Xeneta says Trump’s America First trade policy hurting US shippers

Donald Trump has not immediately followed through with his election vow of sweeping import tariffs but uncertainty in his trade policy leaves U.S. shippers braced for supply chain chaos.

"Following his inauguration on Monday, Trump said he is "thinking about" introducing his proposed 25 percent tariffs on imports from Mexico and Canada on February 1. He did not immediately go ahead with previous threats of 60 percent tariffs on goods from China and 10-20 percent from the rest of the world, instead ordering a probe into trade deficits and unfair trade practices and alleged currency manipulation by other countries," says the latest update from Xeneta, the ocean and air freight intelligence platform.

Peter Sand, Chief Analyst, Xeneta says: “Trump is billing his trade policy as America First but the people it is hurting the most right now are U.S. shippers. We know tariffs are on the way – we just don’t know when, where or the category of goods impacted. This uncertainty makes managing supply chain risk an almost impossible task.

"The worst case scenario is Trump announcing blanket tariffs against China and the rest of the world simultaneously. The rush to import goods into the U.S. ahead of tariffs coming into effect could cause carnage across global supply chains and put upward pressure on already-elevated freight rates."

Data released by Xeneta shows the last time Trump ramped up tariffs on China imports during the trade war in 2018, the ocean container shipping markets spiked more than 70 percent. "On the critical trade from China to the U.S. West Coast, average spot freight rates increased from $1,503 per 40ft container (FEU) on January 1, 2018 to $2,604 per FEU on November 1, 2018.

"Current spot rates from the Far East to the U.S. West Coast stand at $5,234 per FEU. This is 29% percent higher than 12 months ago, primarily due to the impact of conflict in the Red Sea. If rates increase from today’s level by 70 percent, as they did back in 2018, the market would hit an all-time high, surpassing the previous record set during Covid-19."

Sand says: "A ceasefire between Israel and Hamas could see freight rates collapse if there is a large-scale return of container ships to the Red Sea but that is far from certain. What shippers do not need is further uncertainty from Trump’s tariff policy.

"Shippers want to take decisive action against these geo-political threats. In the short term that may mean building up stock inventories if they know when tariffs are coming into effect and the goods within scope.

"In the longer term, shippers may look to shift supply chains out of China to nations such as India or neighbouring South East Asia countries, if the trade war escalates dramatically. However, they will not commit to this financial investment and massive supply chain disruption based on rhetoric and political posturing."