Trump's Trade Threats Compound Global Ocean Shipping Uncertainty

The global ocean shipping industry is grappling with a perfect storm of uncertainty, as geopolitical tensions, trade disputes, and market dynamics collide. The recent election of Donald Trump as US President has added another layer of complexity, with his administration's trade policies and international relations stance creating further uncertainty for container shipping stakeholders. This article explores the potential impacts of Trump's trade and international relations policies on the global ocean shipping market, as well as the broader implications for carriers and shippers alike.

Geopolitical Tensions and Tariffs

Trump's presidency has been marked by a blitz of executive orders and proclamations targeting international relations and trade. The threat of widespread tariffs is an obvious source of uncertainty for container shipping stakeholders, with the potential for increased costs and disruptions to global supply chains. As of 25 February 2025, the following tariffs had been announced:

1. 10% tariffs on China (in addition to tariffs imposed during Trump's first term) as well as the brief abolition of the de minimis exception for imported goods under US$ 800 which has since been reinstated;
2. 25% tariffs against Mexico and Canada (delayed for 30 days from 3 and 4 February respectively); and
3. 25% blanket tariffs on all steel and aluminium imports (expected to take effect from 12 March 2025).

The impact of these tariffs on freight rates is still uncertain, but analysts have predicted that rates may surge as importers seek to frontload shipments in advance of Trump taking office. This has been partially borne out, with the Drewry Global WCI increasing by roughly 13% between 7 November 2024 and 9 January 2025. However, since then, the Drewry WCI has dropped nearly 30% from its 2025 high, indicating that the market may be adjusting to the new reality.

Global Hostilities and Shipping Routes

The ongoing conflict between Israel and Hamas, as well as the Houthi rebels' attacks on vessels in the Red Sea, have significantly disrupted traditional shipping routes. The Houthi attacks have forced container ships to reroute around the Cape of Good Hope, leading to longer transit times and increased operational costs. This disruption has resulted in a surge in ocean freight rates, with prices doubling compared to pre-crisis levels.

However, if the ceasefire between Israel and Hamas holds and the Houthi attacks on vessels in the Red Sea cease, sea freight prices could decrease by 20-25% within two to three months as vessels resume routing through the Red Sea and Suez Canal. This would have significant implications for the global ocean shipping market, as the rerouting of vessels has consumed up to 10% extra capacity, leading to ongoing delays and congestion.

Market Dynamics: Supply and Demand

The balance between shipping capacity and demand plays a crucial role in determining freight rates. In 2025, the market may see an 8% increase in capacity but only a 3% rise in demand. This disparity could lead to reduced volatility, as increased capacity may ease pressure on rates. Conversely, market concentration is enhancing the power of major international forwarders who are targeting substantial profit margins. This concentration could put pressure on freight rates to increase, especially if economic conditions fluctuate.

Implications for Carriers and Shippers

The uncertainty surrounding Trump's trade and international relations policies, coupled with ongoing geopolitical tensions and market dynamics, presents significant challenges for carriers and shippers alike. Carriers may face increased costs and disruptions to their supply chains, while shippers may struggle with higher freight rates and potential delays. To navigate this uncertain landscape, carriers and shippers should consider the following strategies:

1. Diversify Routes: Explore alternative shipping routes to mitigate the impact of disruptions and tariffs.
2. Build Resilience: Strengthen supply chains and inventory management practices to better withstand potential disruptions.
3. Monitor Market Trends: Stay informed about market trends and adjust strategies accordingly to capitalize on opportunities and mitigate risks.
4. Engage with Stakeholders: Collaborate with industry peers, regulators, and other stakeholders to share insights and advocate for policies that support a stable and predictable market.

In conclusion, Trump's trade threats and geopolitical tensions are compounding the uncertainty in the global ocean shipping market. Carriers and shippers must remain vigilant and adaptable to navigate this challenging landscape, while also seeking opportunities to build resilience and capitalize on market trends. By staying informed and engaged, stakeholders can better position themselves to weather the storm and emerge stronger in the face of uncertainty.