Shipping could benefit from tariff slap down, but order likely a short-term fix
The shipping sector is reacting with nervous optimism to the decision of a US court to rule Trump’s signature tariffs illegal.
The peak season for ocean shipping in the northern hemisphere is about to start, and with the majority of container shipping and non-steel imports to benefit from another pause in heavy tariffs, analysts expect importers and shipping firms to increase shipments.
That said, the Trump administration will appeal the ruling, and the Supreme Court docket isn’t a short list at the moment, so the issue might well drag on for some time.
“The court decision to deem the sweeping tariffs unlawful is clearly positive news for shippers who have faced extraordinary increases in the cost of importing goods into the US, but this should come with a warning that the story is far from over. Even if the appeal fails, Trump will not throw in the towel and he has other levers to pull to achieve the same outcome as the sweeping tariffs,” warns Emily Stausbøll, Xeneta’s senior shipping analyst.
The May de-escalation from the heights of US threats of another trade war with China already saw increases in traffic, and even a delay in implementation of global “reciprocal” tariffs would likely see a similar trend.
Freightos chief researcher Judah Levine says volumes and rates have shown the impact tariff pauses (from the administration or the courts) can have.
“The May 12 de-escalation between the US and China has already driven a sharp rebound in ocean freight demand. Shippers have been frontloading to beat the August expiration. This ruling may add fuel to that trend, especially if tariffs are actually suspended—even temporarily.”
While US-China trade is at the forefront of President Trump’s thinking, and much media attention, the impact on container shipping from nations slapped with 30% import tariffs could be just as important.
“Some shippers deterred by the 30% tariffs may now rush to move goods before the appeals process concludes or new tariff mechanisms are activated. That could increase container demand even further, adding to the strength of the early start to peak season,” Levine adds.
Alternative ‘levers’ and knock-on effects
As Stausbøll points out, the ruling only encompasses the direct tariff regime launched by Trump from the White House Rose Garden. It does not affect the potential for huge levies on Chinese ships calling at US ports, or other such attempts to control trade into the US.
For Stausbøll the question is not if, but when.
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“When Trump does pull these levers, we could enter a new era of confusion in supply chains because the situation will become more complex for shippers to navigate. They could be hit with a raft of surcharges and levies, whether that is port fees or a new tariff regime imposed on a product-by-product basis,” she explains.
Customers are unlikely to feel any quick change, especially to prices, whatever the eventual effects of the ruling and the administration’s response.
The suspension of ‘de-minimis’ rules means it’s no longer worth the extra cost for firms like Shien and Temu to buy air cargo space for small B2C deliveries of small orders, and they have instead moved to “ocean fulfilment,” according to Levine. Any rebound resulting from the tariff removal would likely be “short-lived” with that new restriction unlikely to change, he says.
Consumers and businesses are also unlikely to feel an immediate benefit on larger shipments due to market reactions to a jump in volumes and demand. Spot rates have climbed on China-US routes since the 145% tariffs were dropped, and if exporters decide to jump on the chance to avoid worldwide rate hikes, Stausbøll predicts shippers will not tend towards charity.
“The cargo rush following the lowering of US-China tariffs combined with fear and uncertainty in the industry is putting upward pressure on spot rates.
“Average spot rates from the Far East to US West Coast have increased 17% since 14 May to stand at USD 3040 per FEU (40ft container). Into the US East Coast, average spot rates increased 11% to stand at USD 4095 per FEU,” she explains.
“Ongoing frontloading of imports will see big increases in spot rates on 1 June. Average spot rates will rise at least 18% from the Far East to US West Coast and 14% into the US East Coast. Data is being received from shippers paying far higher rates than this, so the market has the potential to increase even more dramatically in early June.”
