As oil prices continue to soar and show an uptrend, shipping costs have increased dramatically as of late, and seem to have an adverse affect on globalization, eventually, exchange traded funds (ETFs).
Many economists argue that globalization won’t shift into the opposite direction, but companies have been looking to keep prices low, ultimately bringing some production closer to the consumer.
Ikea, the Swedish furniture manufacturer, opened its first factory in the United States in May in order to avoid having to ship its products from abroad, says Larry Rohter of The New York Times. Decisions like this are resulting in what economists are calling the neighborhood effect, where companies are putting factories closer to suppliers and consumers to reduce transportation costs. As shipping costs rise, they have overtaken tariffs as the largest barrier to global trade today.
Regardless of rising shipping and transportation costs, economists admit that trade costs do matter, but the world is still in a globalized era.
This sharp rise in transportation costs is most likely to affect those industries that produce heavy or bulky goods which are relatively expensive to ship. However, plants and factories in industries that require less infrastrucutre investment, such furniture, toys, footwear, and even food have already shown signs of mobility as shipping costs rise.