- Freight rates jump sharply due to sudden shifts in U.S. tariff policy.
- A wave of shipping orders followed the pause in tariffs, overwhelming carriers.
- Port congestion expected by mid-July, with wider global implications.
- Red Sea route disruptions easing, but Suez Canal return may trigger new challenges.
- New regulations and infrastructure constraints may tighten logistics capacity.
The global shipping industry is undergoing a volatile “whipsaw” event, reminiscent of early COVID-19 disruptions, following unexpected changes in U.S. tariff policy. Steve Hughes, President and CEO of HCS International, described a scenario where initial tariff announcements caused widespread order cancellations, only to be reversed when the tariffs were paused—triggering a sudden surge in cargo movements.
“Similar to the COVID experience, when the president initially announced the tariffs, a very large number of companies issued stop orders to their overseas factories,” Hughes noted in his update. “This effectively halted a significant portion of ocean shipping. The ocean carriers, seeing their ships being underutilized, started blanking sailings or suspending lanes. This can result in either skipping a scheduled sailing or cancelling sailings until further notice.”
Spot Rates Surge as Carriers Struggle to Keep Up
The unanticipated rebound in demand left carriers scrambling to reinstate previously suspended routes. As a result, spot freight rates on the Asia–U.S. trade lanes saw sharp increases starting June 1.
Rates for shipments to the U.S. West Coast rose to $6,000 per 40-foot equivalent unit (FEU), while East Coast rates climbed to $7,000 per FEU. Projections for July 1 suggest a further increase of up to $2,000, adding pressure to shippers already navigating high costs and space constraints.
Hughes expects the Trans-Pacific capacity to normalize over the next three weeks, as carriers deploy additional vessels. However, he cautions that the market will remain unpredictable in the near term.
Port Congestion Expected by Mid-July
With container volumes accelerating, Hughes anticipates significant congestion at major ports by mid- to late July. This could mirror the bottlenecks seen during the pandemic, especially in Los Angeles and Long Beach, where landside capacity—rail cars, warehouses, and chassis—was stretched thin.
Congestion is already being felt at major transshipment hubs in Asia. According to the S&B Journal of Commerce, Singapore and Shanghai are facing delays of up to two weeks due to a surge in exports to the U.S. during the 90-day tariff reprieve. These disruptions are expected to ripple across global supply chains in the coming weeks.
Red Sea Security Improves, But Risks Remain
Meanwhile, the threat to Red Sea shipping from Houthi attacks appears to be diminishing. Hughes attributes the change to decisive action by the Trump administration, including re-designating the Houthis as a terrorist group and cutting off their funding.
This shift could see vessels return to the Suez Canal, avoiding the longer Cape of Good Hope route. While this may shorten transit times by over two weeks, Hughes warns it could cause another wave of congestion as ships arrive earlier than scheduled, creating a double arrival effect at key ports.
New Vessel Deliveries and Regulatory Pressures Loom
The market also faces structural shifts. Over 350 new container ships were added to the global fleet in 2024, with another 200 expected in 2025. If demand eases or routes normalize too quickly, this could lead to an overcapacity scenario.
Adding to the complexity, the South Coast Air Quality Management District is pushing forward the Indirect Source Rule (ISR), also called the Ports Infrastructure Rule. This could impose new cargo caps and mandates on port operations, increasing compliance costs and introducing more regulatory uncertainty across the logistics industry.
Industry Braces for an Uncertain Summer
With overlapping challenges—tariff-driven volatility, capacity crunches, port congestion, and evolving geopolitical risks—the shipping sector is once again entering a period of heightened unpredictability.
Hughes advises industry stakeholders to stay alert and flexible, as the coming months could mirror the chaos experienced during the height of the COVID-19 pandemic, albeit driven by different forces.
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Source: Repairer Driven News
