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The Merchant · n°133 · February 6, 2025

Expect the unexpected from tariff row

Figure of the week

+11.3% The rise in global air freight demand in 2024, according to IATA (The International Air Transport Association). It is a historic peak. IATA estimates that the sector’s growth could reach 5.8% this year.

Quote of the week

“This is simply the first strike in what could become a very destructive global trade war.” Paul Ashworth, chief North America economist at Capital Economics, quoted by Bloomberg, regarding the first tariff measures announced by the new Trump administration (see below).

The new alliances are in place: should we believe in a rate war?

For maritime shipping, this month of February is a turning point. In the middle of the Chinese New Year pause, the new alliances (Gemini Cooperation and Premier Alliance) have begun to operate, all against a backdrop of extreme commercial uncertainty due to the arrival of Donald Trump at the White House and the (still slim) hope of a return to the Red Sea.

But uncertainty dominates everywhere. Notably around the consequences of the new alliance landscape. For Sea-Intelligence, the resulting “competitive pressure” should “exert downward pressure on the rates of the major east-west trades.” While maritime shipping prices remain high, some believe the alliances may even launch into a rate war to capture market share. This thus implies letting capacity run free. Significant capacity injections on the India-Europe services are indeed already being observed. According to Drewry, the blank sailings rate between weeks 6 and 10 on the major east-west trades reaches 14%. This is significant but still moderate in such a context of falling demand. Too early therefore to affirm that we are facing a price war. “The shipping lines and freight forwarders are waiting to see how things will evolve after the CNY,” indicates Héloïse Roux, maritime expert at OVRSEA. “February should remain relatively low in terms of rates and volumes, but a rebound after the CNY remains possible.”

Uncertainty, finally, of course concerns the upcoming negotiations around the second phase of the ceasefire between Israel and Hamas. Without an agreement, a return of full maritime traffic in the Red Sea remains illusory. Moreover, the carriers are making, rightly, the choice of caution and pragmatism. Maersk recently encouraged its customers to plan their transport on the current configuration via the Cape of Good Hope. For the bank HSBC, transits via the Red Sea will not resume before mid-2025.

Despite a reprieve, Donald Trump’s trade war has indeed begun

The starting signal for hostilities. The new Trump administration announced imposing 25% tariffs on goods imported from Canada and Mexico, before finally granting a month’s reprieve to its two neighbors, the time to find a “deal.” The method is confirmed: tariffs are used as a negotiating weapon. But Trump nevertheless seems ready to use them for real too. This Tuesday, the 10% additional tariffs on imports from China came into force. Beijing has already retaliated, although the American and Chinese presidents have planned to speak soon, according to Trump. Finally, Europe is not forgotten: the American president declared that the EU would be his next target.

Linerlytica takes the opportunity to recall that containerized imports to the United States exceeded exports by 2.4 times in 2024, “which clearly proves that the tariffs imposed since 2018 have been totally ineffective in reducing the American trade imbalance.”

While waiting for the next jolts (there will be some), the American market remains calm. On the Transatlantic, east-west direction, CMA CGM and MSC announced the implementation of PSS (Peak Season Surcharges) of 1000 USD/FEU starting March 1. But beware, we are also beginning to see here the early signs of a price war between alliances.

In brief. The situation is calming down in Panama. American hostility toward the Central American country has subsided since Marco Rubio, the new American Secretary of State, met the Panamanian president José Raúl Mulino. The latter notably agreed to distance Panama from the Chinese Belt and Road initiative (Silk Road) dear to Xi Jinping. The two countries had signed an agreement to that effect in 2017.

Minimis Out: Washington puts a spoke in the wheel of Chinese e-commerce

Air freight activity rebounded strongly during the last week of January, a normal phenomenon just before the start of the Chinese New Year. According to WorldACD, the tonnages transported between Asia-Pacific and Europe increased by 10% over one week, without this, however, pulling freight rates up. The real recovery of air activity from China is expected after February 12. Rates should trend downward in the coming weeks.

On the other side of the Pacific, we will note Washington’s decision to suspend the famous de minimis rule, which allowed exempting from tariffs imports of a value below 800 USD destined for private individuals. According to US Customs, around 4 million de minimis shipments were processed per day in 2024, compared with 2.8 million in 2023! We can therefore expect a short-term braking of e-commerce flows coming from the big Chinese platforms Temu, Shein or AliExpress. This decision could incidentally upend the supply chain, by stimulating storage on the American side or by favoring a modal shift toward maritime. But this effect must be put into perspective. According to the firm Ti, we are talking here about the equivalent of around 8,000 TEU containers, or roughly 10 average containerships. It will not be a tidal wave, and so much the better.

A brief word on transatlantic air freight to finish: the schedule changes of the airlines are currently causing tensions for access to capacity in the Europe-North America direction. Anticipate: this congested situation should last all winter.

👋 See you next week, The Merchant team

Sources

Go further

How much does a freight forwarder cost, and how to avoid hidden fees? → How to import from China to Europe, step by step → BAF, GRI, demurrage: how to read the surcharges on your freight invoice →

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