It was simply a matter of time until the US became just another weak point in the world's supply chain. A container ship slammed a key bridge in the US port of Baltimore early on Tuesday, causing it to collapse. These accidents frequently have repercussions for economies and even elections. It serves as a useful reminder for investors of how infrastructure relates hard assets to soft assets.
Besides immediately felt human sorrow, the catastrophe in Maryland that pushed automobiles and people into the river below is sure to have more far-reaching effects. 52 million tons of goods from abroad were shipped into and out of Baltimore last year, setting a record, according to the governor's office. However, it only ranks as the 20th busiest loading port in the country and barely makes up 3% of the cargo that passes through the Suez Canal, which was severely damaged by Houthi rebel attacks last year. Under pressure from concerns relating to climate change, the Panama Canal also assists in moving far larger volumes.
Still, with about 850,000 cars and light trucks passing through its ports in Baltimore last year, it is the biggest port in the United States for automobiles. Interruptions of any size can have a significant impact. Backlogs at American ports located in the Pacific Ocean during the epidemic extended to warehousing and trucking. Shipping rates were around 700% higher during the height of the logjam than they were before the pandemic. According to a study written for the trade association National Association of Manufacturers, the gross domestic product of the country would lose $520 million every day if Long Beach and Los Angeles were disrupted.
The president of the United States, Joe Biden, pushed to devote $1 trillion of the federal budget to underfunded public works projects. Private investment companies such as BlackRock have also been bolstering funds to assist in cleaning up roads, tunnels, and bridges. However, in the vast world of investment, the efforts are kind of in vain. According to research firm Gartner, spending on artificial intelligence alone will total $300 billion by 2027. The iShares US Infrastructure ETF has increased by just 17% over the last year, while Microsoft's stock price has increased by 53%.
The priorities seem misplaced in many aspects. While AI has the potential to increase productivity and spur innovation, it also necessitates the moving of tangible products such as servers, semiconductors, and other items from one place to another across waterways and other means of transportation. Even though Baltimore might merely be one of many little cogs, the economic machines cannot function without them.