Trump’s tariffs will reshape trade and global transport: Drewry

Huge U.S. tariffs on imports from China, Vietnam, Cambodia, Taiwan, the European Union and other countries will reshape trade and international transport. But to what extent?

Drewry, in its latest update, has looked at the impact of the previous U.S. tariffs against China by the first Trump administration. "This chart shows that the 2018 tariffs froze the volume of China-to-U.S. goods shipped in containers (zero percent net increase in six years) whereas Vietnam, free of such tariffs, benefited from a 45 percent jump in volumes in the same period."

A one percent increase in U.S. tariffs resulted in a one percent decline in trade, one year after tariff imposition, according to a 2024 study on U.S. tariff increases against China in 2018-19. "This shows the sensitivity of trade to tariffs."

Tariffs and Trump 2.0
How about tariffs under Trump 2.0, which take effect almost immediately? The tariffs announced by Trump on April 2 apply to nearly all trading partners but their application is very uneven, the update added.

"The new tariffs are very high both on China (34 percent tariff on top of the previous 20% - i.e. 54 percent), in line with Trump 1.0 tradition, but now also on Vietnam (46 percent), which had benefited from Trump 1.0.

"Asian countries treated more favourably under these new U.S. tariffs include the Philippines (tariff of “only” 17 percent), Malaysia (24 percent) and South Korea (25 percent)."

Higher U.S. tariffs on Chinese goods will prompt favoured Southeast Asian nations like the Philippines and Malaysia to prepare for an influx of factories relocating. "Countries with a good positioning in a global value supply chain (such as Vietnam, Thailand, Malaysia, Indonesia and the Philippines) were already positioning themselves to attract investments, particularly in electronics and automotive manufacturing."

The Trump 2.0 tariffs will, in Drewry’s opinion, reshape international trade and transport.

Tariffs and shipping impact
The US's new radical trade policies will cause pain to some economies and businesses, but others may gain because of shifts in trade flows, the update added. "The potential disruptions to the shipping container industry may also have an asymmetric impact on carriers and shippers in the short run. This has been particularly true in recent years with Covid-19 and Suez Canal disruptions, alongside sustained demand, leading to supernormal profits for carriers."

 Carriers (shipping lines and airlines alike) will need to rethink their strategies and business models - adapting to new realities prioritising protectionism, regional trade and strategic alliances over the previously unfettered flow of goods and services across borders.

Whereas earlier tariffs shifted trading patterns around while volumes continued to grow, a tariff-fuelled U.S. recession could also see ocean volumes dip, the report added.

The U.S. tariffs, potential counter-tariffs and potential U.S. penalties on Chinese ships will reshape trade and the freight markets. "Favoured trading partners will continue to see growing transport volumes, but trade from the countries now hit by the highest tariffs may stall or decline.

"Freight rates, carrier service and port coverage will experience changes due to changes in volumes, transport capacities and new US port penalties (if implemented).

"Shippers, forwarders and carriers have to do a lot of work to address the disruptions and adapt to higher trade barriers."