Global Shipping Industry Navigates Tariffs Uncertainty

Cargo ships put to sea half empty, fluctuating freight rates and possible shipping route changes are some of the recent adjustments industry specialists have noted.

The global economy has been riding a rollercoaster since .US. President Donald Trump returned to the White House in January and kicked off a tariff offensive.

Trump's recent walk-back, announcing a 90-day pause on some previously announced levies, with the exception of those targeting China, has once again upset the balance.

"In the three weeks leading up to the announcement, we saw a slowdown in trade and many ships were only 50 percent full on the transatlantic and transpacific trades to the United States," said Alexandre Charpentier, transport specialist at consulting firm Roland Berger.

During that time, sea freight rates fell and many companies held on to their stocks as a precaution.

"As of last week, we've had the opposite effect," Charpentier said. "People want to ship as much as possible to the United States, they're destocking and there has been a rush for space."

And prices have started to rise again.

Adding to the headwinds facing shipping are new US port fees for Chinese-built and -operated ships, unveiled by Washington on Thursday and due to kick in from mid-October.

Those come on top of the tariffs of up to 145 percent the Trump administration has introduced on a large number of Chinese imports, resulting in a top tax line as high as 245 percent on some products.

China builds nearly half of all ships launched, ahead of South Korea and Japan.

In the long run, shipping companies expect a decline in freight rates, as happened in 2018, 2019 during Trump's first presidential term.

Back then liners "experienced an oversupply of shipping capacity, decreased shipping rates, increased operational costs and ultimately, a reduction in revenue," said Sandy Gosling, specialist in transport and logistics at consulting firm McKinsey.

Tariffs then were lower than those announced by Trump this year.

"It's difficult to see into the future but what seems most likely to us is a slowing of certain routes in favour of other countries in Southeast Asia or India," said Charpentier.

Anne-Sophie Fribourg, vice president of ocean procurement at British freight forwarder Zencargo, said she expected the China-U.S. route would become unprofitable.

If this were to happen, she said, "shipowners will readjust their rotations. In other words, they will turn away from traditional routes to new ones, such as Latin America, where demand has been growing for some time now."

The World Trade Organization (WTO) warned of a potential "even sharper decline of 1.5 percent in global goods trade" in 2025, depending on Trump's tariffs policy.

It said merchandise trade between China and the U.S. could plunge by 81 percent.

Source: HDN