Reciprocal tariffs announced by Donald Trump on Liberation Day April 2 could prevent shippers from making important decisions on supply chains, but are not likely to cause an immediate spike in freight rates.
Peter Sand, Chief Analyst at Xeneta, the ocean and air freight intelligence platform, said: “Liberation Day will not feel very liberating for those shippers caught in the eye of the tariff storm. It is tough to make important decisions on your supply chain when the rules of the game keep changing.
“Many U.S. shippers are right at the point of agreeing new long-term ocean container freight contracts coming into effect on May 1, so this puts them in an extremely difficult position. Where will they be importing goods from in the next 12 months and which carrier should they choose?”
The tariffs will increase the overall landed cost of importing goods, but Sand has stated the downward trend in ocean container spot rates since January 1 is likely to continue.
He said: “At this point we do not expect significant upward pressure on ocean container freight rates. Carriers did push spot rate increases on trades from the Far East to U.S. on April 1, but these are unlikely to stick as they come off the back of steady market decline since January 1 and subdued demand in February and March.
“The falling demand in February and March is partly due to increased volumes in January in the pre-Lunar New Year rush, but also because shippers are easing off from the front loading we saw throughout 2024.
“Once the tariff situation becomes clearer and shippers begin to diversify supply chains across regions, it is possible we could see disruption in ocean supply chains and upward pressure on rates, but this may be a little further down the line.”
Average spot rates from the Far East increased eight percent into the U.S. East Coast and 15 percent into the U.S. West Coast on April 1, however they are down 43 percent and 49 percent since January 1 respectively.
It is a similar scenario for the air cargo market, with analysts not expecting significant increases in rates in the immediate aftermath of the tariffs.
Niall van de Wouw, Chief Airfreight Officer, said: “Time and again, air cargo supply chain professionals have proven their resilience and they will show the same calm determination in the face of the tariff threat.
“We saw an uptick in air cargo rates from China and Europe to the U.S. at the end of March but nothing to set alarm bells ringing. The more likely scenario is a decrease in air cargo rates if tariffs result in higher prices and lower consumer demand.
“We could also see lower demand for U.S. exports if there is growing anti-U.S. sentiment across consumers in regions hit by the tariffs. Consumer sentiment has the potential to be even more powerful than tariffs.
“We should also consider there will be more capacity added to these trades in the coming weeks as airlines start summer schedules, which will also put downward pressure on rates.”
Air cargo spot rates currently stand at US$4.16 per kg from Shanghai to U.S., down from the peak season high of US$5.75 in the week ending November 10. Spot rates from Western Europe to the U.S. stand at US$2.16 per kg, down from the peak season high of US$3.51 in the week ending December 15.
Van de Wouw believes proposals to introduce fees against Chinese ships and carriers entering U.S. ports poses a more substantial risk to air supply chains, if it is approved following a two-day public hearing last week.
He said: “The proposed fees on Chinese vessels and carriers entering U.S. ports could have a more significant impact if congestion in ocean container supply chains causes shippers to move more goods by air.
“With around 98 percent of the world’s goods transported by ocean it doesn’t take much of a percentage shift to have major implications for air freight, as we saw during Covid-19 and the Red Sea crisis.”
Photo credit: iStock/ Wormphoto
