Trump Presidency may see spike in ocean freight rates: Xeneta

Donald Trump’s victory in the U.S. Presidential election is "a step in the wrong direction" for international trade as importers fear another spike in ocean container shipping freight rates, according to the latest update from Xeneta.

"Trump has vowed blanket tariffs of up to 20 percent on all imports into the U.S., and additional tariffs of 60-100 percent on goods from China."

Data from Xeneta shows the last time Trump ramped up tariffs on Chinese imports during the trade war in 2018, ocean container shipping freight rates spiked more than 70 percent.

Shipping is a global industry feeding on international trade, so another Trump Presidency is a step in the wrong direction.

“The knee-jerk reaction from U.S. shippers will be to frontload imports before Trump is able to impose his new tariffs," says Peter Sand, Chief Analyst, Xeneta. "Back in 2018, the tariff on Chinese imports was 25 percent, now it is increasing up to 100 percent, so the incentive to frontload is even greater.

“If you have warehouse space and the goods to ship, frontloading imports is the simplest way to manage this risk in the short-term but it will bring its own problems. A sudden increase in demand on major trade lanes into the U.S. when ocean supply chains are already under pressure due to disruption in the Red Sea will place upward pressure on freight rates.

“In the longer term, another Trump Presidency will reignite the trade war with China and provoke retaliatory action. In 2018, we saw China respond to U.S. aggression by imposing tariffs of its own, which added even more fuel to the fire; so there is a risk this situation could escalate further in the months and years to come.”

Rates steady ahead of electionsAverage spot rates from the Far East to the U.S. West Coast and U.S. East Coast has remained relatively flat in the weeks leading up to the election, down -3.5 percent and -2.5 percent, respectively since October 15, the update added.

"However, the current average spot rates of $5,210 per FEU (40ft container) into the U.S. West Coast and $5,820 per FEU into the U.S. East Coast are 167 percent and 134 percent higher than 12 months ago, primarily due to the ongoing impact of conflict in the Red Sea."

Sand says: “2024 has been a brutal year for U.S. shippers who have already endured massive disruption due to the Red Sea crisis and spiralling freight rates. There is also the looming threat of further strike action at ports on the U.S. East Coast and Gulf Coast in January next year.

“Another Trump Presidency will not be welcomed by U.S. importers and exporters, but they needed a swift and clear result in the election. Uncertainty is toxic for supply chains, so at least the industry now has a clearer understanding of the financial and operational risk and can execute the plans they will have prepared in the event of another Trump Presidency.”

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