- The US imposed and then quickly suspended 25% tariffs on imports from Canada and Mexico under the USMCA.
- Non-USMCA imports, including phones, computers, and medical equipment, are still subject to the tariff.
- The uncertainty has disrupted cross-border trade, causing congestion at ports and border crossings.
- US importers have been frontloading shipments, leading to higher ocean freight volumes and short-term rate fluctuations.
In early March, the US imposed a 25% tariff on all imports from Canada and Mexico, only to suspend the tariffs on USMCA-covered goods within a day. By March 13, the suspension was extended to all USMCA imports, which include automobiles, agricultural products, electronics, and household appliances. These goods account for 50% of US imports from Canada and 38% from Mexico, reports Container News.
However, this exemption does not apply to goods outside the USMCA agreement, which are valued at $1 billion per day. This category includes phones, computers, medical equipment, and other previously low-tariff goods, all of which are now subject to the 25% tariff increase.
Supply Chain Disruptions and Border Congestion
The sudden imposition and rollback of tariffs have caused major disruptions to logistics and supply chains. Many importers rushed to move shipments across the border in February, creating significant congestion at US-Mexico and US-Canada crossings. The rapid changes have made supply chain planning increasingly difficult, as businesses struggle to adapt to an unpredictable trade environment.
This pattern of using tariff threats as leverage is not new. The initial tariff pause in February was reportedly linked to border security commitments from Mexico and Canada. Additionally, last week’s suspension was partly influenced by automakers pledging to shift some manufacturing to the US. Similar trade pressure has been applied elsewhere—concerns over China’s presence in the Panama Canal contributed to the recent sale of Hutchison Ports, and the proposed US port call fee on Chinese-made vessels has already led to CMA CGM pledging $20 billion in US investments, including shipbuilding.
Upcoming Trade Policy Deadlines
The uncertainty surrounding US trade policy is far from over, with several key deadlines on the horizon:
- March 24: The USTR hearing will evaluate the proposed port call fees on Chinese-made vessels.
- April 1: US agencies will release reports on various trade issues under the America First Trade Policy memo, including the proposed 60% tariff on all Chinese goods, which could lead to retaliatory tariffs.
- April 2: The suspension of 25% tariffs on USMCA imports is set to expire, unless further action is taken.
With the risk of higher tariffs remaining, many US importers have been frontloading shipments since November, increasing demand for freight transportation.
Freight Market Impact and Rate Trends
The National Retail Federation’s US import report shows that ocean freight volumes from November to February were 12% higher than the previous year. This surge reflects the ongoing preemptive stockpiling ahead of potential tariff hikes. However, freight rates have experienced fluctuations in response to market shifts.
Container rates on transpacific routes have declined following Lunar New Year, with current rates at:
- $2,660/FEU to the US West Coast
- $3,754/FEU to the US East Coast
These rates are 40% lower than a year ago and have reached levels similar to post-Lunar New Year lows from 2024. Meanwhile, Asia-Europe rates also saw a dip but rebounded slightly in early March due to general rate increases (GRIs). Despite some recovery, the announced $1,000 rate hike fell short, reflecting ongoing pricing volatility.
In the transatlantic market, rates have remained relatively stable, though some carriers have announced April GRIs. Prices across major lanes continue to be twice the long-term average, largely due to ongoing Red Sea diversions, which have added to shipping costs.
Outlook: Uncertainty Continues
The latest tariff uncertainty has left importers and logistics providers in limbo, making it difficult to commit to long-term supply chain adjustments. Many shippers are adopting a wait-and-see approach, holding off on major changes until clearer trade policies emerge.
While ocean freight demand remains strong through May, a slowdown is expected in June and July—traditionally the start of peak season—due to early frontloading of shipments. With upcoming policy decisions and potential new trade barriers, supply chains are likely to face further disruptions in the coming months.
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Source: Container News
