Mr. Trump’s tariffs may cause US importers to step up purchases before the tariffs take effect. This could cause container freight rates to skyrocket. However, by 2026, freight rates may drop sharply as the US needs time to consume inventory.
Mr. Trump’s victory could cause the peak shipping season to come earlier
Mr. Donald Trump’s victory is expected to have a strong impact on global shipping rates as Mr. Trump previously proposed applying tariffs from 10% to 20% on most goods imported from other countries. and a minimum tax rate of 60% on all goods import from China.
Talking to us, Mr. Nguyen Hoang Giang, Head of Analysis Department of Transport – Logistics – Aviation Industry, SSI Investment Consulting & Analysis Center (SSI Research), said that when the tax rate is announced, the US importers can quickly import as much goods as possible, before the decree takes effect.
Import demand increases rapidly, leading to a sharp increase in sea freight rates in 2025.
This expert said that in fact, this also happened in 2018 when Mr. Trump announced a series of tax policies applied to imported goods, especially from China.
Data from Freightos, a sea freight booking intermediary platform, shows that after Mr. Trump announced a series of tariff policies in July 2018, container freight rates nearly doubled compared to the beginning of the year within just one month. 4 months, then peaked in mid-November. The reason is that many importers “race” to import goods before the tax takes effect in January 20219.
According to Freightos research, at that time the ocean shipping cost of a 49-inch TV accounted for 1.5% of the selling price. When freight rates increase, this proportion doubles to 3%. However, compared to the minimum tax rate proposed by Mr. Trump of 10%, importers are still willing to accept this cost and rush to import goods as soon as possible.
SSI experts say that even if the number of new ships expected to enter the shipping market in 2025 can increase by 5%, it will be difficult to cool down freight prices.
“This volume of new ships will be delivered gradually throughout the months of the year, not concentrated at one time. Meanwhile, the demand for imported goods is concentrated at one time. Therefore, even if supply increases by 5%, it will hardly affect freight rates,” Mr. Giang said.
Besides, there may be a potential risk of container shortage next year if the race to import goods becomes intense. Among taxed countries, China’s tax rate is the highest while this country is considered the world’s factory.
“Therefore, China is willing to pay more to rent and buy containers. In other words, empty containers will flock to China just like what happened during the pandemic. This leads to a shortage of containers and the cost of renting and buying empty containers also increases,” Mr. Giang added.
Experts also predict that the peak period of container shipping will also come earlier, possibly from early March, after China ends its holiday season, instead of mid-year as usual.
This also happened this year. According to Freightos, in May, the Joe Biden administration announced plans to increase tariffs to 25% – 50% on a list of Chinese goods worth 18 billion USD, effective from August 1.
While not as far-reaching as the 2018 tariffs and not the only factor driving volumes freight increased in the second quarter, the push to import goods in advance to avoid tax increases in August is a factor causing the peak sea transport season to arrive early this year.
Increases quickly but can then decrease deeply
In 2018 – 2019, Mr. Trump’s tax order was likened to a “dopping” medicine, causing freight prices to increase sharply but decrease equally quickly and deeply.
The push to import ahead of the January 2019 deadline caused many orders expected to be placed in 2019 to be moved to 2018. This led to increased inventory and a decrease in container shipping volume in 2019.
Data on ocean import volumes from the US National Retail Federation show that a nine-year streak of annual container import volume growth, from 2009 to 2018, was interrupted in 2019. Freight Transport also decreased from Asia to North America, falling from a peak of nearly 2,600 USD/TEU in mid-November 2018 to 1,400 USD/TEU at the end of 2019.
Source: Hackett Associates Global Port Tracker, Freightos, NRF (Vietnamese American Association)
Mr. Giang believes that a similar scenario could also happen in 2026, after importers have accumulated enough inventory. “The US will need some time to “digest” all the large inventories that previously boosted imports. Therefore, import demand for new orders may decrease deeply in 2026,” he said.
However, in the long term, he said, the process of deglobalization will stretch the supply chain, increasing transportation demand. Accordingly, the demand for goods transportation is calculated by the volume of goods x total distance.
Specifically, in terms of volume, demand for goods is still increasing and in the long term, demand for goods in the world is still increasing by 3-4%/year. If the US does not buy goods from this country, it will switch to buying from other countries. This will lengthen the supply chain and increase shipping distances.
Besides, export from China to the US may soon recover like what happened before. In 2019, the value of Chinese goods exported to the US decreased sharply compared to 2018, but by 2021 – 2022, the turnover recovered.
With taxed products, China pushes them to other markets and they boost exports to the US of untaxed products. As a result, China’s exports to the US returned to 2018 levels.
According to VietnamBiz.vn
