Ocean freight markets are experiencing significant rate fluctuations amid ongoing shifts in global trade policy. Recent tariff actions between the U.S. and China have introduced new variables into supply chain planning, which have impacted pricing, demand and port operations across North America and Asia.
What’s going on?
This month, the U.S. has introduced tariffs on China, according to Freightos, rates from Asia to the U.S. West Coast rose by 10% week-over-week, while rates to the East Coast increased by 3%.
These hikes have so far coincided with a decline in bookings from China – imports to the U.S have plummeted by 64% as of recently – as shippers anticipate further tariff escalations and have adjusted their strategies accordingly.
Additionally, the uncertainty surrounding these tariffs has prompted many importers to front load shipments, leading to increased congestion at major ports like Los Angeles, it was reported that the Port of LA handled 2.5 million TEUs in the last quarter, which was a 5.2% year-on-year increase, however projections post tariffs are now expecting a 10% decline throughout the year.
What are the results of this?
The immediate consequences of these tariff-induced rate increases are strains on supply chain planning. Companies are facing higher transportation costs, leading to the need for strategic adjustments.
Some importers have resorted to expediting shipments via air freight to mitigate the tariff impacts (Link to Apple Article) despite the higher costs and others are now exploring alternative sourcing options outside of China.
Furthermore, the volatility in ocean freight rates have complicated contract negotiations, recently reports have surfaced that shippers are more hesitant to commit to long-term agreements amid fluctuating rates and the uncertain trade policies. So far, carriers are adjusting their capacity and service offerings in response to the shifting demand patterns, but nothing is 100% certain currently.
Conclusion
Whilst these impacts are causing concerns for manufacturers, the current landscape has underscored the importance of agility and proactive planning in supply chain management. Being informed about policy changes and market changes is necessary to make timely decisions that can safeguard operations.
Partnering with a reliable logistics provider can offer expedited shipping solutions and expert guidance to help you adapt to changing conditions. If you want to learn more about how we can support your global logistics needs, please reach out to our global control centre at info@evolution-timecritical.com or our US control centre at info@evolution-timecritical.us
