Topic of the week: Ocean Container Rates Slide Amid US Tariffs Uncertainty
The global supply chain is facing uncertainty due to recent developments in US trade policy, which has led to a decline in ocean container rates. The Freightos Baltic Index reports that container rates are already experiencing a traditional early-year lull, exacerbated by the uncertainty surrounding US tariffs.
The US has imposed 25% tariffs on imports from Mexico and Canada, affecting approximately $1 billion in daily imports. The administration has partially suspended tariffs on automotive goods under the US-Mexico-Canada Agreement, impacting 50% of imports from Canada and 38% from Mexico. The remaining imports face a 25% tariff increase, affecting a wide range of products, including electronics, medical equipment, and more. This uncertainty has led to significant disruptions in cross-border shipments and surface volume flows from both Mexico and Canada.
Ocean container rates have declined as a result, with trans-Pacific rates down 40% compared to last year, and Asia-Europe rates dipping below last year's low. The recent weakness in rates may be attributed to a post-Lunar New Year lull in demand, carrier alliance reshuffle, and increased competition. The industry is navigating uncertainty, with key deadlines looming ahead, including a US Trade Representative hearing on March 24, agency reports on April 1, and a potential 25% tariff deadline on USMCA goods on April 2.
Shippers are adopting a wait-and-see approach before committing to significant supply chain changes. Importers have frontloaded ocean shipments since November, boosting ocean demand and freight rates. Volumes are projected to remain strong through May, but a weakening is expected in June and July, suggesting a softer start to the traditional peak season. As the industry navigates this uncertainty, it is essential to stay informed and adapt to the evolving trade landscape.
Sea:
- Over the last two weeks China/East Asia to North America West Coast spot rates have decreased by 39% from $4,362/FEU to $2,659/FEU according to Freightos data.
- China/East Asia to North America East Coast spot rates have fallen over the last two weeks, decreasing by 34.1% to $3,754/FEU.
- Global container spot prices have fallen over the last two weeks, and are now sitting at $2,422/FEU, a 20.6% decrease over the last two weeks and a 15.5% decrease from spot rates this time in 2024 according to the Freightos Baltic Index (FBX)
Air:
- Global Air Freight spot rates currently sit at $2.31, as rates continue to fluctuate according to the Freightos Air Freight Index (FAX)
- Europe to Northern America spot rates currently sit at $2.37 (100-3000kg), says FAX, increasing by 0.85%
- Europe to Asia, Greater China spot rates currently sit at $1.17 (100-3000kg), says FAX, decreasing by 0.45%
That’s all for this week’s update…
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