Recent shifts in U.S. trade policy have once again unsettled the global supply chain and ocean container rates, which was already experiencing a seasonal slowdown, according to the Freightos Baltic Index.
The Trump administration's initial announcement of a 25% tariff on all U.S. imports from Mexico and Canada has been felt immediately throughout the logistics industry. However, within days, the administration granted a one-month reprieve for automotive goods under the United States-Mexico-Canada Agreement (USMCA), later expanding the suspension to all imports covered by the agreement. This move affects an estimated 50% of Canadian imports and 38% of Mexican imports, including automotive goods, food and agricultural products, as well as various appliances and electronics.
Despite this temporary relief, approximately $1 billion in daily imports remains subject to the 25% tariff hike. These goods include a wide range of products, from electronics like phones and computers to medical equipment. The abrupt imposition and subsequent partial rollback of these tariffs have caused disruptions in cross-border trade and surface shipment volumes between the U.S., Mexico, and Canada.
This back-and-forth on tariffs is part of a broader trend of the Trump administration leveraging trade policy for various strategic objectives, noted Judah Levine, head of research for Freightos. In this case, the administration has cited border security concerns, the fight against fentanyl trafficking, and illegal immigration as key motivations. Reports also indicate that part of the tariff suspension resulted from auto manufacturers committing to shifting some production from Canada and Mexico to the U.S.
The unpredictability of these policy changes has made it difficult for shippers to plan effectively, Levine stated. Many companies have adopted a cautious stance, delaying significant supply chain adjustments. However, the looming prospect of further tariff increases, particularly on imports from China and other key U.S. trade partners, has led some importers to expedite ocean shipments since November, leading to a surge in ocean freight demand and rates.
According to the National Retail Federation, U.S. ocean import volumes from November through February were approximately 12% higher than the previous year, indicating a substantial frontloading effect. While volumes are expected to remain strong through May, a downturn is anticipated in June and July, suggesting a softer start to the traditional peak shipping season due to earlier inventory buildup.
These trade policy fluctuations have also impacted container rates. Trans-Pacific container prices have continued to decline post-Lunar New Year, with West Coast rates falling to $2,660 per forty-foot equivalent unit (FEU) and East Coast rates dropping to $3,754 per FEU. These figures mark a 40% decline from the previous year and are at or near their lowest levels for 2024 following the Lunar New Year period.
Similarly, ocean freight rates on the Asia-Europe route have dipped below last year’s lows in recent weeks.
Asia-North Europe rates increased slightly by 3% to $3,064 per FEU, while Asia-Mediterranean rates remained steady at $4,159 per FEU.
Although general rate increases in early March temporarily slowed the decline, pushing rates up by a few hundred dollars, the increases fell short of the $1,000 hike initially announced by carriers. Asia-Mediterranean rates have stabilized, remaining roughly on par with levels from a year ago.
The recent decline in rates, particularly on trans-Pacific routes, may be attributed to a combination of factors, Levine explained. These include the seasonal drop in demand following Lunar New Year and ongoing adjustments within carrier alliances, which have intensified competition and disrupted capacity management as new service structures take effect.
As the industry navigates ongoing uncertainty, several key deadlines lie ahead. These include the March 24 United States Trade Representative hearing, which will influence a decision on proposed port call fees; the April 1 deadline for agency reports on various trade issues outlined in the president’s America First Trade Policy memo; and the recently established April 2 deadline for potential 25% tariffs on USMCA-covered goods.
Source: www.freightwaves.com
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