Ocean rates drop post-Lunar New Year, but Red Sea tensions and newly imposed tariffs could drive volatility.
Shippers face rising costs as tariffs and geopolitical risks mount.
Ocean freight rates from Asia to North America have declined following the Lunar New Year demand lull, but newly imposed U.S. tariffs on Chinese imports are adding fresh concerns for global supply chains. These developments, combined with ongoing Red Sea disruptions, could sustain market volatility in the coming weeks.
Lunar New Year Slowdown Hits Spot Rates
As of Jan. 28, ocean spot rates from Asia to the U.S. West Coast fell 7% week over week to $4,938 per forty-foot equivalent unit (FEU), according to Freightos. Rates to the East Coast saw a milder decline of 1%, settling at $6,656 per FEU. Meanwhile, rates to North Europe and the Mediterranean also fell by 12% and 4%, respectively.
This drop follows a January rate surge, when shippers rushed to move goods ahead of the Lunar New Year factory closures in China. Rates climbed nearly $6,000 per FEU between mid-December and mid-January before retreating to current levels. The market is now watching closely to see if post-holiday backlogs will drive a rebound.
New Tariffs Shake Up Trade Dynamics
Adding to market uncertainty, newly implemented U.S. tariffs on Chinese imports are reshaping shipping trends. Former President Donald Trump officially enacted a 10% tariff on a broad range of China-based goods as of February 1. This has triggered a wave of frontloading activity, as businesses seek to import goods before higher costs take effect.
Many importers had already accelerated shipments in anticipation of the tariffs, leading to increased container volumes in January. Now, with the tariffs in place, experts predict a potential short-term dip in demand as businesses assess cost impacts and adjust sourcing strategies. Some companies are exploring alternative suppliers in Southeast Asia to mitigate cost increases, which could shift trade flows in the months ahead.
Geopolitics and Freight Rate Volatility
Beyond tariff concerns, geopolitical risks continue to disrupt global shipping. Red Sea tensions remain unresolved, with major carriers like Maersk and CMA CGM maintaining detours around Africa rather than using the Suez Canal. While diplomatic efforts persist, no major carriers have resumed operations through the region, prolonging higher fuel costs and transit times.
What’s Next for Freight Rates?
The next few weeks will be a critical test for the ocean freight market. If Lunar New Year backlogs accumulate, rates may rebound as factories resume operations. Meanwhile, prolonged tariff uncertainty and shifting trade strategies could lead to fluctuating demand patterns, preventing a more significant price correction.
Despite recent declines, freight rates remain well above pre-pandemic levels. For business leaders, strategic agility is key—securing capacity early, diversifying supply chains, and closely monitoring tariff impacts will be essential for navigating the evolving trade landscape in 2024.
