Will High Tariffs Under Trump Disrupt Shipping?The shipping industry, known for its resilience and adaptability to changing winds, may once again prove its mettle in the face of potential tariff challenges during another Trump presidency.
Just a week after the US elections, which saw an unexpected victory for former President Donald Trump, his cabinet is beginning to take shape. As the new administration prepares for the January 2025 inauguration, Ship Technology has consulted with industry experts to understand the sector's response.
A Word on Everyone’s LipsShipping is vital to the global economy, moving goods across the world’s oceans through container ships, bulkers, and tankers. Free trade has propelled growth over the past 50 years, but it has also fueled a protectionist backlash, particularly during Trump’s first term. Tariffs on imports were a hallmark of his 2024 campaign, sparking concern about their impact on the transport sector.
Among transportation sectors, shipping stands to be hit hardest by rising tariffs. Judah Levine, chief analyst at freight trading platform Freightos, detailed the industry's vulnerabilities.“In 2018, Trump’s tariff hike prompted a surge in ocean imports as shippers rushed to bring in goods before new tariffs went into effect in early 2019,” Levine recalled.
With tariffs on Chinese goods potentially reaching 100%—compared to the 25% imposed in 2018—Levine predicts that the same front-loading of goods will occur, possibly even before official announcements are made.“Anticipation of tariff hikes could drive up ocean freight demand and rates now, with the situation intensifying once tariffs are confirmed,” Levine said.
The Ripple Effect of TariffsThe already elevated spot rates for shipping, exacerbated by the Red Sea crisis, have pushed East-West trans-Suez rates to double their 2023 prices. While rates have dropped from their crisis peaks, some routes, particularly to the US West Coast, are still three times as expensive as they were previously.
Xeneta’s chief analyst, Peter Sand, also pointed to a similar pattern.“The immediate reaction from US shippers will be to frontload imports ahead of tariff increases. In 2018, the tariff on Chinese imports was 25%; now, it could go as high as 100%, so the incentive to frontload imports is even greater,” Sand explained.
But this rush to stock up on goods will place even more pressure on supply chains already strained by global disruptions, driving freight rates higher.
Familiar TerritoryHowever, some experts argue that the US shipping industry is well-versed in handling these fluctuations. For instance, earlier this year, frontloading occurred as stakeholders prepared for a potential dock worker strike, demonstrating the industry's ability to adapt to such challenges.
Margaret Kidd, a professor at the University of Houston, explained that rising rates and frontloading are a typical response to expected tariff hikes.“Retailers and manufacturers have been frontloading imports in anticipation of tariffs, much like we saw between May and August of this year due to the ILA strike. Frontloading accelerates ocean rates by increasing demand for containers and vessels, which, in turn, affects trucking and warehousing,” she said.
While tariff hikes raise global trade costs, the true impact will hinge on the specific way in which the tariffs are enforced.
The Trade War Resurfaces?Even with advanced knowledge of the tariffs, there’s little the industry can do to avoid their adverse effects.“The impact of tariffs was evident in Trump’s first term when shipping rates spiked 70%,” Sand noted. “With the likelihood of more tariffs, shippers are bracing for another round of similar challenges.”
In the long term, another Trump presidency could reignite tensions with China, potentially triggering retaliatory actions that would further escalate the trade war and significantly impact the shipping industry.
However, there are also political similarities to 2016, particularly with Trump’s focus on US infrastructure restoration.
Maritime lawyer José Cot suggested that Trump’s administration might prioritize investing in port facilities, which increased fees for foreign shipping operators could fund.“Trump’s infrastructure plans are expected to include port upgrades, possibly funded by taxes or fees on foreign companies,” Cot said.
Infrastructure and Environmental ConcernsKidd, however, disagreed, arguing that US ports may benefit from a different level of investment under Trump than they did under the Biden administration.“The Biden-Harris administration has overseen significant infrastructure investments, such as the $3 billion Clean Ports Program through the EPA. These transformative investments from the Inflation Reduction Act have been generational in nature, and I don’t see Trump continuing that trend,” Kidd said.
Cot and Kidd shared a similar view on environmental policy. Trump’s administration is unlikely to prioritize climate change initiatives, but Cot argued that focusing on oil and gas exploration could benefit offshore sectors.“Trump’s pledge to remove regulatory barriers for oil and gas exploration could drive growth in the marine and energy sectors, particularly offshore drilling in the Gulf of Mexico,” Cot explained.
While this may lead to increased investment in traditional energy sectors, some experts see the future of maritime investments shifting toward wind and other renewable energy sources.
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