Trump’s tariffs will reshape trade and international transport : Drewry
LONDON : Huge US tariffs on imports from China, Vietnam, Cambodia, Taiwan, the European Union and other countries will reshape trade and international transport. But to what extent?
Drewry has looked at the impact of the previous US tariffs against China by the first Trump administration. This chart shows that the 2018 tariffs froze the volume of China-to-US goods shipped in containers (0% net increase in six years), whereas Vietnam, free of such tariffs, benefited from a 45% jump in volumes in the same period.
According to a 2024 study (Haberkorn et al) on US tariff increases against China in 2018-19, a 1% increase in US tariffs resulted in a 1% decline in trade, one year after tariff imposition. This shows the sensitivity of trade to tariffs.
How about tariffs under Trump 2.0, which take effect almost immediately?
The tariffs announced by Trump on April 2 apply to nearly all trading partners but their application is very uneven.
The new tariffs are very high both on China (34% tariff on top of the previous 20% – i.e. 54%), in line with Trump 1.0 tradition, but now also on Vietnam (46%), which had benefited from Trump 1.0.
Asian countries treated more favourably under these new US tariffs include the Philippines (tariff of “only” 17%), Malaysia (24%) and South Korea (25%).
Much higher US tariffs on Chinese goods will prompt favoured Southeast Asian nations like the Philippines and Malaysia to prepare for an influx of factories relocating. Countries with a good positioning in a global value supply chain (such as Vietnam, Thailand, Malaysia, Indonesia, and the Philippines) were already positioning themselves to attract investments, particularly in electronics and automotive manufacturing.
China and the European Union have said that they will retaliate, indicating that the trade between these countries and the US will be hit in both directions.
The US’s new radical trade policies will cause pain to some economies and businesses, but others may gain because of shifts in trade flows. The potential disruptions to the shipping container industry may also have an asymmetric impact on carriers and shippers in the short run. This has been particularly true in recent years, with Covid-19 and Suez Canal disruptions, alongside sustained demand, leading to supernormal profits for carriers.
The Trump 2.0 tariffs will, in Drewry’s opinion, reshape international trade and transport.
Carriers (shipping lines and airlines alike) will need to rethink their strategies and business models – adapting to new realities prioritising protectionism, regional trade and strategic alliances over the previously unfettered flow of goods and services across borders.
Whereas last time tariffs shifted trading patterns around while volumes continued to grow, a tariff-fuelled US recession could also see ocean volumes dip.
So, to conclude, we’d highlight the following:
The US tariffs, potential counter-tariffs and potential US penalties on Chinese ships will reshape trade and the freight markets.
“Favoured” trading partners will continue to see growing transport volumes, but trade from the countries now hit by the highest tariffs may stall or decline.
Freight rates, carrier service and port coverage will experience changes due to changes in volumes, transport capacities and new US port penalties (if implemented).
Shippers, forwarders and carriers have to do a lot of work to address the disruptions and adapt to higher trade barriers.
Source : Drewry