Predictions For The U.S. Economy, China, And Artificial Intelligence From A Shipping CEO

The chief executive of A.P., Vincent Clerc, is one of the few executives who has a deeper understanding of the situation of the world economy. The Moller-Maersk MAERSK.B -0.76%.

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Clerc assumed leadership of the second-largest container shipping company in the world in the beginning of 2023, as shipping rates were beginning to decline from Covid-pandemic highs.

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Maersk is hopeful that its foray into e-commerce and land-based logistics will be profitable. Also, it is getting ready for the 2025 dissolution of its partnership with Mediterranean Shipping, the largest container shipping company in the world.

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On February 28, Trade Algo chatted with Clerc outside of Mobile World Congress in Barcelona about the prognosis for the world economy, tensions between the United States and China, and the possibilities of artificial intelligence.

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The conversation is summarized below.

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Trade Algo: Will there be a recession in the United States?

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Vincent Clerc: In the U.S. and Europe, consumption is holding up fairly well, and the threat of a recession is fading—especially in the U.S., where employment statistics are a wonderful leading indication. You are more inclined to spend money if you believe the job market is excellent and you have employment than if you believe it is terrible and you fear losing your employment.

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So, the risks of a recession have diminished as long as the job market remains strong, which seems to be the situation right now.

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We want the Federal Reserve and central banks all over the world to address inflation thoroughly before it takes hold too firmly. It's encouraging that at least some of the inflationary signs we're starting to observe seem to indicate toward a reduction in pressure.

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Is globalization reversing course?

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It isn't, in my opinion. A world where we believe we can live independently and don't share a common fate is an impossible dream—or even a nightmare.

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Countries have come to the realization that one cannot be naively global. Whether it's oil, chips, or anything else, some things are essential for maintaining national security. States must intervene in the market, and perhaps parts of the supply chain should be regionalized. Yet, most of the world's infrastructure is interconnected, and sectors like the production of automobiles and clothing will continue to rely on them.

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Will China's reopening prevent a world economic downturn?

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Several ideas predicted that China's consumption would surge after the reopening, but this hasn't happened yet. After two years, there exist pent-up savings, which could lead to pent-up consumption.

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At a higher level of activity, things will return to normal. The strength of the recovery as it develops will determine how much it de-risks the world economy. That will most likely be a topic of discussion in the second part of the year.

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Are tensions between the United States and China a sign of a new economic Cold War?

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Even though tariffs have been in place for a long time, the United States has never had a worse trade deficit with China than it did last year. Therefore trading is still taking place.

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On several important minerals, semiconductors, and other things, we observe flare-ups. Yet, a lot of the goods we trade, such clothing, shoes, home improvement products, and similar items, are not the ones that the U.S. and China are at odds about. The infrastructure is in place to create the things that American consumers require on the market.

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Is China still an important supplier and the world's factory?

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Many don't realize how long supply chains may be. A manufacturer that can take a raw material and turn it into a finished product is no longer available. Suppliers at various levels collaborate with one another. Supply chains are vertically integrated in the production of clothing, furniture, and other goods.

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A gradual diversification has occurred, with certain products, for example, going to Vietnam. Yet we've also seen businesses like Apple AAPL +2.40% struggle to obtain the scale and knowledge they need outside of China. This transformation is therefore taking place, though not as quickly as you might initially believe.

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Is AI a technological revolution on par with the internet? 

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The potential of AI is still in its infancy, and there are many moral dilemmas. We can look back 150 years and grasp the effects of steamships and steam in the industrial revolution, particularly how they contributed to global warming.

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AI is expanding the horizon. We'll have to wait and see how far [it goes] over time. Knowing that something is likely to happen is one thing, but it is far better if you can also offer solutions on how to handle the disturbance. I anticipate that eventually AI will challenge a lot of current popular understanding.

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Energy is used a lot in the shipping industry. What are your objectives for reducing pollution, and when do you plan to accomplish them?

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By 2040, we intend to be carbon neutral. We put a lot of effort into making sure that this is a commitment we will keep and not just a hollow promise.

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The business of the supply chain has a high carbon intensity. It exacerbates the consequences of climate change. We have 19 ships that will use green methanol on order. We have finished placing our orders for ships powered by oil and carbon. 

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The transition is a difficult and drawn-out process. The good news is that the technology is available. What we need in order to update our network on an environmentally friendly basis is the scaling of capacities.

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What makes Maersk avoid using carbon offsets?

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That doesn't fix the problem and is not a scalable approach. The rest is merely applying cosmetics to the issue if we don't address the cause of it.

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Shipping costs are decreasing. What post-pandemic plans does Maersk have? 

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We are evolving from being a pure-play shipping and terminal provider to a more comprehensive logistics integrator. The journey began for us in 2017. The epidemic made that worse, but we were already two or three years into our transformation when the pandemic struck, giving us a leg up. What you are seeing is a gradual expansion of the networks we run globally to include the very last mile.

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Speaking with consumers, I discovered that many of them are considering switching from air to ocean transportation due to the cost and carbon footprint. You typically [use] air freight more when demand spikes suddenly because you're attempting to keep up with customers. The converse is true after an inventory correction. You witness some transformation of air into seawater. In a few years, I predict that the proportion of air freight will be lower than it is now.