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The Merchant · n°154 · July 10, 2025

Tariff chaos deepens as deadlines multiply

Figure of the week

30,000 According to Linerlytica, this is the number of TEUs that would have to be removed each week over the next four weeks from the rotation on the trans-Pacific routes in order to halt the collapse of rates.

Quote of the week

“We have decided to move forward with you, but only with a more balanced and more equitable TRADE.” In two nearly identical letters to the president of South Korea and the prime minister of Japan, on July 7, 2025, Donald Trump extended the negotiation deadline to August 1, while threatening both countries with a 25% surcharge if no agreement were reached.

The free fall continues on the trans-Pacific routes

For the first time in 2025, it is now more expensive to ship a 40-foot container from Asia to Northern Europe than to the US west coast. This inversion underscores the growing divergence of rates between the two major East-West routes. On the one hand, spot rates on the Asia-Northern Europe route rose by 8% last week, to their highest level since December 2024. On the other hand, trans-Pacific rates continue to collapse after the peaks of early June: at the end of last week, the Freightos FBX index noted, for example, a 39% drop.

The Asia-Europe lane benefits from a certain balance between supply and demand. This is favored by the capacity adjustments that took place in May and June in favor of the trans-Pacific routes. While the frontloading phenomenon was overestimated between China and the United States, it is this overcapacity situation that is weighing on rates. Indeed, the decline in demand was only partial - US imports from Asia fell by only 5.6% in two months - but the overly rapid increase in supply unbalanced the market. Worse! Even as imported volumes from Vietnam or Indonesia explode (+34% and +33% respectively), this is not enough to offset the excess of ships…

The withdrawal of a few services by operators such as MSC remains insufficient according to Linerlytica, which estimates that about 30,000 TEUs per week would have to be cut to reverse the trend. To adjust supply to demand, carriers have multiplied blank sailings on the Asia-United States axis, which now concentrates 57% of the canceled departures planned through mid-August, compared with 29% on Asia-Europe and 14% on the North Atlantic. These efforts are nonetheless too scattered, especially as volatility is fueled by uncertainties surrounding US tariff policy toward China. At this hour, it is therefore difficult to imagine a recovery in freight rates on the trans-Pacific routes.

Will the tariff war take place?

The date of July 9, initially set by Donald Trump to enact the entry into force of massive tariff increases if agreements had not been found, was pushed back to August 1 for many countries. This postponement, made official by a presidential decree, in no way calms the situation. This announcement, which came with new threats, worried many observers: the S&P 500 index fell by nearly 1% on Monday, and Japanese manufacturers saw their shares decline.

The situation is highly variable. On the European side, it seems the Union has adopted the Italian proverb: Chi va piano, va sano e va lontano. Without fanfare and with discretion, the Europeans have been negotiating for three months, with Brussels seeking to avoid a doubling of tariffs, which would go from 10% to 20% in the absence of an agreement. It would appear that a compromise is about to be negotiated: Washington proposes to maintain the base rate of 10% on European products, with targeted exemptions on spirits and aeronautics, which would satisfy notably France, Italy and Ireland. On the eve of the July 9 deadline, other sectors saw their exemption requests go unanswered, for example automotive, pharmaceuticals or metallurgy. If the agreement appears close, Commission President Ursula von der Leyen must nonetheless intensify her exchanges with the member countries, divided between those who want a quick agreement and those who refuse any asymmetric concession… at the risk of seeing a new tariff increase.

Elsewhere, the negotiations are becoming tense - to the point where the United States appears ready to fall out with its main allies, such as Japan or South Korea. The leaders of these two countries received formal letters announcing tariff increases to 25% starting August 1. Other countries - Malaysia, Indonesia, South Africa, Kazakhstan or Bangladesh - would face increases ranging between 25% and 40% if they did not reach an agreement. The timeframe is tight, underscoring that the Trump administration has not abandoned its plans from last April. Finally, the US president also warned the members of the BRICS that they would expose themselves to additional sanctions if they adopted policies deemed “anti-American” - without specifying what he meant by that.

In this context, panic is palpable: some countries, such as Thailand, have urgently proposed partial bilateral agreements. But this haste is worrying for all industry professionals. As Peter Sand, chief analyst at Xeneta, points out: “Such massive upheavals in so little time can be disastrous for some companies, which are currently assessing their options: how to continue operating under this new tariff regime?”

A Canal for the future

Plans galore at the 10th International Financial Summit of Panama! The Panamanian Minister for Canal Affairs, José Ramón Icaza, took stock of the country’s 25 years of direct management of the Canal. He first hailed a “responsible” management, marked by the successful 2016 expansion, a 30% rise in transits in the second quarter of 2025, and a 13% growth in annual revenue. The minister also emphasized the macroeconomic impact of the interoceanic waterway, which represents 2.9% of Panamanian GDP, generating thousands of jobs. The summit was also an opportunity to give an interview in which he recalled that the country’s sovereignty over the canal, recognized by a neutrality treaty, implies that all navigation, including military, remains subject to the payment of transit tolls. In doing so, he rejected any idea that a country could be exempted from it - a way of responding to the many US officials who say they want to assert US tutelage over the Canal.

The speech was also an opportunity to sketch out the strategic vision for the Canal’s future, detailing a series of projects aimed at consolidating it as a major logistics and energy platform. The country thus intends to build the Río Indio reservoir with the goal of securing water resources. These are essential for the canal to remain navigable. Other projects are in the pipeline: an interoceanic gas pipeline intended to transport liquefied gas; the development of an intermodal logistics hub, which could raise the container handling capacity from 9 to 15 million TEUs per year. Planned for 2026 or 2027, the pipeline project would represent an investment estimated between 4 and 8 billion dollars, which would result in the creation of more than 30,000 jobs.

111 years after its inauguration, the canal intends to adapt to several challenges: climate change; the global energy transition; and the evolution of geopolitical fault lines, embodied notably by the increasingly aggressive posture of the United States.

👋 See you next week, The Merchant team

Sources

Go further

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