Shipping industry sinks into crisis as Trump's tariffs disrupt global trade flows

The global sea shipping industry is navigating another wave of uncertainty as US President Donald Trump's new tariffs reroute trade flows, raise concerns about rates volatility and stir uncertainty on transport demand.

The minimum 10 per cent reciprocal tariff on all exports to the US, with additional levies that are set to bring total tariffs up to 54 per cent for China, will hurt demand for cargoes from key trading partners including China, Vietnam, Japan, South Korea and Taiwan, which in turn could hit freight rates and earnings of shipping companies such as NYK, Cosco, Maersk and others in coming quarters, according to Bloomberg Intelligence analysts.

Mr Trump's "imposition of tariffs on trading partners around the world is likely to accelerate re-routings of global trade and longer-term fundamental shifts in shipping demand,” Bloomberg Intelligence said in an April 3 report.

Mr Trump's baseline tariffs of 10 per cent on many countries' imports into the US came into effect on Saturday, triggering customs agents’ collections at airports, seaports and customs warehouses across the US. Higher levies on goods from larger trading partners are scheduled to start on April 9.

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The move has stoked fears of full-blown international trade wars, raised risks of economic recession and prompted retaliatory responses from some countries. China on Friday retaliated against the US tariffs, as the world's biggest oil importer reacted with a 34 per cent tariff on all imports from the US starting from April 10.

Mr Trump's latest round of tariffs that are risking spiralling into a trade war do not compare with the measures he took starting in 2017.

"The tariffs are so broad and so high that there are few duty-free alternatives. In other words, US import costs will inevitably go up,” Judah Levin, head of research at Freightos Group, said. "Retaliatory tariffs will also mean that demand for US exports is likely to drop, negatively affecting US agriculture and manufacturing.”

A rise in orders for long-lasting goods drove many US importers to "front-load” inventory since November in anticipation of these new tariffs, which kept US ocean import container volumes stronger than usual since late last year.

"With the reciprocal tariffs not being applied to goods loaded before April 9, we may see a very brief scramble that will push container rates and demand up for the next few days,” Mr Levin said.

"After that though, many importers who’ve built up inventory are likely to be able to reduce or pause orders and shipments until the tariff dust settles.”

This move will result in "container volumes and rates dropping, possibly significantly, soon and could be one factor that will cause a very subdued peak season period this year – similar to how a tariff-driven pull forward in 2018 led to somewhat lower container rates and demand in 2019,” he added.

The latest tariffs imposed by the Trump administration are expected to hit container shipping the hardest, according to shipping association Bimco.

"From a shipping perspective, the container sector will be affected the most. Many tanker and dry bulk commodities have so far been exempted from the tariff increases but most goods shipped in containers will face import tariff increases,” Niels Rasmussen, chief shipping analyst at Bimco, said.

"In a scenario where the tariff increases would result in zero growth in US container imports, it would reduce global container volume growth by 0.5 percentage points.”

Maritime data group Veson Nautical said that uncertainty surrounds the US tariffs, because "any counter measures could impact the global shipping sector and lead to reduced international trade and sustained higher inflation.”

In addition, China’s economic recovery is fragile, adding further uncertainty given its crucial role as a global demand driver.

"This delicate situation could be worsened by potential trade wars as China’s economy is heavily dependent on exports,” Veson Nautical said.

The uncertainty surrounding the so-called liberation day tariffs imposed by the US on trading partners could prevent shippers from making important decisions on supply chains.

"Liberation day will not feel very liberating for those shippers caught in the eye of the tariff storm. It is tough to make important decisions on your supply chain when the rules of the game keep changing,” Peter Sand, chief analyst at freight pricing platform Xeneta, said.

“Many US shippers are right at the point of agreeing new long-term ocean container freight contracts coming into effect on 1 May, so this puts them in an extremely difficult position. Where will they be importing goods from in the next 12 months and which carrier should they choose?”

Trade war concerns

The World Trade Organisation's initial estimates show that the new US tariffs, coupled with those introduced since January, could lead to an overall contraction of around one per cent in global merchandise trade volumes in 2025, the body said in an April 3 statement. This represents a downwards revision of nearly four percentage points from previous projections.

"I'm deeply concerned about this decline and the potential for escalation into a tariff war with a cycle of retaliatory measures that lead to further declines in trade,” Ngozi Okonjo-Iweala, director-general of the WTO, said.

Dubai-based DP World, the global ports operator with terminals from Peru to Australia, said on Thursday that businesses will face "significant” adjustments in response to the tariffs.

'With tariffs increasingly shaping policy, we recognise that businesses are facing significant adjustments,” the company said in a statement to The National. "As supply chains realign, new manufacturing and trading hubs may emerge in response to shifting cost structures and market access considerations.

"For cargo owners, this environment brings challenges that require greater flexibility and adaptability. At DP World, we are working closely with our customers to navigate these complexities – helping them maintain continuity, find efficiencies and build resilience in an evolving global landscape.”