- US tariff shifts have caused repeated swings in container shipping demand, distorting freight rates across major trade lanes.
- Spot rates from the Far East to the US and South America East Coast surged briefly but are now falling as capacity shifts again.
- North Europe bucked the trend due to congestion and redirected capacity, with upward pressure expected to persist into late 2025.
- Shippers are turning to index-linked contracts to manage rate volatility and protect long-term supply chain stability.
The global container shipping industry was further disrupted in April when President Trump announced broad US tariffs on imports from China and other nations. These measures set off a chain reaction in global supply chains, particularly affecting transpacific routes. As the industry continues to adjust, the ongoing impact of these tariffs is being felt in more complex and less visible ways, according to a report by Xeneta.
Tariff Shifts Reshape Trade Flows and Freight Rates
Adjusting vessel capacity across trade routes is a gradual process, not an instant one. Following the temporary easing of US-China tariffs, carriers were quick to redeploy ships to the US West Coast, prioritizing it over the East Coast. This uneven return of capacity caused rates on the West Coast to soften earlier, disrupting the usual rate relationship between the two coasts.
Typically, freight rates from the Far East into the US West Coast sit around $1,000 lower per FEU than those into the East Coast. On May 31, for example, average spot rates stood at $3,124 into the West Coast and $4,180 into the East Coast. However, deeper rate drops on the West Coast since then widened this gap to $2,015 per FEU. While this spread is expected to normalize over time, it’s likely to result from sharper declines in East Coast rates rather than a recovery in the West.
The ripple effects of the tariffs have extended beyond the Transpacific. South America East Coast trades also felt the impact. As carriers shifted capacity back to North American lanes, spot rates from the Far East to South America East Coast surged—from $1,890 per FEU on May 1 to $6,945 by July 16, a jump of over 260%. This spike was further intensified by record-high demand on the route in May, coinciding with reduced available capacity.
Impact of Tariffs on Ocean Freight Rates and Capacity
The easing of US-China tariffs triggered major shifts in global container shipping, as carriers moved capacity between trade routes to follow demand. Rates on the US West Coast dropped sharply due to early capacity returns, widening the usual gap with East Coast rates. Meanwhile, the East Coast trades in South America experienced a dramatic surge in rates driven by reduced capacity and record demand, although this is now reversing as carriers shift back.
North Europe also saw unexpected rate increases, largely due to port congestion made worse by redirected capacity from US-bound trades. While US and South American rates are likely to trend downward through 2025, North Europe could face sustained upward pressure on contract prices.
In response to this volatility, more shippers are adopting index-linked contracts to keep pricing aligned with market conditions and ensure long-term stability across unpredictable trade environments.
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Source: Xeneta
