The recent presidential debate saw candidates spar over trade policies, particularly the merit of import tariffs. The Biden administration has maintained many Trump-era tariffs, even increasing some, and plans to tighten loopholes that currently allow tariff-exempt e-commerce goods to flood into the US from Chinese platforms like Temu and Shein. However, former President Trump proposes a more aggressive approach, suggesting tariffs of 10% to 20% on most of the $3 trillion worth of annual US imports, and a minimum 60% tariff on all imports from China.
The Ripple Effect on Ocean Freight
Tariffs increase the duties that importers must pay, leading to higher consumer prices. But they also affect container flows and costs for the North American ocean freight market. When tariffs are announced, many importers rush to move inventory into the country before the increases take effect. This surge in demand puts upward pressure on freight rates. If Trump wins the election and implements his proposed tariffs, the impact on ocean freight could be even more significant than in 2018.
Lessons from the 2018 Trump Tariffs
In 2018, Trump’s tariffs on $200B worth of Chinese goods led to a rush of importers moving goods into the country before the tariffs took effect. This rush doubled ocean container rates from Asia to the US West Coast by mid-November. Even a doubling of container rates is preferable to importers than paying a tariff increase later on. This rush also impacted annual container volumes, with many orders that would have been placed in 2019 moved up to 2018, leading to lower container volumes in 2019.
Looking Ahead to 2025
If Trump secures a victory in the upcoming election and his administration announces more far-reaching tariff hikes, the biggest economic impacts would come from increased costs to importers paying the new duties, which could be passed on as higher prices to consumers. However, these proposed tariffs would likely have a stronger impact on ocean freight flows and rates than those seen in 2018. The election outcome in November, along with the expectation of impending tariffs, might itself be enough to spark an early surge in ocean demand and prices.
