Reciprocal tariffs announced by Donald Trump on “Liberation Day” could prevent shippers from making important decisions on supply chains, but are not likely to cause an immediate spike in freight rates. These expectations are expressed by Xeneta, an ocean and air freight intelligence platform.
Peter Sand, Chief Analyst at Xeneta: ‘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 US shippers are right at the point of agreeing new long-term ocean container freight contracts coming into effect on 1 May, so this puts them in an extremely difficult position,’ adds Sand. ‘Where will they be importing goods from in the next twelve months and which carrier should they choose?’
Also read: ‘Fees on China-built ships can congest supply chains’
Downward trend in ocean container spot rates expected to continue
The tariffs will increase the overall landed cost of importing goods, but Sand has stated the downward trend in ocean container spot rates since 1 January is likely to continue.
Sand says: ‘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 US on 1 April, but these are unlikely to stick as they come off the back of steady market decline since 1 January 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 frontloading we saw throughout 2024,’ states Sand.
Disruption further down the line
‘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,’ explains Sand.
Average spot rates from the Far East increased eight per cent into the US East Coast and fifteen per cent into the US West Coast on 1 April, however they are down 43 per cent and 49 per cent since 1 January respectively.
Also read: ‘Trump’s America First trade policy is hurting US shippers’
Similar scenario for air cargo market
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: ‘We saw an uptick in air cargo rates from China and Europe to the US 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 US exports if there is growing anti-US 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,’ adds Van de Wouw.
Fees against Chinese ships and carriers more substantial risk
Van de Wouw believes proposals to introduce fees against Chinese ships and carriers entering US ports poses a more substantial risk to air supply chains, if it is approved following a two-day public hearing last week.
He says: ‘The proposed fees on Chinese vessels and carriers entering US 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 per cent 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.’
Also read: ‘Trump Presidency threatens spike in container shipping markets’
