Analyst: Tariffs weaken container shipping season
Recent policy changes by the Trump administration are reshaping the dynamics of international trade and have far-reaching implications for freight and logistics, according to a supply chain analyst.
Currently, most economists are forecasting a slowdown in U.S. gross domestic product (GDP) growth, an increased likelihood of a domestic and global recession, and a possible contraction in global trade. Levin said these factors will inevitably affect the freight market, especially sea and air freight.
For businesses that rely on international trade, adaptability will be key. These strategies could include diversifying supply chains, exploring alternative modes of transportation and keeping a close eye on policy developments, Levin said. Despite the challenges ahead, he said, it is possible to find opportunities in the chaos.
Levin advises vendors to stay informed and agile, as the coming months are likely to reshape the freight industry in ways we're only beginning to understand.
Wave of uncertainty
In the maritime sector, anticipation of the new tariffs prompted U.S. importers to bring forward stockpiles from November 2024. This front-loading effect has kept seaborne import container volumes exceptionally strong. However, the situation is about to change dramatically.
Because reciprocal tariffs do not apply to shipments made before April 9, Levin said there could be a brief scramble that would cause container rates and demand to rise in a matter of days. But then, as importers pause orders to let the tariff situation settle, volumes and freight rates could fall sharply.
This pattern could lead to a weak peak season, reminiscent of the tariff-driven advance shipments in 2018 that led to lower container rates and demand in 2019. Once inventories are depleted, the strength of the container market will depend on the broader economic impact of the trade war. The Port of Los Angeles had previously forecast a 10% decline in container throughput in the second half of the year.
The container shipping industry has responded in other ways. Shipping companies have canceled dozens of voyages while waiting for the result of the tariff adjustment. A proposed US port fee on Chinese-built ships has led US agricultural exporters to report difficulties securing shipping capacity.
Turbulence ahead
The air cargo industry is already feeling the impact of these policy shifts. Levin said Chinese e-commerce platforms, anticipating changes to the minimum rules, have embarked on a diversification strategy. They are moving manufacturing to countries like Vietnam, increasing the use of seaborne logistics, and investing in warehousing capacity in Mexico and the United States
The industry has also seen the cancellation of the Sino-US Charter Agreement (BSA) and charter agreements, with airlines reallocating capacity to other routes. Although spot prices for air cargo between China and the US have fallen, they remain above historical levels. The new policy, which will be introduced on May 2, is expected to lead to a brief surge in demand, followed by a sharp drop in rates on the route.
However, the knock-on effects may not be limited to the US-China route. As capacity is reallocated, we are likely to see downward pressure on rates on many routes. Shippers should also be prepared for potential customs delays if the new system is not fully implemented.
Currently, most economists are forecasting a slowdown in U.S. gross domestic product (GDP) growth, an increased likelihood of a domestic and global recession, and a possible contraction in global trade. Levin said these factors will inevitably affect the freight market, especially sea and air freight.
For businesses that rely on international trade, adaptability will be key. These strategies could include diversifying supply chains, exploring alternative modes of transportation and keeping a close eye on policy developments, Levin said. Despite the challenges ahead, he said, it is possible to find opportunities in the chaos.
Levin advises vendors to stay informed and agile, as the coming months are likely to reshape the freight industry in ways we're only beginning to understand.
Wave of uncertainty
In the maritime sector, anticipation of the new tariffs prompted U.S. importers to bring forward stockpiles from November 2024. This front-loading effect has kept seaborne import container volumes exceptionally strong. However, the situation is about to change dramatically.
Because reciprocal tariffs do not apply to shipments made before April 9, Levin said there could be a brief scramble that would cause container rates and demand to rise in a matter of days. But then, as importers pause orders to let the tariff situation settle, volumes and freight rates could fall sharply.
This pattern could lead to a weak peak season, reminiscent of the tariff-driven advance shipments in 2018 that led to lower container rates and demand in 2019. Once inventories are depleted, the strength of the container market will depend on the broader economic impact of the trade war. The Port of Los Angeles had previously forecast a 10% decline in container throughput in the second half of the year.
The container shipping industry has responded in other ways. Shipping companies have canceled dozens of voyages while waiting for the result of the tariff adjustment. A proposed US port fee on Chinese-built ships has led US agricultural exporters to report difficulties securing shipping capacity.
Turbulence ahead
The air cargo industry is already feeling the impact of these policy shifts. Levin said Chinese e-commerce platforms, anticipating changes to the minimum rules, have embarked on a diversification strategy. They are moving manufacturing to countries like Vietnam, increasing the use of seaborne logistics, and investing in warehousing capacity in Mexico and the United States
The industry has also seen the cancellation of the Sino-US Charter Agreement (BSA) and charter agreements, with airlines reallocating capacity to other routes. Although spot prices for air cargo between China and the US have fallen, they remain above historical levels. The new policy, which will be introduced on May 2, is expected to lead to a brief surge in demand, followed by a sharp drop in rates on the route.
However, the knock-on effects may not be limited to the US-China route. As capacity is reallocated, we are likely to see downward pressure on rates on many routes. Shippers should also be prepared for potential customs delays if the new system is not fully implemented.
