An incoming Trump 2.0 presidency and renewed tariff wars might be looming, but how this will impact ocean shipping markets ahead of his 20 January inauguration remains unclear.
Ocean freight spot rates from China to the U.S. have drifted lower in recent weeks, though still significantly higher than a year ago. Asia-Europe trade lanes – where annual contract negotiations are underway – have shown a more recent spark.
“Given the strong demand pulled forward this year, we were expecting demand to come down significantly toward the end of the year. Yet, November volumes were similar to October and September. We are seeing steady demand, though the market is reacting more slowly than many were expecting given the disruption on the radar. But if the typical seasonal trend holds, we are expecting a slight bump up toward December and January,” said Niki Frank, CEO of DHL Global Forwarding Asia Pacific.
Tariff landscape
Pinning down exactly what new U.S. tariffs will be implemented, and when, is a difficult task given Trump’s transactional approach to bilateral relations with both friends and foes. Announcements thus far from the Trump camp include promises to introduce 25 percent tariffs on imports from Canada and Mexico, along with at least a 10 percent tariff hike on Chinese imports.
Additionally, Trump said he would introduce new 100 percent tariffs against BRICS countries—an intergovernmental organization initially founded by Brazil, Russia, India, China, and South Africa to identify business opportunities that have now expanded to include nations like Egypt, the UAE, Ethiopia, and Iran—should they try to create a rival currency to the U.S. dollar.
A Logistics Trends & Insights (LTI) representative said that U.S. inventory levels were currently high, which could help explain why rates have so far not surged. This is because many shippers frontloaded cargo earlier in the year before the 30 September expiry date of the International Longshoremen’s Association’s (ILA) Master Contract covering U.S. East and Gulf Coast ports.
The expiry of the contract led to a three-day shutdown of ports before the ILA and the United States Maritime Alliance (USMX) reached a short-term contract extension, which is due to expire on 15 January 2025.
January disruptions loom ahead
Despite ongoing negotiations, the ILA and USMX remain divided on port automation, with only wage increases currently agreed upon.
Should the ILA and USMX be unable to come to an agreement by 15 January, a potential second port lockdown in January, combined with prospective new tariffs, could tighten shipping markets in the coming weeks.
“East Coast ports account for almost 50 percent of the U.S. inbound volumes,” noted Praveen Gregory, Senior Vice President, Ocean Freight, DHL Global Forwarding Asia Pacific. “If the East Coast Port is shut down, then all inbound vessels will be stuck waiting for their berthing window, which then further delays their return journey to Asian and European ports, thus disrupting capacity on key trades.”
Gregory also pointed out that while the factors affecting ocean freight are manageable individually, looking at the bigger picture, the possibility of ILA strikes in the U.S. East Coast ports could also tie up the vessels moving into Gemini, delaying the Gemini cooperation kick-off.
DHL’s December Ocean Freight Market Update noted that China’s exports are currently exceeding forecasts as factories anticipate U.S. tariffs. Some container lines have also reported full bookings from Asia into the Americas, potentially because shippers are attempting to pre-empt new tariff regimes.
The U.S. National Retail Federation is also predicting strong shipping markets, with U.S. imports forecast to rise by 14.3 percent and 12 percent year-on-year in December and January, respectively. Also, spot freight markets from Asia to the U.S. may not accurately reflect shipper demand this year. Aside from the fact that most trans-Pacific cargo moves under long-term contracts, carriers have also been adding capacity.
According to data from Sea-Intelligence, there was a sizeable injection of capacity growth in Asia to the U.S. West Coast trade lane in late November and early December, which could explain flat-lining spot rates.
Rates comparison platform Freightos noted that container lines might struggle to increase rates in the coming weeks as some carriers will reportedly introduce December GRIs. But with the arrival window to receive goods before the strike closing, a significant number of inventories already built up from Q3 front-loading, and likely still a runway of several months before tariffs go into effect, carriers may not succeed in increasing rates until later in December or early January ahead of Lunar New Year.
Alliance restructuring
The start of February will also see ocean shipping alliances restructure. DHL’s December Ocean Freight Market Update warned that service disruptions are expected as ocean shipping alliances shift to their new set up mainly on East-West trades.
The upshot, according to Vespucci Maritime, will be that reliability could be further impacted while networks are reconfigured.
“Shippers should expect quite some turbulence in the networks and services offered from February until the new networks are fully phased in,” the analyst said. “In particular, February-March is likely to see many changes compared to what shippers were expecting as it is not an operationally easy feat to phase hundreds of vessels into entirely new strings.”
“In ocean trade, the issues only come when anything unplanned pops up. We know this alliance reshuffle is coming. Carriers and freight services have already planned and catered to that. Shippers should expect some disruption while the new alliances bed down, but barring any exceptions, eventually we are hopeful that the new networks deliver the improved service levels carriers are promising,” said Frank.
