The Greatest Rival to North American Trade

An Increasing Number of Hurricanes

An image of a hurricane as seen from space

Image by NASA from Unsplash

Despite the many efforts to sign free trade agreements and the willingness to create a regionalized economy through nearshoring, data suggests that, in the near future, disastrous weather events could become ever more common with an increasing probability of disrupting trade. And amongst these events, the most important for the region will most certainly be hurricanes that are growing in strength and quantity.

But before looking at recent trends, it is worth establishing a key fact: hurricanes, most certainly, are a hindrance to trade. In the last 44 years, it is estimated that hurricanes have resulted in damages exceeding $2.6T in the US alone. A single hurricane, can stop as many as 323,000 containers from reaching  a port in North America—more on this soon.
Given their destructive nature, we have developed sophisticated tools to better understand hurricanes and mitigate their damages. This makes hurricanes a predictable hindrance, but a hindrance nevertheless. 

Thanks to modern technology, we are able to closely monitor hurricanes as they form in the Atlantic and Pacific oceans, giving ports upwards of a 72 hour notice when a hurricane is to strike. This allows port authorities to restrict activity 24 hours before a hurricane strike to avoid potential damages. Given the strong winds of hurricanes—reaching between 74 and 95 mph for a Category 1 alone—it would be difficult to force vessels to continue their routes and have port operators unload their cargo. Thus, the key impact from hurricanes comes from effectively halting trade or forcing companies to reroute vessels already in transit to their end port.

Hurricanes, of course, are not a novel occurrence in the world of trade. In fact, current estimates from Port Economics show that at least 38% of major ports in the world are located in areas at high risk of being impacted by a hurricane. 

Ports at Risk from Hurricane Activity World Wide

A pie chart showing the share of ports in the world that are in risk of being hit by a hurricane
(Data from Port Economics)

North America is not an exception to this trend. If anything, the region has a long history of battling with them. Since hurricanes only form in areas far from the equator and the poles, the tropics that engulf the region are perfect for them. In the last 100 years, for instance, the US has experienced 182 hurricanes.

If we were to take the risk zones established by Port Economics, we would notice that 32 ports in North America are currently in areas where hurricanes are likely to strike. This, in turn, implies that little over 29% of ports in the region are potential subjects to hurricane-related trade disruptions—below the global average of 38%. However, some of the ports in question hold a disproportionate share of the region’s trade. If, instead of counting ports in risk zones, we look at the containers handled by each of the—measured in twenty-foot equivalent units (TEUs), we notice the share of trade subject to hurricane-related disruptions grows to 37.6%. This means that nearly two out of every five ports in North America are potential subjects to hurricanes.

Ports in North America at Risk from a Hurricane

A bar graph showing the share of ports and TEUs in North America that are potentially at risk from hurricanes and those which are not
(Figure made with data from Mexican and US port authorities)

This, of course, isn’t news. As we just mentioned, hurricanes have been a fairly standard phenomenon in North America for the last century. What is worrying, however, is the likely possibility that the next couple of years might hold an increased number of hurricanes of higher strength. As a matter of fact, recent studies suggest that, in recent years, the likelihood that hurricanes reach higher categories has nearly doubled. While it is true that the number of hurricanes to hit the US has remained fairly consistent in recent years, they continue to cause immense damages across North America.

Number of hurricanes in the US (1851-2022)

A line graph showing the number of hurricanes in the US between 1851 and 2022

(Data from NOAA)

To understand these patterns, we must, in turn, understand how hurricanes are formed. In essence, hurricanes are the result of western winds encountering warm water in the Atlantic or Pacific oceans. The difference in temperatures creates harsh wind motions which, in turn, result in hurricanes. 

Recently, multiple studies have signaled a worrying trend: human activity has resulted in the systematic increase of ocean temperatures rising by nearly 1 degree Celsius over the last hundred years. For hurricanes, this implies a larger difference between northern winds and sea temperatures, allowing them to grow stronger faster and become far more common.

Average Global Sea Surface Temperature (1880-2020)

A line graph showing the annual anomaly in ocean temperatures between 1880 and 2020
(Data from EPA)

For trade, this implies the worrying possibility that disruptions could become ever more common in the region with impacts growing to millions of TEUs.

To quantify this, let’s consider the potential impact of one hurricane alone. Following protocol, ports in the region should close operations at least 24 hours before a hurricane hits. Often, these same ports take between two and three days to restart operations after a category 1 hurricane. If we assume the hurricanes themselves take an additional day to pass through a region, this would stop all trade between 4-5 days.

We also know from looking at official statistics for Mexican and US port authorities that, in total, the 32 ports at risk of being hit by a hurricane handle a total of 62.9 million TEUs per year. This roughly equals 172.4 thousand TEUs every day. If, again, we consider that hurricanes can shut down operations in impacted ports between 4-5 days, this would, in turn, result in lost trade of between 259 and 323.9 thousand TEUs per every additional hurricane. If, in the next decade, we were to experience an additional five hurricanes—equivalent to just one more hurricane every two years—, the region would experience a disruption of  anywhere between 1.2 and 1.6 million TEUs.

Impact of Every Additional Hurricane in North American Trade

A series of bar graphs showing potential disruptions to North American Trade from 1 to 5 additional hurricanes.
(Figure made with data from Mexican and US port authorities)

Hurricanes are already a part of trade in North America resulting in large losses to the region as a whole. The question will be if these same phenomena will become an increasing norm. If such is the case, the region could soon face an increased number of disruptions in the millions of containers. Port authorities and transportation companies should acknowledge this reality and plan accordingly for a future increasingly subject to the mercy of hurricanes.

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