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The Merchant · n°158 · September 4, 2025

Plummeting tariffs in the oceans

Figure of the week

4,500,000 According to Linerlytica, this is the container-ship capacity, in twenty-foot equivalent units (TEUs), that will have to be scrapped by 2030 in order to offset the current boom in orders for new vessels.

Quote of the week

“ALL TARIFFS ARE STILL IN EFFECT!” On August 29, Donald Trump posted on his Truth Social network in reaction to a court ruling declaring illegal some of the tariff surcharges he had imposed. The case will be reviewed by the Supreme Court in October.

Falling rates, toward a new normal?

On the Asia-Europe route, freight rates continue to decline. The slight uptick recorded this week by the SCFI index changes nothing: the eleven weeks of decline are set to continue. As Lars Jensen, founder of Vespucci Maritime, notes, peak season will have lasted only a short time: MSC has already canceled several sailings, several weeks before China’s Golden Week. This downturn reflects the ebb in demand. Linerlytica notes a significant drop in booking volumes - between 5 and 20% in just a few weeks. Drewry also forecasts further declines in the coming weeks.

The situation is even more critical on the trans-Pacific routes. Lars Jensen points out, for example, that after weeks of decline, rates there are now approaching pre-Red Sea crisis levels, a period that had been characterized by heavy overcapacity. For his part, Peter Sand (Xeneta) notes that “the fourth quarter will again be loss-making, despite profits banked earlier in the year.” For his part, John McCown, founder of Blue Alpha Capital, notes that, on this route, imports into the United States could plunge by 17.5% between August and December. Should it actually materialize, this contraction would be unprecedented in its scale. The sector must prepare for a fourth quarter dominated by blank sailings and increased pressure on prices.

On the trans-Atlantic route, rates are more stable, even if they have been stagnating at levels deemed barely profitable for several weeks. In a context made all the more tense by the fierce competition among the carriers, they are trying to curb the erosion of their margins: Hapag-Lloyd recently launched a cost-cutting program with the goal of saving one billion by the end of 2026. There nonetheless remains one thorny problem: overcapacity. For now, the carriers have not really tried to cut excess capacity, but this could become a fundamental issue: according to Sea-Intelligence, global capacity supply is expected to grow by a further 5 to 8% per year over the coming years. It is hard to imagine demand keeping up with that pace. In short, the fall in rates could be symptomatic of a genuine structural transformation.

An endless war

The tariff war is far from over. In Europe, the European socialists are up in arms against the deal signed by the European Commission this summer… Will they be able to scupper the deal? But this is not the most important episode in this endless saga. The tariff increases decided by Donald Trump now hinge on the Supreme Court’s verdict. The Federal Court of Appeals for the Washington circuit ruled illegal most of these “reciprocal tariffs”: according to some of the judges, the president overstepped his powers by invoking the International Emergency Economic Powers Act (IEEPA) of 1977. The judges’ decision notably emphasizes that the IEEPA mentions neither tariffs nor taxes, and that “the power to levy taxes belongs to Congress.” The tariffs targeted by this ruling - notably those weighing on nearly all US imports and on fentanyl coming from Mexico and Canada - will remain in effect until October 14, the date on which the Supreme Court is expected to hand down its decision!

That decision could prove historic given how colossal the stakes are. If the Supreme Court were to uphold the increases, it would strengthen presidential latitude in trade policy, which would give Donald Trump new room to maneuver to reshape the global economic order, while an invalidation could open the way to massive refund claims and undermine a pillar of Trump’s economic program.

On the US administration’s side, Treasury Secretary Scott Bessent says he is confident that the Supreme Court will uphold these measures in the name of the economic and health emergency. He notably recalled the 70,000 annual deaths linked to fentanyl, one of the first causes invoked by Donald Trump to raise tariffs: “If that isn’t a national emergency, what is?” In line with the administration’s tariff doctrine, he is reportedly preparing a brief insisting on the growing scale of trade deficits, equated with a threat to national security. In the event that the Supreme Court were to rule against the tariffs, Bessent also sketched out a plan B: recourse to a 1930 law (Smoot-Hawley), which allows temporary surcharges of 50% in cases of commercial discrimination.

One thing is certain: nothing will be over come October 14.

Is there a pilot on the plane?

It is the end of a paradoxical summer for air freight. On the one hand, the season was marked by a temporary rise in the volumes traded. On the other, tariff uncertainty weighed on many players.

According to the International Air Transport Association (IATA), global demand grew by 5.5% in July in tonne-kilometers. It was notably driven by the Asia-Europe axis and by frontloading ahead of the entry into force of the new US surcharges. Willie Walsh, the association’s director general, nonetheless warned that the results for “August would better reflect market conditions.” At the end of the month, the first figures on the Asia-North America axis already recorded a 1% decline year on year. From this standpoint, the end of the de minimis exemption, which came into force a few days ago, has abruptly slowed trans-Pacific trade…

Faced with the collapse of the China-United States flow, carriers must redeploy their capacity to other territories, whether Latin America or Europe. Despite freight rates that are broadly stable out of Hong Kong - the effect of a low season - the geographic reshuffling is accelerating, particularly on the Asian continent: Vietnam, Thailand and Malaysia are gaining in importance, driven by electronics and AI servers. Instability nonetheless remains the rule. It is fueled both by tariff uncertainty and by inflationary risk, which would notably affect maintenance costs.

It would take a very clever person to say today what the summer of 2026 will hold for the air sector.

👋 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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