Mobile phones, televisions, refrigerators, as well as gasoline, bills, fruit and vegetables may become more expensive in the coming months due to the crisis in the Red Sea. Although the Houthi rebels’ attacks on container ships carrying goods from Asia to Europe seem far away to us, their effects can directly reflect on our pockets. Inflation had now begun to slow down.
Confindustria and Bankitalia warn that the crisis in the Suez Canal could even trigger problems for supply chains; thoughts bring us back to the recent stalemate in microchip supply recorded during Covid, which halted production for weeks in some European industries, especially automotive. What should we expect? Which products are most at risk of being affected?
TVs and mobile phones face the risk of price increases
Large container ships sail the world’s seas to transport goods from one continent to another. 90 percent of world trade is done by sea; In Italy, this rate drops to 54 percent. However, 40 percent of the goods we import into our country pass through the Suez Canal. But following recent attacks by the Houthis on container ships carrying goods from Asia to Europe and from Asia to Europe, more and more shipping companies have opted to circumnavigate Africa to avoid attacks by pro-Iran rebels in the Red Sea. This choice means longer delivery times (two weeks more travel) and higher shipping costs, which have almost doubled in recent months. Extra costs that will most likely be passed on to end consumers through increased prices of products imported from Asia.
Considering that more than half of Europe’s imports of electronic goods and electrical appliances come from China, the products most at risk of price increases include TVs, mobile phones, tablets, small and large household appliances. Microwave ovens and hair dryers are a few of them. But Beijing and other Asian countries provide us with many things, just read the labels of the products and clothes we buy to realize this. Therefore, the price increase alarm can be triggered on almost anything, including fruits and vegetables, but only on those we import from Asia or Africa. In such a case, it should be taken into consideration that there is a danger of Italian ports being cut off in favor of Northern European ports. Gasoline and bills are also at risk, let’s see why.
Gasoline and higher bills: more than 400 euros per family per year
The problem in the Suez Canal also affects oil tankers and ships carrying liquefied natural gas; This means we may soon see more expensive household bills and increased fuel prices. Assoutenti raised the alarm by stating that there was a hypothetical 10% increase in the public price lists set by distributors and that the average price of green beer could rise to 1,950 euros per liter. At the end of the year this will mean 200 euros more for the family just for fuel supplies.
The association also estimates an impact on bills: up to +200 euros per family per year. Price increases that could increase inflation in Italy by up to 1%. Other forecasts predict that the crisis in the Red Sea will increase prices in Europe by 2%.
Repercussions on exports, supply chains and the global economy
There is a risk that the crisis in the Red Sea will have negative repercussions not only on Italian imports, but also on exports, weakening the national GDP. Luxury goods, fashion and food products that we transport to Asian countries by ship may be affected. All Made in Italy, including the agri-food sector with an annual value of over 570 million euros for Asia. First of all, there is fear about wine exports (112 million euros to China) and apple exports, since the main places we send them to are Asian countries: Saudi Arabia and the United Arab Emirates.
The possible blockage of some Italian supply chains, especially automotive, mechanical and chemical, should not be ignored. Some European factories, such as Tesla in Berlin Brandenburg, were forced to stop production due to a lack of raw materials or spare parts from Asian countries. “The detours around South Africa will extend delivery times, but goods will still reach their destinations, suggesting real shortages are unlikely,” says David Rees, senior emerging markets economist at Schroders. According to the expert, we therefore find ourselves in a very different situation from what happened during the pandemic. However, he says he is concerned about the risk of inflation, above all energy prices. “Increased tensions in the region could push oil prices towards $120 per barrel” and cause the global economy to drift into stagflation. But as of today, we are still below $75 per barrel.
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
