The upheaval in global trade following President Donald Trump’s tariff announcements is sending shockwaves through international markets and supply chains.
But that’s been good news, however temporary, for container rates that had been trending down for some time, analyst Freightos said in its weekly update.
At the forefront of this trade war escalation is China, now facing a staggering minimum duty of 54% on all goods exported to the U.S., with some items subject to over 70%, and as much as 129%, in tariffs, after a new 50% duty announced by the White House Wednesday. This dramatic increase compounds existing Trump and Biden-era duties, creating a formidable barrier for Chinese exporters and U.S. importers alike.
The ripple effects of these policy changes extend far beyond U.S.-China trade relations, said Freightos research chief Judah Levine, in the update. Many Asian countries that had previously benefited from trade diversion are now also subject to steep tariffs. This shift is forcing importers to reevaluate their sourcing strategies and supply chain configurations.
In response to the U.S. measures, China has already announced retaliatory tariffs on U.S. exports. Other major trading partners, including Canada and the EU, are considering or implementing their own countermeasures. This tit-for-tat approach threatens to further destabilize global trade flows and increase the likelihood of a broader economic recession.
The immediate impact on ocean freight has been swift. Shippers scrambled to load final shipments before the new tariffs took effect, leading to a short-term surge in demand for container space and even shifts to less-than-containerload (LCL) and air cargo options. However, this burst of activity is expected to give way to a significant drop in container demand to the U.S. in the coming months.
For the week that ended on Friday, Asia-U.S. West Coast container rates increased 3% to $2,246 per forty-foot equivalent units, according to the Freightos Baltic Index. Asia-U.S. East Coast prices increased 5% to $3,541 per FEU.
Looking ahead, the Port of Los Angeles anticipates a 10% decrease in volume for the second half of the year. This decline could be exacerbated by growing overcapacity in the container market, along with a recession potentially leading to a collapse in freight rates reminiscent of the 2008 financial crisis.
Indeed, as capacity continues to grow from newbuild introductions on the major trade lanes, even with Red Sea diversions continuing to absorb capacity, rates out of Asia have fallen sharply since Lunar New Year, with container prices now beneath their 2024 floor.
Rates rebounded by a few hundred dollars per FEU on the trans-Pacific on start-of-month general rate increases last week, though no bump came through for Asia-Europe lanes, as carriers increase capacity management efforts. The expected tariff-driven drop in demand will only put more downward pressure on rates.
Find more articles by Stuart Chirls here.
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