After almost a week of being stuck in the Suez Canal, the boat by the name of the Ever Given was freed during the early hours of March 29.
The Ever Given is a Japanese-owned boat that is one of the largest ships currently operating in the world. With the ship’s length being almost twice as long as the canal is wide, there are many potential causes for this boat getting stuck in the canal. While it is still unknown what exactly caused the incident it could be anything from bad weather to human or machinery error.
A trade route such as the Suez Canal being blocked for almost a week has an extreme impact on the global economy. While the United States was mostly unaffected by this incident, countries in Europe and Asia will notice the most impact to their economy. Things like food will most likely be spoiled and go to waste, costing European and Asian companies to lose a significant amount of money. America, however, will not be directly affected by the boat having been stuck in the Suez Canal for an extended period of time, other than by possible delays in certain goods if some of their components were caught in the blockage.
“Let’s use the iPhone to show how America could possibly be impacted. The iPhone is an American made product that is assembled in China using components from Germany, Switzerland and a few others. The blockage may delay shipments to China from Germany. This could delay production if the Chinese factory was waiting on components from Germany. But, there would be no impact if the manufacturer had the components in stock. Similarly, a British clothing manufacturer that needed cotton from India will have a negative impact only if the firm did not have the cotton in stock,” said Dr. Willis Lewis, a professor of economics.
European and Asian countries should expect a delay on certain goods and production due to the extended time these transports had to add to their journey since many ships were grounded due to the blockage or had to reroute to go around the Cape of Good Hope, adding weeks to their journey. Companies will mostly be affected due to the extra expenses which could cause an increase for consumers in industries directly affected by this.
“While the long-run effects of this blockage will be small, in the short-run (over the next few months) some companies will experience considerably reduced earnings due to shortages of parts or final products. These shortages may translate to higher prices for consumers in certain sectors. For the shipping industry, the impact is direct: longer travel time means a more costly journey,” said Dr. Danko Tarabar, an assistant professor of economics.
While companies may start coming up with alternative routes or make some sort of contingency plan in case something like this blockage happens again, consumers shouldn’t expect the transportation of goods by way of the sea to stop anytime soon. This blockage was a rare event, and while it could have potentially cost companies millions of dollars, sea transportation is still a cheaper alternative than other methods of transportation.
“This was the longest blockage since 1976 and it does not happen a lot. Due to the lesser capacity of airplanes and trucks, sea transport will still be the major tool of inter-continental trading. In terms of the costs, air freight is priced five times more than road transport and 12-15 times more than sea transport,” said Dr. Gang Wang, an assistant professor of financial economics.
The incident with a ship like the Ever Given getting stuck and causing a blockage of the Suez Canal is a rare occurrence that will mostly affect European and Asian countries. Americans more than likely won’t notice any difference or effects from the blockage of the Suez Canal. The world’s economy will feel a bit of a dent from this incident but within the next few months, both the economy and countries involved will have fully recovered.
There were many reactions to the events that unfolded due to the blockage of the Suez Canal. Some people made and shared memes, others worried about the effects on the economy and some even questioned why this happened in the first place. Winthrop University students had many different reactions to the incident as well.
“I think it’s interesting how this ship could block something so critical to global trade and interrupt the trading system for almost a week. It’s probably going to cost the global economy hundreds of millions of dollars,” said Logan Wallace, a senior English and political science major.
Some also think the incident is an example of how companies care too much about money to care about anything else.
“I think it shows how much companies prioritize profits over anything else. Ships have been getting too big for the Suez Canal for years and no one cares because they can get money off of it. The blockage just brought the flaws of international commerce to fruition. There is no contingency plan, because having that backup would cost too much money,” said Evan Overton, a freshman musical theater major.
The blockage of the Suez Canal led to companies and the world economy losing millions of dollars and disrupted global trade in the eastern hemisphere. While it will only take a couple months to recover, this incident could have been much worse and even dangerous for some. It’s important that companies take this as a lesson to always have some sort of back up plan in case something similar happened again in the future so that it won’t hit the consumers, companies or economy as hard as it has this time.
