Welcome to the SCLOE Information

Analysis and Impact of Trump's Tariffs: An In-Depth Report by Freightos

Late November typically marks a quieter period for transpacific ocean freight, but rates have remained robust and steady, staying above US$5,000/FEU since mid-October, with East Coast rates surpassing US$6,000/FEU this week. This sustained rate strength is likely due to shippers' efforts to frontload cargo in anticipation of potential disruptions, including a possible renewed ILA strike at East Coast and Gulf ports after January 15, as well as concerns over anticipated tariff increases under the Trump administration in the coming year.

Shipper apprehension was further fueled by President-elect Trump’s announcement on social media this week, in which he expressed plans to impose a 25% tariff on all imports from Mexico and Canada, starting on his first day in office in January, in response to illegal immigration and drugs. Additionally, Trump revealed intentions to introduce a 10% tariff on all Chinese imports, though without a specified timeline.

In relation to Canada and Mexico, this announcement represents an escalation of Trump's earlier campaign rhetoric calling for 10%–20% tariffs on all imports. This proposed move would break from the USMCA trade agreement established during Trump’s first term and accelerate the tariff process, circumventing the typical review periods required by trade acts, which could otherwise take up to a year. While this could delay implementation until after January 20, the announcement heightens urgency for shippers on these trade routes.

Just as transpacific shippers are taking precautionary measures ahead of anticipated tariff changes, the announcement about Canada and Mexico could also prompt increased import activity in those regions, particularly for cross-border trade. This could drive up volumes, road, and rail rates as importers rush to beat potential tariff rollouts.

Mexico is already taking steps to expand its container port and rail capacity in response to surging trade with the US and the increased flow of Chinese goods into Mexico in recent years. However, these developments may slow the growth of Mexico-US trade, particularly as rising transportation costs and higher tariffs may increase expenses for importers and consumers. This is especially true for top exports from Canada and Mexico to the US, such as vehicles and auto parts, which often cross borders multiple times, and potentially fuel, as Canada is the largest supplier of crude oil to the US.

Despite strong ocean freight volumes over the past few months at major hubs like LA/Long Beach, congestion has remained relatively low. In Canada, however, recent labor lockouts at ports on both coasts caused some delays, which are expected to take a couple of weeks to fully resolve. These disruptions were brought to an end by a government order, and both sides have agreed to enter mediation, though unions have challenged the legality of the back-to-work order, with a hearing scheduled for December.

In terms of Asia-Europe routes, rates surged 30% in early November due to General Rate Increases (GRIs), maintaining those levels even amidst some mid-month attempts at further hikes. Asia-Mediterranean prices saw a more modest increase of over 10% recently, as demand appears to be rebounding, possibly due to early preparation for the Lunar New Year rush. However, skepticism remains regarding the sustainability of December GRIs aimed at pushing rates past US$6,000/FEU, despite recent blanked sailings and the early Lunar New Year surge. Some carriers have warned of further price hikes next year as new EU emissions regulations come into effect.

In air cargo, despite expectations of a chaotic peak season due to continued high B2C e-commerce volumes, ex-China rates have not spiked as anticipated. Carriers report being busy but not overwhelmed, suggesting that capacity additions and proactive planning by shippers may be sufficient to prevent severe rate increases or congestion through the end of the year.

Source: Container News