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These days, the cost of oil is the equivalent of imposing a tariff rate of about nine per cent on goods coming into the United States. At $150 a barrel, transport costs act like a tariff of 11 per cent. And at $200, all the trade liberalization efforts of the past 30 years are reversed, Mr. Rubin said.
Oil prices now account for about half of total freight costs, and for the past three years, for every $1 increase in world oil, there has been a corresponding one per cent increase in transport costs.
“Unless that container is chock full of diamonds, its shipping costs have suddenly inflated the cost of whatever is inside,” Mr. Rubin said. “And those inflated costs get passed onto the Consumer Price Index when you buy that good at your local retailer. As oil prices keep rising, pretty soon those transport costs start cancelling out the East Asian wage advantage.”