The Merchant · n°141 · April 10, 2025

Shippers grapple with "impossible" tariff choice

🚢 Stable rates... while awaiting the chaos?
🇺🇸 The global tariff war has been declared
✈️ New routes on the horizon

Figure of the week

50% According to Donald Trump, this is the additional customs tariff increase the United States will impose on China starting today if it does not abandon its retaliation. It would come on top of the 54% surcharge already announced on Chinese products since the start of Trump’s second term.

Quote of the week

“Oil prices are down, interest rates are down (the slow-moving Fed should cut rates!), food prices are down, there is NO INFLATION, and the long-abused USA is taking in billions of dollars a week in tariffs from the countries that were exploiting it.” Donald Trump, Monday, April 7, defending his tariff hikes on the social network X.

An uncertain calm before the storm?

For now, it is hard to gauge the scale of the disruption Donald Trump has caused in the ocean freight sector. On transpacific routes, the general rate increase (GRI) planned for mid-April should hold: spot rates are recovering. According to Drewry’s World Container Index (WCI), the spot rate between Shanghai and Los Angeles jumped 10% this week, interrupting a downward spiral that began in January. The same trend applies to the Shanghai Containerized Freight Index (SCFI), which recorded a 6% rise on the west coast and 8.5% on the US east coast from Asia.

The rebound in rates between Asia and the United States could nonetheless prove short-lived. Judah Levine, an analyst at Freightos, warns for example that “many American importers rushed their shipments before the new tariffs took effect, but they could then suspend or reduce their orders until the situation stabilizes, causing a sharp drop in volumes and prices.” Many bookings have already been canceled in Asia.

On Asia-Europe routes, by contrast, rates continue to fall under the combined effect of overcapacity and slowing trade. The Shanghai-Rotterdam rate lost 3% this week, according to the WCI, while Shanghai-Genoa dropped 4%. Sea-Intelligence notes that capacity on the Asia-Europe axis jumped 27% compared with last year, worsening a chronic overcapacity situation that the increase in blank sailings is not fully managing to stabilize.

This chaotic picture is further complicated by Donald Trump’s announcements. Despite the divergences between maritime routes, the situation is extremely worrying for all professionals in the sector. With global volumes down 13.6% between January and February, and a 17.4% drop in North American imports, the risk of a severe contraction in world trade looms. Sea-Intelligence does not rule out a 2009-style scenario, when the financial crisis led to a 9% drop in global containerized volume.

Under these conditions, adaptation will be necessary. That is what Lars Jensen, founder of Vespucci Maritime, emphasizes: “For shipping lines, it is now a matter of navigating an extremely uncertain tariff regime, where duties can change rapidly, and dramatically, both upward and downward.”

War is declared

The whole world was having nightmares about it. Donald Trump did it. On April 2, he announced the imposition of a universal customs tariff of 10% on all imports from 185 countries and territories. He also added specific surcharges targeting some sixty countries. Among them, China is very hard hit (+34%), but so are South Africa (+30%), India (+26%), Japan (+24%), Australia (+24%), and the European Union (+20%). In this context, the effect on global markets is tangible, as they collapsed within a few days. Goldman Sachs now puts the risk of a US recession in 2025 at 45%.

The Chinese reaction was not long in coming, with the government retaliating with equivalent customs duties. Immediately, Donald Trump threatened to raise the stakes with an additional 50% tariff on Chinese imports if the retaliatory measures were not lifted… In this global trade war, that particular front is especially hot.

Unlike China, the European Union is playing the caution card. Brussels is preparing a counter-measures plan covering $28 billion worth of American products, but the priority seems to be keeping the door open to negotiations: “We must respond without escalation,” said Dutch Trade Minister Reinette Klever. More offensive, Emmanuel Macron called for suspending European investments in the United States, such as the CMA CGM group’s recent $20 billion project. While the 27 are speaking with one voice for now, their unity remains fragile.

In this incendiary context, the ocean freight sector is more than ever in wait-and-see mode. If the immediate effects are limited, trade routes could be redrawn. Cliff Xu, CEO of Rhenus Air & Ocean for China, “expects a reorientation toward Southeast Asian countries.” Likewise, free-trade zones and bonded warehouses are already being developed in the United States.

A week after the announcements, the situation therefore remains extremely confusing. Donald Trump seems dug in on his promise to rebalance the American trade balance. But this strategy worries even the highest levels of the state. Elon Musk, for example, is calling for a free-trade agreement with Europe… To be continued.

For now, one can above all fear a “nuclear economic winter,” to use the phrase of billionaire Bill Ackman, who had backed Trump in 2024.

A new map of the world?

Until April 2, air freight experienced a rebound in rates fueled by the anticipation of customs measures imposed by the Trump administration. According to the Baltic Air Freight Index (BAI), global air freight rates climbed 7.1% in March, for an annual rise of 5.1%.

The new customs duties and the removal, on May 2, of the de minimis exemption on Chinese shipments could bring about a reversal of the situation. After this phase of frenzied frontloading, there could be a significant collapse in volumes and prices. Added to this is another difficulty: the ability of US customs to process the new customs tariffs, which could lead to enormous delays and strong customer dissatisfaction. In response to this volatility, companies such as Hellmann Worldwide Logistics are betting on flexible contracts and route diversification.

In the longer term, the erosion of China’s cost advantage could lead to a relocation of production toward Europe or Southeast Asia, according to Brinkley Chan, a Hong Kong-based consultant. A recomposition of flows that could durably redraw the map of air freight: the world’s logistics map is undergoing a profound transformation.

Toward a sail-powered container ship?

Windcoop, a French cooperative, is taking a new step by launching the construction of the very first sail-powered container ship. At 91.3 meters long, with a capacity of 210 TEU and equipped with a vertical loading system, this vessel was designed in partnership with RMK Shipyard. It will link Madagascar to Europe. It was produced thanks to an original cooperative model bringing together 1,600 members, including companies such as Valrhona, Prova, and Cafés Richard. Through this, Windcoop managed to raise 6.8 million euros in two years. The ship will combine an asymmetric sail with loading by conventional port cranes in Marseille. It will also be equipped with an onboard crane to serve less well-equipped ports in Madagascar.

👋 See you next week, The Merchant team

Sources

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