Tensions in the Red Sea have extended to Yemeni land after the United States and the United Kingdom led bombings against multiple sites controlled by the Houthi armed group on Thursday night.
The Houthis have carried out dozens of attacks on commercial vessels that they say are linked to Israel, and that were passing through the 30km (20-mile) wide Bab-el-Mandeb strait. They demand that Israel stop the bombardment of Gaza and allow humanitarian aid.
A US-led coalition is trying to deter the Houthis by positioning destroyers and other military platforms in the Red Sea and by shooting down the Yemeni group’s missiles and drones. But the Houthis have been clear that they have no intentions of stopping until Israel ends its war, which has killed nearly 24,000 Palestinians.
Traffic through the Red Sea is down by more than 40 percent disrupting global supply chains. Some of the world’s largest shipping operators have redirected their vessels around the Cape of Good Hope on the southern tip of Africa, delaying delivery times and adding a further 3,000-3,500 nautical miles (6,000km) to their route.
But just how much have the Houthi attacks impacted Israel’s economy itself? And how are they affecting global trade?
What’s happening in one of the world’s busiest maritime routes?
So far, at least 26 vessels have been attacked by Houthis since they seized the Israeli-linked Galaxy Leader vessel in November.
US warships in the region have thwarted several other attacks by the Houthis, with the latest being on Wednesday when the US and UK shot down missiles and drones. The UN Security Council on Wednesday condemned the Houthi attacks.
The Red Sea connects Asia to Europe and the Mediterranean, via the Suez Canal. Currently, around 12 percent of the world’s shipping passes through the Red Sea, averaging around 50 ships a day, carrying between $3bn to $9bn worth of cargo. In total, the value of goods passing through the route is estimated at more than one trillion dollars per year.
Are all shipping vessels affected?
Container shipping appears to have been hardest hit. However, data released by Reuters earlier this week appeared to show that the passage of oil tankers had barely been affected.
Data cited from MariTrace showed that, during December, an average of 76 oil freighters were to be located in the Red Sea, only two fewer than the previous month’s average, Other trackers reported a marginal increase over the same period.
In early January, the Houthi rebels announced that, should a vessel wishing to transit the area declare its ownership and destination in advance of entering the waters, it would not be fired upon.
Maersk and Hapag-Lloyd have since denied reaching any agreement with the rebel group.
Have the attacks undermined Israel’s reputation as a secure trading partner?
As of mid-December, Israel’s only Red Sea Port, at Eilat, reported an 85 percent drop in activity since the attacks began.
While the bulk of Israel’s marine traffic comes through the Mediterranean ports of Haifa and Ashdod, exports of Dead Sea potash, as well as imports of Chinese manufactured cars – which make up 70 percent of Israel’s EV sales – are reliant upon Eilat.
For many carriers, the risks to both vessel and crew are significant. This week, Chinese state-owned carrier Cosco joined with its subsidiary, OOCL in suspending shipments to Israel.
However, Brad Martin, a former US Navy captain and a director of the Institute for Supply Chain Security at the RAND Corporation cautioned against overstating the challenge before Israel.
“Red Sea shipping disruption, and even some shippers declining Israeli cargo, will not bring Israel to its knees economically,” he wrote by email.
“Flow through the Mediterranean will likely continue unimpeded. Israel is probably in a better position for absorbing disruption than most of its neighbours. However, shipping and trade can become subject to diplomatic and political action, so economically damaging isolation could certainly occur on that front,” he said.
What might the longer-term impact be?
While analysts have agreed that the direct impact of the Houthi rebel attacks on Israel’s economy has been limited, the longer the disruptions continue, the greater the repercussions might be.
One acute vulnerability may be Israel’s ambitions to establish itself as an exporter of Liquid Natural Gas (LNG) of which it holds a small but growing share of vital international market.
“Prior to the attack (of October 7), Israel was on its way to becoming a reliable gas exporter,” Gabrielle Reid, an associate director at risk consultancy S-RM, said.
“But, the hostilities have exacerbated the political risk of doing business in Israel and further jeopardise the outlook for the Eastern Mediterranean region as a potentially important player in global natural gas markets,” she said.
What has been the effect elsewhere?
According to Clarkson Research Services Ltd, traffic through the Red Sea is currently down 44 percent on that recorded during the first half of December, as increasing numbers of vessels take the longer route around the Cape of Good Hope to reach harbour.
As well as the obvious costs of increased fuel and manpower, this carries increased insurance costs and can lead to delays, as congestion at ports takes its toll.
According to Drewry World Container Index, which tracks shipping along eight major routes between US, Europe and Asia, the cost of transporting a 40-foot (12-metre) container from China to Europe is expected to increase by 248 percent from $1,148 in November, when the attacks began.
Depending upon how shipping companies respond, Simon Heaney, a senior manager in container research at Drewry, told Al Jazeera that overall costs could increase anywhere between 3 and 21 percent.
Delays will also be a significant factor, as much of the “Just In Time” manufacturing processes in developed economies, where goods are delivered moments before they are needed, struggle to adapt to interruptions.
How might this impact the global economy?
While current demand for manufactured goods from countries such as China and India remains lower than during the peak of the pandemic, any change in cost or disturbance to shipping schedules is likely to carry consequences.
However, while increases in transport costs can lead to inflation – the International Monetary Fund estimated that chaos in shipping routes during the pandemic led to a 1 percent increase in global inflation – that has not happened yet, economists have suggested.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
