Five key questions facing ocean container shippers under a Trump presidency

By Eloisa Tovee, Xeneta

 19/11/2024

Earlier this month, Donald Trump won a second term in the White House. During his campaign, Trump pledged an economic policy that promises to revitalise American manufacturing and counter what the US regards as China’s unfair trade practices.

Trump has vowed tariffs of up to 20% on all imports into the US and additional tariffs of 60% on goods from China. The US already imposes tariffs in those ranges, and higher on certain categories of goods, notably a 100% tariff rate on EVs.

The last time Trump ramped up tariffs on Chinese imports during the trade war in 2018, ocean container shipping freight rates spiked more than 70% – applying ever greater strain on global ocean supply chains.

As reported on 6 November 2024, Peter Sand, Xeneta chief analyst warned that: “Shipping is a global industry feeding on international trade, so another Trump presidency is a step in the wrong direction.

“The knee-jerk reaction from US shippers will be to front-load imports before Trump is able to impose his new tariffs. Back in 2018, the tariff on Chinese imports was 25%, now it is increasing up to 100%, so the incentive to front-load is even greater.”

For shippers directly impacted by the proposed tariffs, monitoring ocean container shipping data on a global level will enable them to see in real-time the impact of rapid shifts in global sourcing, near-shoring and front-loading.

Here are five other considerations for you to build into your contingency plans:

1. Will front-loading be at the same level as in 2018?

There is likely to be even more front-loading of imports this time around, compared with Trump’s first tariffs in 2018.

In 2018, tariffs came in several waves, each with specified goods identified. This meant shippers had to wait for those lists to be published, with a further two months or more before the tariffs were implemented.

This time, shippers may be working to the worst-case scenario, with all tariffs being introduced immediately following Trump’s inauguration on 20 January. This would give shippers a much shorter window of opportunity.

Another key difference is the level of tariffs being introduced. In 2018, the rush for front-loading was for goods from China with a 25% tariff. Trump is now planning tariffs of up to 20% on all imports into the US and more than 60% on China imports, so the incentive to front-load is even greater.

There is also the threat of further strikes at ports on the US east coast and US Gulf coast in January for shippers to consider.

Average spot rates may have softened by 6.9% from the Far East to the US west coast since 15 October, and by 1.5% into the US east coast in the same period, however shippers who were waiting for the election results before committing to a decision on front-loading are far more likely to take action now.

If you’re considering front-loading your goods, be prepared that a sudden increase in demand on major tradelanes into the US will place upward pressure on freight rates and available capacity on some tradelanes.

2. What can shippers do to reduce risk?

Future-looking shippers need to leverage data to track freight rate trends and benchmark their position in the market. This involves comparing the rates you pay with those of other shippers, carriers and freight forwarders.

Additionally, monitoring rates across various tradelanes is crucial, especially when considering alternative US ports for imports. Since not all ports offer the same advantages, Xeneta customers utilise the North America Routing filter within the platform to analyse rate variations by region and entry/exit point. This helps identify the most cost-effective and operationally efficient routing options.

Find out more about Xeneta North America Routing here.

3. The supply chain risks of a Trump presidency have been known for a long time – are shippers fully prepared?

2024 has been an exceptionally challenging year for shippers, highlighting the resilience and adaptability of stakeholders across ocean container shipping networks in maintaining global supply chains. Shippers have navigated a complex landscape, including the ongoing conflict in the Red Sea, while staying vigilant about potential disruptions such as the US east coast port strikes and uncertainties surrounding the next US presidency.

This has seen front-loading taking place throughout the year, with monthly container volumes entering the US at an all-time high in August at 2.64m teu (source: CTS).

By front-loading, many shippers have bolstered their inventory buffers, which could mitigate some of the potential impact of renewed Trump-era tariffs. This strategic approach not only ensures smoother operations in the short-term, but also highlights the importance of foresight and flexibility in managing supply chain challenges longer-term.

4. What is the medium-term impact on rates?

Unlike the introduction of tariffs in 2018, average spot rates from China to the US west coast are starting from an elevated position, primarily due to the Red Sea conflict. The current average spot rates of $5,020 per feu (40ft container) into the US west coast and  $5,915 per feu into the US east coast are 198% and 147% higher than 12 months ago.

As touched on above, if front-loading does lead to elevated spot rates into Q1 and Q2 next year, it could place upward pressure on the long-term market. This would have implications for many US shippers, because it would coincide with tender season for new long-term contracts.

5. What is the longer-term impact on supply chains?

In 2018, we saw China respond to US trade policy ‘aggression’ by imposing tariffs of its own. There is a risk that similar dynamics could unfold again in the coming months and years, potentially leading to further escalation.

If a trade war intensifies, some shippers may look to diversify supply chains and shift imports to the US via alternative tradelanes. One option might be establishing factories in other countries across the Far East, though this approach is costly and time-intensive. Additionally, businesses are often hesitant to move away from the well-developed manufacturing and trade infrastructure that China offers.

A more immediate and likely alternative is increased use of Mexico as a gateway for US imports. This trade route has gained significant traction in 2024, with record volumes shipped from China to Mexico, signalling its growing role as a “back door” into the US. From January to August 2024, imports along this route rose by 22.2% year on year. Spot rates have reflected this surge in demand, with the current level of $3,530 per feu from China to Mexico west coast almost 100% higher than 12 months ago. Average spot rates on this trade peaked at $7,600 per feu mid-year.

It’s also worth repeating that Trump has vowed tariffs of up to 20% on all imports into the US. Once the full details of Trump’s tariff framework are known, it may well be the case that other nations and trading blocs, such as the EU, respond in a similar way to China during the first trade war by imposing tariffs of their own.

For these reasons, it is important to monitor ocean container shipping data on backhaul trades, because these could also be impacted if a trade war with the US escalates at a more widespread global level.

Looking beyond Trump

The US elections were just one of the global shocks that impacted the market in 2024. For a full analysis of containerised ocean freight trends and future market disruptions, watch the Xeneta 2025 Outlook Webinar.

Hosted by Xeneta’s chief analyst, Peter Sand, and senior shipping analyst, Emily Stausbøll, this webinar continues to explore the repercussions of US trade policies, and key themes expected to impact the ocean market in 2025.

source : theloadstar