Disruptions in global trade due to attacks on ships in the Red Sea could impact the products you purchase.

• Attacks on ships in the Red Sea have caused challenges in global trade.
• It’s impacted companies that do everything from fashion to hospital supplies.

Factories that produce cars in Belgium and Germany have stopped working. The release of spring fashion lines at a well-known British department store has been postponed. A Maryland-based company that manufactures hospital supplies is uncertain about when it will receive parts from Asia.

The Red Sea is experiencing attacks, adding to the challenges of global trade already affected by pandemic-related port congestion and Russia's invasion of Ukraine.

In an effort to halt Israel's attack on Hamas in Gaza, Houthi rebels in Yemen are attacking cargo ships traveling between Asia, Europe, and the United States. This has resulted in a disruption of traffic, causing delays and increasing costs. This is happening at a time when the world is still grappling with inflation.

Ryan Petersen, CEO of Flexport, stated that the current situation is short-term chaos, which results in increased costs. Each rerouted ship carries 10,000 containers, necessitating numerous emails and phone calls to replan each container's journey.

The Panama Canal's low water levels due to drought are adding to the chaos in global shipping, as shippers are racing to move goods before Chinese factories close for the Lunar New Year holiday.

The longer the war in Gaza continues, the greater the threat to Red Sea trade, which could lead to a 2% increase in goods inflation, exacerbating the already high prices for groceries, rent, and more. This could also result in higher interest rates, which would further weaken economies.

In Greater Landover, Maryland, Man & Machine is anticipating a shipment from Taiwan and greater China. Despite numerous obstacles, the company produces washable keyboards and accessories for hospitals and other clients.

Clifton Broumand, founder and CEO, typically receives a shipment of components once a month. However, the most recent delivery, which originated in Asia four weeks ago, has been delayed due to the closure of the normal route through the Suez Canal caused by Houthi attacks.

The shipment was halted at the Panama Canal due to drought-related issues, and now it may need to travel across the Pacific to reach Los Angeles before being transported by truck or train to Maryland. Broumand is uncertain about the arrival time of the products.

Our customers understand that it's both annoying and interesting. It's not like asking 'Why didn't you plan this?' because nobody knew. We inform our customers about the delay and explain the reason, which may not be liked but won't harm anyone. It's just another source of frustration.

Other industries are seeing similar hassles.

Tesla has shut down its factory near Berlin from Monday to Feb. 11 due to shipment delays, while Volvo idled its assembly line in Ghent, Belgium, for three days this month, waiting for a key part for transmissions.

The production at a Suzuki Motor Corp. plant in Hungary was halted for a week due to a delay in obtaining engines and other components from Japan.

Marks & Spencer's CEO, Stuart Machin, stated that the Red Sea trouble is significantly affecting the company and is causing delays in the release of new spring clothing and home goods collections, which were originally scheduled for February and March.

The Suez Canal is responsible for roughly 20% of the clothes and shoes imported into the U.S., while in Europe, the Red Sea serves as the route for 40% of clothes and 50% of shoes.

The maritime shipping industry is facing a crisis with global implications, according to Lamar.

Nearly 25% of global shipping capacity is being or will be rerouted from the Red Sea, resulting in thousands of miles and a week or two being added to trips.

The cost of shipping a 40-foot container from Asia to northern Europe has increased from under $1,500 in December to almost $5,500. Meanwhile, the cost of shipping Asian cargo to the Mediterranean has also risen, from $2,400 in December to almost $6,800, according to Freightos.

During the peak of supply chain disruptions two years ago, shipping a container from Asia to northern Europe cost $15,000 and shipping one from Asia to the Mediterranean nearly cost $14,200.

Katheryn Russ, a University of California, Davis, economist, stated that we are not experiencing supply chain disruptions to the extent that occurred during the pandemic.

In 2021 and 2022, American consumers, restless from Covid-19 restrictions and bolstered by government stimulus checks, splurged on purchases, including furniture, sports equipment, and other goods. As a result, factories, ports, and freight yards were inundated with orders, causing delays, stockouts, and inflated prices.

After the supply chain disruption, shipping companies increased their fleet size to better handle shocks.

Judah Levine, Freightos' head of research, stated that the market is experiencing overcapacity, which is a positive aspect as there will be enough capacity to handle the disruption.

The global demand has decreased due to several factors, including the U.S. Federal Reserve and other central banks raising interest rates to control inflation and China's struggling economy. Although inflation has decreased over the past year and a half, it is still higher than central banks desire.

Russ, a former White House economic adviser in the Obama administration, stated that there are significant forces driving down inflation. Although the Red Sea disruption may have a minor impact on the decline in inflation, it is unlikely to significantly affect it beyond a tenth of a percentage point.

Retailer Target stated that despite many companies claiming to have not seen significant results, they are confident in their ability to provide guests with the products they need, as most of their products do not pass through the Suez Canal.

BMW stated: "Our factory supplies are secure; all lights are green." Yara reported being "mildly impacted" by transit challenges in the Red Sea.

Stellantis CEO Carlos Tavares stated: "Things are moving well, and it's been OK so far."

If Flexport CEO Petersen is correct, the respite may not last. If shippers avoid the Suez Canal for a year, the higher costs would lead to goods inflation of 1 to 2%.

A U.N. shipping expert, Jan Hoffmann, cautioned on Thursday that Red Sea shipping congestion poses a threat to global food security by impeding the delivery of wheat to parts of Africa and Asia, which rely on European and Black Sea region exports.

If the Middle East conflict expands and oil prices rise, which are currently lower than they were the day before Hamas attacked Israel on Oct. 7.

For now, companies are muddling through.

Urban Outfitters' Free People subsidiary imports clothing from India and ships it through air, according to co-president Frank Conforti, who stated this at an investors' conference this month. However, it is too expensive to transport furniture and household goods via planes.

Comforti stated that while home goods aren't as fashion-conscious as clothing, losing 15 days while sailing down the tip of Africa isn't catastrophic.