On June 7, 2024, a cargo ship was sailing to a foreign trade container terminal in Qingdao Port, Qingdao Port, China.
Cost Photo | Noor Photo | Getty Images
Trade analysts warn that the threat of new tariffs, which former President Donald Trump doubled down on during Tuesday night's presidential debate, will create inflationary pressures in supply chains and ripple through the broader economy.
Trump defended his trade policies during the debate, dismissing concerns that tariffs of up to 20% on all imports and additional tariffs of 60% to 100% on goods from China would lead to higher consumer prices.
Judah Levine, director of research at Freightos, said if history is any guide, additional tariffs will drive up ocean shipping prices. During the first Trump administration, shipping container rates from Asia to the U.S. West Coast rose sharply from July 2018 to November as importers rushed to get goods into the U.S. before tariffs took effect, Freightos data shows. It doubled mid-term.
Levine said that the Biden administration announced in May this year that it planned to increase tariffs on certain Chinese goods, scheduled to take effect on August 1, which also led to early loading of products. The U.S. Trade Representative’s office delayed Biden’s tariff hike at the last minute to extend the review period.
Levine said this tariff risk, combined with the Red Sea crisis and the possibility of a port worker strike in October, has led to an early and strong shipping season this year, with freight rates from Asia to the U.S. West Coast increasing by almost two percent from May to May. times.
“If Trump wins the election, we may see an immediate increase in imports as importers will want to process some shipments quickly in response to the new tariffs,” said Lars Jensen, CEO of Vespucci Maritime. “This “The new tariffs are likely to be introduced in late January, so the window for importing goods before the tariffs is very short.”
Peter Sand, chief shipping analyst at ocean freight rate intelligence platform Xeneta, said any increase in freight demand will push up freight rates.
“Shippers respond to supply chain threats by importing as much cargo as possible as quickly as possible,” Sand said. “Following the outbreak of the Red Sea conflict, import front-loading has caused freight rates to rise significantly, and we will see the same behavior from shippers before any new tariffs take effect.”
“When the ocean container shipping market grows, the costs are passed on and ultimately paid by the end consumer,” Sander added. “This could be due to increased costs of goods on the shelf or a limited selection of products available.”
The last time Trump raised tariffs on Chinese imports during the 2018 trade war, the ocean shipping container shipping market soared by more than 70%, Xeneta data shows. Average spot freight rates increased from $1,503 per FEU (40-foot container) on January 1, 2018 to $2,604 per FEU on November 1, 2018.
“Raising trade barriers is almost always a negative move,” Sander said. “When Trump introduced tariffs in 2018, we saw the cost of shipping goods rise dramatically, and his latest proposal would simply be history repeating itself.”
Trump pushed back during the debate on the idea that tariffs are causing consumer prices to rise, saying: “We're going to get billions of dollars, hundreds of billions of dollars. I have no inflation, almost no inflation, they have the highest inflation rate. , perhaps the tallest in the world.
Trump's proposed tariffs come at a time when global ocean supply chains are already under intense pressure from conflicts in the Red Sea and the risk of port strikes.
Xeneta data shows that spot rates from the Far East to the U.S. East Coast rose 303% between December 1, 2023, and July 1, 2024.
“Whether it’s a trade war or a conflict in the Red Sea, geopolitical disruptions are poisonous to ocean supply chains and are happening more frequently than ever before,” Sand said. “Shippers and freight forwarders don’t like uncertainty because it’s Reducing their ability to manage supply chain risks. That’s why people who work or operate in the maritime industry embrace global trade and don’t want to see tariffs or other barriers.”
The U.S.-China trade war and multiple rounds of tariffs from the Biden and Trump administrations, as well as the threat of more tariffs in the future, have also led to increased nearshoring of supply chains, with a focus on Mexico. A report released by Moody's on Wednesday showed that China's share of imports from the United States has dropped significantly in the past two years, from nearly 19% at the beginning of 2022 to only 13.5% at the end of 2023. %, making Mexico the number one product in the U.S. market. China fell to second place in trade with the United States at the end of 2022, before being overtaken by Canada, which rose to second place in the final quarter of 2023.
The rise in Asian nearshoring in Mexico is expected to be part of the next review date for the United States-Mexico-Canada Agreement (USMCA), with the outcome of the presidential election likely to influence the outcome. On July 1, 2026, the United States, Mexico and Canada will confirm in writing whether to continue the agreement, or if one or more of the three parties decides to take steps not to renew the agreement.
During Tuesday night's debate, Trump reiterated his past claims about Mexican manufacturing being linked to China. “They're building big car factories in Mexico, a lot of them are Chinese-owned things… They're building these big factories and they think because of these people, they're going to sell cars to the U.S. (Biden) administration),” Trump said.
