The Trouble with Tariffs

In this week’s Roar: Expediting imports, declining freight rates, the off-again on-again de minimis exemption, Mexico’s tariffs plans, and the costs of changing trade policies.

Heightened concerns over increased US-China trade tensions (even compared to just a few weeks ago) are prompting shippers to further frontload their imports. They’re hoping to mitigate some of the impact of anticipated tariffs. This could mean that the usual seasonal lull in container volumes after the Lunar New Year are diminished and that Trans-Pacific container rates remain elevated. Recent moves by the U.S. to restrict, and then reallow, duty-free entry for lower-value “de minimis” imports, has also led shippers to shift from airfreight to ocean. Understandably, the industry is adjusting its operations to respond to geopolitical uncertainties.

As always, ocean shipping trends can be trade lane-specific. Despite carriers’ efforts to implement blanked sailings and general rate increases (GRIs), freight rates on the Asia-North Europe route continue to soften. Slot utilization remains down during the typical slowdown after the Chinese New Year, indicating low demand. Data suggests current blank sailings haven’t kept pace with the decrease in cargo volumes from the East. Asia-Mediterranean rates have also experienced a decline.

The de minimis exemption, which allows duty-free entry for shipments valued under $800, has been reinstated—at least temporarily. The suspension caused delivery delays and increased costs for e-commerce platforms and consumers—potentially impacting a billion small-value e-commerce packages annually due to duties and additional processing. Collecting tariffs on such high volumes would be difficult and costly. If—when?—the de minimis exemption expires, industry stakeholders need to prepare for increased paperwork and delays and communicate potential impacts to their customers.

Mexico’s economic minister plans to initiate talks with the US regarding the recently imposed 25% tariffs on steel and aluminum imports. In his view, the tariffs are unjustified, particularly since Mexico imports more steel and aluminum from the US than it exports to it, and that Mexico is the primary destination for US steel exports—52% of it. He also argues that given the fact that some steel products cross the US-Mexico border multiple times during manufacturing and production, the tariffs could hurt both economies.

Recent developments in U.S. trade policies, particularly the flip-flopping de minimis exemption for Chinese shipments, are prompting Asian e-commerce companies to reconsider their logistics strategies. This is expected to increase costs and complicate customs procedures for shipments to the U.S., which is pushing some businesses to explore alternative markets. Europe is emerging as a potential alternative, thanks to its favorable trade policies and robust e-commerce networks. This may lead to Asia’s air freight volumes shifting to European markets as companies adapt.

For the rest of the week’s top shipping news, check out the article highlights below.