The Merchant · n°157 · July 31, 2025

Trade tensions ease, shippers face ongoing ambiguity

🚢 What rates on the September horizon?
🇪🇺 EU-US: agreement and disagreements.
📉 Discover the back-to-school crisis?

Figure of the week

$1,500,000,000 This is what the 15% tariff would cost Volkswagen, according to the flagship of the German automotive industry. The manufacturer is therefore considering relocating part of Audi’s production to the United States.

Quote of the week

“Trump has made tariffs the central axis of global trade.” According to Maria Tadeo, correspondent for Le Grand Continent in Brussels, in a hot take on the agreement signed Sunday, July 27, between the European Union and the United States.

A restless summer for rates

Despite an extremely unstable first half on the logistics and geopolitical fronts, global container volumes traded rose by 5.3%, growing in every region except Oceania. During that same period, US imports from Europe increased by 8%, benefiting notably from the deterioration of the Sino-American relationship - particularly when the trade war raged in April-May. Despite this rise in trade, the outlook for the second half is darkening.

In late July, freight rates continue to fall on most major routes, in the continuation of the reversal that began in June - even though they remain far higher than in May on the Asia-Europe route. The Shanghai Containerized Freight Index (SCFI) thus fell for the seventh consecutive week: on the Asia-United States route, spot rates plunged by 5% toward the west coast and by 7% toward the east coast in a single week. For example, the average rate for a container shipped from Shanghai to the US west coast fell by 6.4% last week. In the case of the Asia-Europe route, the decline is less uniform, but rates toward Northern Europe nonetheless fell by 1% while those toward the Mediterranean fell by 6%. In Asia, several carriers are announcing significant rate increases, but it is possible they will not hold: the overcapacity effect continues to weigh heavily.

The outlook for August is mixed. It is nonetheless certain that there will be no summer truce in the logistics upheavals we have been facing since last January. The implementation of the US 15% tariffs on European products starting August 1 should cause a decline of more than 10% in US imports, since it is the importers who will have to foot the bill. This would help reverse the first half’s trend. For now, the market remains tight, with ships full four weeks out, but demand appears to be softening. And between the drop in imports and the overcapacity on the trans-Atlantic lanes (+16% year on year), it is currently very difficult to predict in which direction rates will go in the fall.

An agreement. Many questions.

On Sunday, July 27, Donald Trump was playing golf in Scotland. Between two holes, he finally concluded a trade agreement with the European Union. By its scale, it is the most important of his second term. Starting August 1, the United States will apply a uniform tariff of 15% on the majority of European exports, including automobiles. For that sector, it is a notable decrease compared with the 25% that had been in effect since April 3, but it remains far higher than the 1.5% applied before Trump’s return to power… For its part, the European Union conceded on many points. Ursula von der Leyen, who had a mandate from the 27, agreed to eliminate entirely its tariffs on US imports. In addition to this strictly tariff dimension, the agreement includes European purchases of US liquefied natural gas (LNG) worth 750 billion dollars, a commitment to 600 billion in European investments in the United States, as well as orders for military equipment.

Several sensitive sectors remain outside the perimeter defined by the agreement: the 50% tariffs on steel and aluminum are thus maintained. A quota mechanism was indeed mentioned by the Commission… but on that matter, Donald Trump has amply demonstrated that his promises bind only those who believe them. Very quickly, contradictions appeared: Ursula von der Leyen claimed that pharmaceutical products would be covered by the agreement, which Donald Trump immediately contradicted.

A true manifestation of the imperial conception of tariffs that Donald Trump holds, this agreement elicited mixed reactions within the European Union. Germany and Italy, the main industrial exporting powers, supported the agreement, preferring this solution to a confrontation that could prove much more costly. For its part, and although it had given a mandate to Ursula von der Leyen, France denounced excessive concessions and regretted that the European Union imposed no counter-measure. As a final concession to the US president, Ursula von der Leyen took up the Trumpian talking points on the trade imbalance between the two blocs, notably asserting that Europe had to “rebalance” its trade. This is a genuine break with the EU’s traditional position, which until now insisted on the complementarity of the two economies. On the American side, Donald Trump hailed a diplomatic victory. This new agreement comes after the United Kingdom (10%) and Japan (15%). It therefore seems that 15% has become the new US tariff norm.

The agreement raises many questions, which will only be clarified gradually. First of all, the massive purchase of US LNG is supposed to reduce dependence on Russian gas, but it makes Europe more vulnerable to an extraterritorial energy logic while heavily compromising its climate objectives. More generally, it is clear that the Union chose to stabilize the relationship with the United States in the short term, at the cost of a lasting asymmetry. The future will tell whether that was the right choice. Moreover, the agreement signed with the European Union does not put an end to the uncertainty opened last April.

Many countries have not yet signed an agreement with the United States, beginning with Canada, whose relationship with its neighbor has continued to deteriorate. If these states have not found a solution before Friday, the increases announced by Trump at the start of the month will come into force… unless the deadline is pushed back again. Finally, there remains one central question: the Sino-American relationship. According to the Wall Street Journal, Trump would like to conclude an economic agreement with Beijing that would open China further to US companies and technologies. A matter to follow over the summer.

Toward a fall crisis?

Since spring, US importers have faced an explosion in the amounts of customs bonds required by the authorities. Each company must maintain a guarantee equivalent to at least 10% of the duties it estimates it will owe over a twelve-month period. But with tariff increases that can reach 25%, many US importers are seeing their coverage obligation jump from 50,000 to several hundred thousand dollars. Or even more… These high bonds often require cash deposits or letters of credit, which creates enormous pressure on the cash flow of some companies. Worse still, it is not possible to adjust the existing bond. A company that sees tariffs rise must take out new bonds without the previous ones being refunded… This leads to a stacking of guarantees that considerably increases their financial exposure.

Until now confined to the logistics sector, this situation could quickly cause a systemic crisis. Small and medium-sized enterprises have neither the financial cushion nor the access to credit of large structures. They therefore risk no longer being able to cover the required amounts: their goods would then be blocked in customs… and their operations paralyzed. On a large scale, the current rigidity of the bonding system is not designed for the tariff instability created by the Trump administration. As it stands, there is a real risk of cascading bankruptcies. These would reduce the flow of imports… which would cause strong pressure on consumer prices. All this reveals a structural vulnerability of US trade, which could cause a genuine administrative and financial shock.

👋 Next departure in September, The Merchant team

Sources

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