation in earlier job gains.

Economic Outlook: Resilient, but Risks Loom

Economists note that while the job market remains strong, the outlook is clouded by policy risks. President Trump’s “Liberation Day” tariffs-raising duties on a wide range of imports, including a 145% tariff on Chinese goods-have injected volatility into financial markets and could dampen future hiring if trade tensions persist. Federal government employment declined by 9,000 jobs last month, reflecting layoffs and budget cuts.

Despite these risks, the labor market’s performance in April provided some relief to investors, with stock futures rising after the report’s release. The Federal Reserve is now less likely to lower interest rates in the near term, as the jobs data eased fears of an imminent downturn.

“Job growth in April exceeded expectations, even amidst concerns regarding the effects of President Donald Trump’s sweeping tariffs on U.S. trading partners,” CNBC reported.

While experts caution that the full impact of tariffs and policy changes may not be felt for several months, April’s job report underscores the U.S. economy’s capacity to generate jobs and maintain low unemployment in the face of uncertainty.

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Business

How Your Lipstick, Lunch & Underwear Predict a Recession

Published

3 weeks ago

April 17, 2025

Bolanle Media Staff

As economists scrutinize GDP reports and unemployment rates, unconventional metrics—from cosmetics to undergarments—offer startlingly accurate glimpses into economic health. These “unofficial indicators” reveal how consumer behavior shifts under financial strain, often foreshadowing downturns before traditional metrics do.

Lipstick Effect: Small Luxuries in Hard Times

The lipstick index, coined by Estée Lauder’s Leonard Lauder, tracks rising sales of cosmetics during recessions. When budgets tighten, consumers skip big-ticket indulgences but splurge on affordable treats like lipstick. During the 2001 post-9/11 downturn, U.S. lipstick sales jumped 11%, while the Great Depression saw a 25% spike in cosmetics sales.

Today, brands like MAC and Sephora report 15% growth in cosmetics sales, with drugstore options gaining traction as consumers prioritize affordability. This trend reflects the “moisturizer index” observed during COVID-19, where skincare replaced lipstick due to mask mandates, but the core principle remains: small luxuries thrive when wallets shrink.

Men’s Underwear: A Bare Necessity

The men’s underwear index, popularized by Alan Greenspan, signals trouble when sales drop. Men postpone replacing worn-out undergarments until finances stabilize, making it a reliable recession harbinger. Recent data shows a 6% decline in sales, suggesting consumers are stretching non-essentials.

Lunch Habits: Brown-Bagging It

Economic anxiety reshapes meal choices. More workers now bring lunches from home, opting for cost-saving over convenience. Similarly, the snack index reveals downturns through reduced purchases of items like Chex Mix and pet treats—General Mills reported a 5% sales drop, linking it to weakened consumer confidence.

Beer and Beauty: Downgrading Discretionary Spending

The beer index highlights a shift from craft brews to budget six-packs during recessions. “Craft beer sales are significantly down,” notes supply chain expert Jackington, as social drinking becomes a lower priority. Meanwhile, beauty routines adapt: “recession blonde” trends (skipping salon touch-ups) and press-on nail searches (up 10%) reflect thriftiness3.

Why These Indicators Matter

These metrics capture real-time consumer sentiment often missed by lagging economic reports. While not foolproof, they underscore how financial strain permeates daily life—from skipped haircuts to stretched underwear. As economist Kevin Shahnazari explains, “Affordable indulgences provide psychological comfort without breaking the bank”.

In an era of uncertainty, the economy’s pulse beats in the details—proving that sometimes, the most telling signs are hiding in plain sight.

Business

Chinese Business Owners Face Uncertainty as Trade War Escalates and Growth Slows

Published

3 weeks ago

April 17, 2025

Bolanle Media Staff

The deepening U.S.-China trade war has plunged Chinese entrepreneurs into a crisis of confidence, with retaliatory tariffs exceeding 145% on key exports and domestic economic pressures compounding fears of prolonged stagnation. While China reported stronger-than-expected GDP growth of 5.4% in Q1 2025, analysts warn this pre-dates the full impact of America’s sweeping tariffs enacted in April—a move that threatens to derail export-driven sectors and exacerbate existing vulnerabilities.

Trade War Fallout
The U.S. has imposed a 145% tariff on Chinese goods, prompting Beijing to retaliate with 125% duties on American imports, including agricultural products. This escalation has disrupted supply chains globally, with Chinese manufacturers reporting canceled orders from U.S. buyers and halted shipments across industries like furniture, toys, and apparel. Hong Kong-based exporters, such as Gaoxd, have seen sales drop by 20% this year, with owners citing a “wait-and-see” paralysis among clients.

Domestic Challenges
Despite the Q1 growth surge, China faces a fragile recovery:

Real estate crisis: Property market indicators remain weak despite minor price rebounds.
Consumer hesitancy: Domestic demand lacks momentum, with households reluctant to spend amid deflationary pressures.
Manufacturing strains: Factories report minimal room to further cut costs, with relocation to Southeast Asia hindered by underdeveloped supply chains.

Strategic Shifts
Beijing is aggressively diversifying trade partnerships, reducing U.S. export reliance from historic highs to 14.7% in 2024. President Xi Jinping’s recent Southeast Asia tour emphasized China’s pitch as a “reliable” alternative to U.S.-led trade frameworks. Meanwhile, state media insists China has “valuable experience” from eight years of trade tensions, framing the conflict as an existential struggle against Western decline.

Outlook
While China’s $586 billion fiscal stimulus and focus on high-end manufacturing aim to offset trade losses, analysts caution that the tariffs’ delayed effects could erase Q1 gains. With U.S. imports of Chinese goods effectively halted by prohibitive tariffs, businesses face a bifurcated future: adapt to decoupled markets or risk collapse in a prolonged standoff between the world’s largest economies.

As economist Vina Nadjibulla notes, the critical question is which economy can endure more pain—a calculus now keeping Chinese business owners awake at night.