Tariff-Driven Turmoil in Ocean Shipping: A Strategic Reassessment for Investors

The global ocean shipping industry is navigating a perfect storm of trade wars, geopolitical tensions, and capacity imbalances, creating a landscape fraught with risk but also opportunities for investors who can decode the shifting dynamics. As U.S.-China tariff disputes escalate and de-escalate in a cyclical pattern, carriers are forced to recalibrate their strategies to preserve margins in a market defined by volatility. For investors, understanding how capacity control—through blank sailings, alliances, and fleet adjustments—intersects with trade policy is critical to assessing the long-term sustainability of this sector.

The Trade War’s Dual-Edged Impact on Capacity

The U.S.-China trade war has been a seismic force in ocean shipping. During the 2018 tariff surge under President Trump, spot rates for shipping from China to the U.S. West Coast spiked by over 70% [1]. In 2025, a temporary pause in tariffs led to a short-lived spike in Asia-North America rates, but the broader trend remains one of instability. Carriers are now grappling with a paradox: overcapacity in the face of softening demand. For instance, 45% of ships bound for the U.S. West Coast from China are idling outside China, with blank sailings—cancellations of scheduled voyages—rising sharply to manage this imbalance [2]. This has led to a 61% drop in Asia-to-U.S. West Coast spot rates year-to-date [1], underscoring the fragility of a market where trade policy can shift overnight.

The Red Sea crisis has compounded these challenges. Rerouting vessels around the Cape of Good Hope added 10–15 days to transit times and inflated fuel and insurance costs, with 40-foot container rates peaking at $5,901 in July 2024 before easing to $2,812 by July 2025 [3]. While carriers have imposed emergency risk surcharges, these measures have done little to offset the structural overcapacity driven by new vessel orders. In 2025 alone, 1.82 million TEU of net additional capacity is expected to enter the market [2], further pressuring rates.

Capacity Control: Blank Sailings and Alliances as Margin Sustainers

To mitigate these pressures, carriers have turned to aggressive capacity control. Blank sailings have become a blunt but effective tool. In May 2025, carriers removed 30% of U.S. West Coast and 40% of U.S. East Coast vessel capacity to anticipate weaker volumes following tariff spikes [4]. This strategy, while stabilizing rates in the short term, risks alienating shippers and eroding trust in carrier reliability.

Alliances are another lever. The restructuring of major alliances—such as Maersk and Hapag-Lloyd’s Gemini Cooperation and MSC’s independent operations—has allowed carriers to consolidate market share and optimize routes. For example, Gemini’s 90.9% schedule reliability highlights the benefits of collaboration in maintaining service consistency amid disruptions [4]. However, these alliances also raise concerns about reduced competition, potentially leading to rate manipulation in a market already reeling from trade war uncertainty.

Fleet adjustments are equally pivotal. The U.S. SHIPS Act of 2025, which mandates cargo preferences for U.S.-flagged vessels, is pushing carriers to rethink their fleet strategies. While this could bolster domestic shipbuilding, it also introduces regulatory complexity and higher costs for international operators [5]. Meanwhile, the dry bulk sector has seen a 26% drop in new vessel orders in Q1 2025, as carriers opt for used vessels and time charters to hedge against demand uncertainty [1].

Financial Performance: A Tale of Two Carriers

The financial toll of these strategies is evident in the performance of industry giants. Maersk, the second-largest container shipping company, has seen its profit margins squeezed by falling rates and operational costs. Despite resilient demand outside the U.S., its 2025 forecasts remain cautious, reflecting the sector’s broader struggles [4]. Similarly, MSC, which operates 20% of global container capacity, revised its profit forecast downward in 2025 due to overcapacity and rate declines [4]. COSCO, meanwhile, faces new U.S. port fees starting October 14, 2025, which will further erode margins [2].

Yet, not all carriers are equally vulnerable. Those with diversified trade routes—such as Maersk, which has expanded services to Mexico as a manufacturing hub—are better positioned to weather U.S.-China trade volatility. Mexico’s emergence as a key node has allowed carriers to adjust routes and avoid some of the worst impacts of tariff-driven demand shifts [1].

Strategic Implications for Investors

For investors, the key takeaway is that margin sustainability in ocean shipping hinges on a delicate balance between capacity control and trade policy agility. Carriers that can dynamically adjust their networks—through alliances, route diversification, and selective blank sailings—are more likely to outperform. However, the risk of prolonged overcapacity looms large. Drewry’s forecast of a 4% increase in global container rates in 2025 [4] contrasts with the reality of falling spot rates, suggesting a disconnect between carrier optimism and market fundamentals.

Moreover, geopolitical risks—such as the Red Sea crisis and U.S. sanctions on the shadow fleet—add another layer of complexity. Carriers with robust contingency planning and diversified fuel strategies (e.g., LNG-fueled vessels) may gain a competitive edge [1].

Conclusion

The ocean shipping industry is at a crossroads. Trade wars have turned capacity management into a high-stakes game of prediction and reaction, with carriers walking a tightrope between preserving margins and maintaining service reliability. For investors, the path forward lies in identifying firms that can navigate this turbulence through strategic flexibility, technological innovation, and geopolitical foresight. As the sector braces for further volatility, those who can decode the interplay between tariffs, capacity, and carrier behavior will be best positioned to capitalize on the opportunities ahead.

Source:
[1] The Biggest Global Supply Chain Risks of 2025 [https://www.xeneta.com/blog/the-biggest-global-supply-chain-risks-of-2025]
[2] Record-breaking ship orders are piling up, and the ... [https://www.moomoo.com/news/post/25541052]
[3] Container freight rates - statistics & facts [https://www.statista.com/topics/9237/container-freight-rates/]
[4] Global Liner Performance Report May 2025 [https://www.linkedin.com/posts/amanda-bradfield-05779080_schedule-reliability-is-finally-turning-a-activity-7348599295413014528-6drn]
[5] Charting a New Course: The SHIPS Act of 2025 [https://www.troutman.com/insights/charting-a-new-course-the-ships-act-of-2025-reintroduced/]