New tariffs will hit shippers just before peak season

Figure of the week

33% The percentage of the world helium supply that could be potentially affected by the de facto closure of the Strait of Hormuz, according to early estimates. Qatar is one of the world’s leading suppliers of helium, a key input in many products. Rises in helium prices have the potential to impact costs of semiconductors, medical devices and other products and could feed into consumer electronics.

Quote of the week

“Section 301 was originally intended as a tool to get countries to negotiate and remove barriers to US exports. This administration appears keen to retaliate first and discuss mostly later.” Deborah Elms, head of trade policy at Singapore-based Hinrich Foundation, outlines how the USTR is intending to use Section 301 of the Trade Act to justify a new tariff regime.

New tariffs will hit shippers just before peak season

Following its Supreme Court setback, the Trump administration appears to be making good on its threats to continue its tariff policy by other means . Shippers received a boost in February when the Supreme Court overturned a large part of the administration’s tariff policy. However, Treasury Secretary Scott Bessent said then that the government would continue its tariff policies by any means necessary. This week it seemed to be starting to put the next steps in its tariff policy into practice. Until now, the administration has used Section 122 of the Trade Act to temporarily impose 10% tariffs on all US imports as a replacement for the IEEPA tariffs that were struck down. However, Section 122 duties will expire on July 27. The longer-term replacement is a series of tariffs levied under Section 301. In order to impose Section 301 tariffs, the country in question must have certain trade barriers against the US. These could include “structural excess capacity” or forced labor. To help ensure these tariffs can be imposed by July, the US Trade Representative has launched Section 301 investigations on most of the US’s trading partners. The timing of these new USTR’s investigations indicates their purpose — they are being launched to help justify a series of new tariffs. Normally the results of the USTR fact finding would lead to negotiations. In this case it appears unlikely they will be used for any other purpose than to provide a legal fig leaf for tariffs. The new tariffs are likely to land just before peak season, creating more cost pressure and new administrative challenges for shippers. And unlike the previous round of IEEPA tariffs, this new round is unlikely to be struck down by the courts, legal experts have indicated. Tariffs under Section 301 will be difficult if not impossible to challenge legally. Any shippers still celebrating the demise of the IEEPA tariffs should probably put the champagne on ice .

Air cargo shippers feel Middle East ripple effect

Disruptions to the Middle East’s air freight hubs and airline operations are causing knock-on effects for trans-Pacific services . The effects of the US-Israeli attack on Iran are already starting to feed through onto trade lanes outside the Middle East. Average global air freight rates rose 6% week on week, according to WorldACD, with the cost of jet fuel almost doubling since the beginning of the conflict. Carriers such as Oman Air Cargo have already warned of imminent fuel surcharges. Trade lanes originating in or passing through the Middle East have been most affected. But the importance of Gulf carriers such as Emirates, Qatar Airways and Etihad, as well as the transshipment roles of key Middle Eastern hubs, has led the conflict to have a disproportionate impact on global capacity. As a result, customers are increasingly being advised to plan shipments seven to 10 days in advance. They are also being warned to prepare for fuel surcharges in coming days, particularly from Chinese airlines .

Shippers face pressure on multiple fronts

With the Middle East conflict showing no signs of resolution and the US government taking steps to implement a new tariff regime (see story above) shippers are facing pressure on multiple fronts . Maersk chief executive Vincent Clerc has warned that rising transport costs as a result of the war in Iran will be passed on to shippers and eventually consumers. At the time of writing, oil prices stood at around $102 per barrel, but many analysts have given up trying to predict where prices are heading due to extreme volatility. There is also rising awareness of the potential wider supply chain fallout of the conflict, with supplies of helium, aluminium and fertilisers particularly affected. Shortages of these inputs could begin to create cascading effects throughout supply chains as seen during the pandemic. At the same time, more clarity has emerged over the status of the Strait of Hormuz. It currently appears that Iran is prepared to let through vessels that are not linked to countries it considers to be enemies. Reports that it has begun mining the strait have not been confirmed. However, despite the potential supply chain shock caused by the Middle East conflict, indications are that 2026-27 container service contracts are being signed at higher than expected rates. Walmart has already finalized its contract, and analysts are expecting other major retailers to follow suit over the next week. This will open the door for smaller shippers to sign their own contracts. One carrier executive who did not want to be named told the Journal of Commerce, “We have now seen an unpredictable shock to the global ocean market in four of the last six years. “Some BCOs recognized that and wanted to take risk off the table. They signed early and at higher rates than many were predicting.” For now, shippers’ concerns about fuel costs are rising, with several carriers having already announced imminent emergency fuel surcharges. Due to FMC regulations, these require one month’s notice before implementation. Shippers therefore should brace for surcharges from early April onward .

🤔 Did you know ?

US Customs and Border Protection has said it could start to repay IEEPA tariffs as soon as April after being ordered to expedite refunds by the Supreme Court. CBP said refunds could begin once it has completed a series of technology updates. Overall, it is due to refund $165 billion plus interest, with around $650 million in interest accruing each month. The interest due may be incentivizing CBP to pay refunds sooner rather than later, despite the administration’s desire to slow the process.

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