Growing trade tensions and likely tariff increases by the incoming US administration may have negative implications for global trade, exacerbating the growth challenges faced by European and Middle East seaports, Fitch Ratings says. A slow recovery in demand for consumer goods is likely to continue in Europe in 2025, supporting the seaport sector.
Proposed new tariffs by President-elect Donald Trump on Chinese and European goods could exacerbate growth challenges for export-oriented economies, reducing seaport activity, particularly in northern Europe, according to our EMEA Transportation Infrastructure Outlook 2025.
As more than two-thirds of US goods imports are duty-free (although this varies from 80%-90% for Canada and Mexico to 40% for China), we think a reasonable working assumption for the purposes of our economic forecasts is applying Trump’s election campaign tariff promises only to the existing basket of dutiable imports. This implies a jump in the US effective tariff to about 7.8% from 2.3% in 2023 globally, including a 25pp increase for China and a 3pp increase for Germany.
These tariff increases could materially affect global trade, port volumes and connectivity, and may necessitate adjustments to shipping routes, with port calls shifted and capacity reallocated. Trade tensions may raise uncertainties over the existing complex geopolitical situation in the Middle East, which has already led to the Red Sea crisis. The industry is still adjusting to sailing around the Cape of Good Hope, which has reduced mainline vessel calls and connectivity in some ports in the East Mediterranean region, while increasing congestion in others, particularly in the Western Mediterranean region.
The Middle East and eastern Mediterranean face port overcapacity risks due to extensive terminal construction projects outpacing demand growth. In the Middle East, greenfield projects may contribute over half of future capacity, adding about 29 million twenty-foot equivalent units (TEU) over the next five years. Plans in the eastern Mediterranean could add 11 million TEU of capacity over five years, mainly in Egypt. The combined impact of these expansions and geopolitical instability may weigh on the cash flow generation of the existing ports in the region.
Eurozone consumption picked up in 3Q24 as real household incomes rose, boosting a recovery in shipped volumes, which shrank in 2022-2023. We expect consumption to continue recovering in 2025, supporting seaport activity as reflected in a ‘neutral’ outlook for the sector, even though households and consumers have become more cautious.
Source: Fitch Ratings
