Weekly Newsletter

President Trump’s apparent softening on tariffs against China in recent days has buoyed markets and raised hopes for a detente between the world’s two largest economies. For Chinese leaders, it only strengthens their resolve that Trump will eventually cave if they wait him out. After weeks of spiraling hostilities, the administration now says they are willing to cut tariffs on Chinese goods. The administration is considering slashing levies in some cases by more than half in a bid to de-escalate tensions with Beijing, The Wall Street Journal reported last week.

A quick note on US shipbuilding… The United States is home to roughly 150 private shipyards, but only about 10 of these have the capacity to build ocean-going vessels. Among them, only one, Philly Shipyard, has a track record of constructing container ships. Currently, the yard is building two 3,600 TEU vessels for Matson. In 2024, the South Korean company, Hanwha entered into a purchase agreement to acquire Philly Shipyard. The deal was finalized on December 19, 2024, with Hanwha acquiring the shipyard for $100 million. Hanwha is Korea’s 7th-largest business conglomerate with a broad footprint that includes aerospace, solar energy, shipbuilding, and retail. In 2023, the company also acquired Daewoo Shipbuilding & Marine Engineering, further expanding its influence in the global shipbuilding sector. So, where exactly are we planning to build our new containerships again?

Both the International Monetary Fund and World Trade Organization are forecasting severe falls in trade as a consequence of the administration’s policies. These macro-economic outlooks have the IMF expecting a 0.5% decline from its January forecast for global GDP and 0.9% decline in US GDP, while the WTO forecasts a 0.2% fall in world merchandise trade.

As a result of these downgrades in economic activity, there is now a forecast of a 1% decline in container moves, including loaded, empty and transshipment cans. That's roughly the same level of contraction that the market saw in 2020 with COVID.

North America is expected to see volume declines of 5.5% and 4.6% in 2025 and 2026 respectively, with China taking a 4.8% hit, but recovering faster than the US, returning to growth next year, of around 1.6%, after finding new markets. There may be few upsides for container shipping from this trade war. Maritime consultants have viewed the possible effects on container shipping should tariffs and port fees enter into force as currently proposed but warned that most data does not allow for Chinese countermeasures.

As to the USTR fees, one consideration could be the expansion of slot agreements and vessel-sharing arrangements to shift volumes onto partner-operated vessels that fall outside the scope of the USTR measures. Other potential remedies would be potential hub and spoke reconfigurations, effectively using ports such as Kingston, Cartagena, and Freeport to unload Chinese vessels, with non-Chinese built feeders delivering to the US. A third possibility would be to use ports in Mexico and Canada delivering into the US by road and rail, which would add cost and complexity to supply chains.

Charter market options for compliant vessels will likely remain tight, but shifting non-Chinese built vessels into US trades will be a possibility for carriers and their alliance partners. Charter rates for non-Chinese built ships could spike, affecting all carriers with spot charters (especially ZIM and smaller operators). If tariffs are also introduced, the impact would deepen above all due to acceleration in sourcing shifts away from China.

Both the Premier Alliance and Gemini Cooperation have a low exposure to Chinese-built vessels operating in US trades, making them best placed to adjust services with the least disruption. China’s state-owned carrier Cosco’s fleet is 53% Chinese built, and its Ocean Alliance partners OOCL, a Cosco subsidiary, and CMA-CGM may offer some flexibility for Cosco, but this will not be enough to shield Cosco from major impacts. Moreover, smaller independents, without the protection of a larger alliance including Zim, Swire and Seaboard are more exposed to the policy shifts. MSC, the world’s largest carrier only has 12% of its fleet built in China but has operated as an independent since February. With no alliance to share costs or adjust rotations, MSC must absorb impacts and respond with its own resources.

As the tariff dominance unfolds between the U.S. and China, there’s a tentative sense of optimism on the ground in China, that this standoff might blow over within two months, or even sooner. The ripple effects are being felt. Some factories, particularly those reliant on U.S. orders, have shut down their operations completely. Many more are grappling with abrupt order cancellations and an atmosphere of uncertainty that makes future planning nearly impossible. Add to that the recent introduction of steep port fees imposed by the U.S. Trade Representative on China-bound vessels, and we could be looking at a full-scale trade freeze. 

Importers are facing significant challenges due to steep tariff increases on Chinese imports, with rates surging as high as 145% on certain goods (125% reciprocal tariffs on top of 20%) . These sudden hikes are disrupting logistics operations, prompting widespread cancellations of orders, and forcing companies to reassess their global supply chain strategies. The key challenge now is how these companies will approach their suppliers for future orders. With tariffs remaining a significant factor, shippers are evaluating whether to stick with traditional suppliers or seek new options that may help mitigate the higher costs associated with tariffs. In particular, businesses are carefully considering which countries remain viable for long-term sourcing relationships. The goal is to identify regions that offer cost-effective manufacturing without the heavy financial burden of tariffs or unexpected policy shifts.

Many BCOs are simply playing a wait and see game, suspending orders for 30 to 60 days with the hope that calmer heads will prevail, and tariffs will come back down. 

DHL Group has temporarily suspended business-to-consumer or B2C shipments to the US with a customs value exceeding $800. In a statement, the company attributed the decision to recent Customs regulatory updates amid the ongoing tariff issues. The firm said it is experiencing multi-day transit delays to the US from any origin for shipments with a declared customs value exceeding $800.

ZIM is temporarily suspending their Central China-US West Coast service due to the current market conditions brought on by the reciprocal tariffs. Originally started from July 2024, the 13-day service departed from Ningbo heading to Los Angeles. Additionally, the Taiwan-based T.S. Lines also has shut down its service connecting South China ports with Los Angeles due to the slowed trading demands.

Container lines have blanked at least 80 sailings this month compared to 51 in March 2020, when volumes crashed amid early COVID-19 lockdowns.

Carriers (VOCCs) are entering contract negotiations with higher rate expectations, aiming to recoup revenue from previously underpriced services. Initial quotes for the 2025–26 contract year are reflecting a 25% increase from the prior year. Real rates, however, have been lower.

Uncertainty over the administration’s changing tariff policy is claiming another casualty: the traditional timeline for the signing of annual service contracts between ocean carriers and importers in the TPEB trade. The typical timeline for closing deals has been delayed by at least two weeks. The reason is confusion over how tariffs in general, and the trade war between Washington and Beijing specifically, will affect commerce on the busiest trade lane over the next 12 months. While VOCCs and their largest retail customers are continuing to disagree over pricing levels in the 2025–26 service contract negotiations, the tariff uncertainty is causing hesitation among shippers who need to make a final decision on the volumes they will import as part of the so-called minimum quantity commitments (MQCs) that must be adhered to during the life of the contracts. 

Container lines and major US importers generally conclude annual service contract talks by early April, with NVOs nailing down their own contracts by late April or early May. Carriers normally extend existing contracts beyond the typical April 30 end for smaller importers and NVOs who are in the final stages of contract talks.

Maersk introduced a $1000 PSS for May and another $2000 for May 15th. Many expect rates to climb in May even with capacity increasing and tariffs imposed. Expect contract rates to come down (though higher than 2024) and FAK/spot rates to climb.

The TPEB market will experience an oversupply of capacity, with container volumes projected to grow by 3-4%, while capacity increases could outpace that demand. This imbalance may lead to intensified competition among carriers and influence rate structures. However, with tariffs implemented, carriers are now skipping China Ports and implementing blank sailings thereby reducing capacity from China. 

The cancellation of the de minimis rule is a clear example of President Trump's broader strategy to recalibrate trade with China and reduce the long-standing U.S. trade deficit. The de minimis threshold, currently set at $800, allows individual parcels valued below this amount to enter the United States duty-free and with minimal customs oversight. While originally intended to streamline low-value imports and ease the burden on customs authorities, the rule has become a key conduit for small, direct-to-consumer shipments from China, often bypassing tariffs imposed on bulk commercial imports. The rule expires on May 2nd.

This loophole has been widely exploited by Chinese e-commerce platforms and suppliers, enabling a massive volume of inexpensive goods to enter the U.S. market without contributing tariff revenue. It has also fueled the rise of cities like Yiwu, a once-obscure industrial hub located south of Ningbo in Zhejiang Province. Yiwu has become synonymous with high-volume, low-cost manufacturing, housing more than 75,000 vendors that cater primarily to U.S. buyers. The city has emerged as a critical player in global small-package trade, with an estimated 60% of its exports bound for the United States. Yiwu’s suppliers are also responsible for producing around 90% of China’s Christmas decorations, underscoring the city’s central role in supplying seasonal and consumer goods to American retailers.

Thailand's export growth in March was higher than February's 14% annual rise, while tariff negotiations with the US set for this past week are expected to proceed positively, the commerce minister said on Monday. Pichai Naripthaphan said exports, a key driver of the Thai economy, would continue to grow if the negotiations went well. "I believe the outcome of the negotiations will likely be good and have a high chance of success," he told reporters, citing the strong relationships between the two countries. Sourcing changes?

According to JMC, the introduction of new tariff regulations is expected to significantly disrupt port activity, particularly at major U.S. gateways like the Port of Long Beach and Port of Los Angeles. While tariff changes may seem like a distant policy issue to some, the repercussions ripple far beyond the docks, affecting the economic lifeblood of the cities, regions, and even the country as a whole. 

Ports are not isolated entities; they are complex ecosystems deeply embedded in a vast network of supporting industries. A decline in imports due to higher tariffs means fewer ships calling at the ports. This reduction directly translates into fewer longshore jobs, less work for drayage and trucking companies, reduced throughput at off-dock container yards, decreased activity at cross-dock operations, less customs entries, and less demand at distribution centers. Exporters and importers alike will feel the strain, and many small to mid-sized businesses that depend on global trade may face operational or financial hardships. 

The POLB/POLA complex, the largest in the United States, is a cornerstone of the national supply chain and supports over 3 million jobs across the country. A slowdown there has far-reaching consequences, not just for California, but for the U.S. economy at large. In 2022 alone, the combined direct and indirect activities tied to these ports generated approximately $2.78 billion in state and local taxes and $4.73 billion in federal tax revenue. These figures underscore the ports' critical role as engines of economic vitality.

Simply put, fewer vessels don't just mean quieter docks, they mean a contraction of jobs, business revenue, and public funding. The ripple effects are unavoidable. Whether it’s the trucker hauling containers inland, the warehouse employee processing inventory, or the city relying on tax revenue to fund public services, the impacts of reduced port activity due to tariff changes are widespread and deeply felt. No one is immune to the cascading effects of trade disruption, and the new tariff rules could mark the beginning of a significant economic shift if not managed with strategic foresight.

Antwerp-Bruges overtook Rotterdam in the first quarter to assume the mantle of Europe’s busiest container port, handling 3.43 million TEUs against its Dutch rival’s 3.36 million TEUs.

On July 19th sweeping changes will come to the less-than-truckload (LTL) classification system and shippers are wrestling with how to prepare for them. The reclassification being pursued by the National Motor Freight Traffic Association is meant to shift more products to density-based LTL classes, and that could affect how much LTL shippers pay to ship goods.

Many shipments have had poor NMFC information or dimensional information on bills of lading that it was very cumbersome to make such a judgement. While many shippers are proactive about the NMFC changes, others may be waiting until July to see how things shake out. Some shippers may resist accepting reclassification in a time of soft LTL freight demand, especially if it results in higher rates. But those companies can expect more shipment inspections, reweighing, and, as a result, changes to freight invoices, as almost every LTL carrier is working with a costing model and knows what its charges should be based on operating costs. Some will try to switch to another carrier that quotes a cheaper rate, but in a few months, they will likely come back to you and demand a rate increase, because the pricing they offered was not working. The reimagination of the NMFC will affect more than 2,000 NMFC items, moving them into full-scale density classes. Although the NMFC doesn’t set prices, it is used to determine rates in motor carrier pricing tariffs.

The Trump administration is threatening to stop future federal approvals for transportation projects in Manhattan and may withhold funding if New York City’s congestion pricing program continues. The threat issued on April 21 comes after the MTA, which is implementing the new toll on motorists driving into parts of Manhattan, continued charging drivers after the U.S. Department of Transportation’s April 20 deadline to end the program.

In a letter to New York Gov. Kathy Hochul, Transportation Secretary Sean Duffy said that his department will stop giving authorizations on advance construction projects or National Environmental Policy Act approvals for plans within Manhattan, except for safety projects, unless the MTA ends congestion pricing by May 21.