Prolonged tension in some of the world's biggest trading partners could result in subdued peak season demand and rates, as well as shifts in supply chain patterns, according to a new Freightos analysis.

U.S. President Donald Trump — after a one-month postponement — introduced 25% tariffs on all Mexican and Canadian imports to the US and added another 10% tariff increase on Chinese goods in early March.

The U.S. Commerce Secretary stated later in the day that negotiations are ongoing and could result in some reduction of or exceptions to these tariffs by late Wednesday, with a one-month exemption for automakers announced by mid-day.

Freightos said goods from China, Mexico, and Canada made up about 40% of total US imports by value in 2024.

"The consensus among shippers, forwarders, and carriers at this week's TPM conference was that although these trade barriers will drive more diversification of US sourcing partners, these steps will first and foremost be felt as higher costs for importers and likely higher prices for consumers."

It added that the tariffs will also hurt U.S. exporters as Canada and China have already announced retaliatory actions, and Mexico will reveal its countermeasures moving forward.

Freightos said many shippers had been frontloading imports from China since the election in anticipation of Trump tariff increases, and the president's proposed 60% tariffs on Chinese goods could go into effect as soon as April – as could a wider application of reciprocal tariffs on numerous countries.

"Duties now at 20% across the board for Chinese imports – tariffs introduced on a broad but specific list of Chinese goods in 2018 reached a maximum level of about 25% – is likely already enough of an incentive to slow the pace if not end the pull forward seen in the last few months," it added.

The new Freightos analysis noted that the combination of a seasonal slump in demand and the possible end of frontloading likely drove the sharp fall in transpacific ocean rates last week. 

Daily prices this week are already below US$3,000/FEU to the West Coast and US$4,000/FEU to the East Coast matching the post-Lunar New Year lows hit in April of last year.

"If frontloading of the past few months was significant enough, we could also expect to see subdued peak season demand and rates as a result," Judah Levine, head of research at Freightos said.

"Likewise, tariffs driving up inflation and negatively impacting consumer spending could also push down demand for ocean freight in H2," he added.

Port fees for Chinese-affiliated ships

Meanwhile, the USTR's proposal for port call fees for Chinese-made vessels, which could go into effect as early as April too, would also put upward pressure on rates into the US.

Levine cited MSC CEO Soren Toft's comments at the recent TPM conference that not only will the proposed fees for each U.S. port call mean hundreds of dollars per FEU in costs passed on to shippers – and possibly make transatlantic lanes serviced by smaller vessels uneconomical – they will also drive carriers to omit calls at smaller ports, leading to lower volumes at these ports and possible congestion and delays as more containers are routed through the major hubs.

"Though the 25% tariffs on Canada and Mexico are in effect and will likely stay in place in some form in the near term, de minimis eligibility for low-value imports from those countries – which was meant to be suspended along with tariff introductions – will remain in place for now," Levine said.

He added that U.S. de minimis eligibility for Chinese goods – a major driver of the surge of e-commerce goods moving by air from China to the US since mid-2023 – likewise has remained in place despite initially being suspended by the executive order that also introduced the first 10% tariff hike on China in early February. 

"Expectations that de minimis will eventually be canceled for Chinese imports is already leading to reports of canceled charters and a shift to ocean freight," Levine said.

Freightos Air Index China-US rates have dipped to less than US$5.00/kg compared to about US$6.00/kg a year ago, suggesting some easing of demand.

Levine noted that this level remains significantly elevated compared to the long-term average, though, reflecting that a big drop in volumes or release of capacity into the market has yet to materialize.