Industry: Due to the impact of U.S. tariffs, ocean container freight rates have declined

Industry analysis suggests that the latest developments in US trade policy have once again put global supply chains in an unstable state, as President Donald Trump's imposition and partial suspension of some tariffs have caused significant disruption and uncertainty for businesses operating in North America.

This sense of uncertainty has extended to ocean container freight rates, and according to the Freightos Baltic Index data, ocean container freight rates have fallen into the pain of the traditional low season at the beginning of the year.

The initial announcement of a 25% tariff on all goods imported by the United States from Mexico and Canada had a ripple effect on the logistics industry. However, within a few days, the government issued a one month suspension order for automotive products covered by the United States Mexico Canada Agreement, which was later extended to all imported products under the agreement. This affects 50% of imports from Canada and 38% of imports from Mexico, including automotive products, food and agricultural products, as well as many electrical and electronic products.

The remaining imported goods worth approximately $1 billion per day are now facing a 25% tariff increase. This category covers a wide range of products from telephones, computers to medical devices. The sudden implementation and subsequent partial suspension of these tariffs resulted in significant disruptions to cross-border transportation and ground traffic from Mexico and Canada.

Judah Levine, research director at Freightos, wrote in a report released with the latest data that this tariff seesaw is not an isolated event, but part of Trump's broader pattern of using trade policy as leverage to achieve various goals. In this case, the declared goals include addressing border security issues and preventing the flow of fentanyl and illegal immigrants. However, some reports suggest that this is partly due to car manufacturers promising to shift some production from Canada and Mexico to the United States

Levin said that the uncertainty brought about by these rapid policy changes makes the planning and adjustment of shippers extremely challenging. Many companies adopt a wait-and-see attitude before committing to significant changes in their supply chains. However, the threat of tariff increases is imminent, especially for imported goods from China and other US trading partners, which has prompted some importers to ship sea freight ahead of schedule since November, boosting demand and shipping costs.

The latest data from the National Retail Federation shows that from November last year to February this year, the import volume of US sea freight increased by about 12% compared to the same period last year, showing a significant driving effect. Although it is expected that the freight volume will remain strong throughout May, it is expected that the freight volume in June and July will weaken, indicating a weak start to the traditional peak season due to early shipments.

The impact of these trade policy fluctuations is also evident in container freight rates. After the Lunar New Year, trans Pacific container prices continued to decline, with freight rates on the West Coast dropping to $2660 per 40 foot equivalent unit and on the East Coast dropping to $3754 per FEU. Compared to last year, these numbers have decreased by 40% and are at or slightly below the 2024 low point after the Lunar New Year.
Similarly, in recent weeks, the sea freight prices of Asia Europe trade have also fallen below last year's low point.

The Asia Nordic rate has increased by 3% to $3064 per FEU. The Asia Mediterranean price remains at a level of $4159 per FEU.

Although the general rate hike in early March slowed down this decline and pushed rates up by a few hundred dollars, the increase was far below the $1000 increase announced by the operator. The prices in the Asia Mediterranean region have stabilized and are roughly equivalent to those of a year ago.

Levin said that the recent weakness in freight rates, especially on trans Pacific routes, may be the result of multiple factors working together. This includes the stagnation of demand after the Spring Festival, as well as the recent restructuring of operator alliances, which has led to intensified competition and decreased efficiency in capacity management as operators adapt to newly launched services.

With the industry facing uncertainty, several key deadlines are looming. This includes the United States Trade Representative hearing on March 24th, which will make a decision on the proposed port charges; According to the President's "America First Trade Policy" memorandum, the deadline for agencies to report various trade issues is April 1st, while the new deadline for imposing a 25% tariff on USMCA goods is April 2nd.