The spectre of significant US import tariffs, reintroduced and expanded under a second Trump administration, is casting a long shadow over global trade routes and the international transport sector, according to analysis from maritime consultancy Drewry.
The analyst warns that the proposed levies, targeting major trading partners like China, Vietnam, and the European Union, carry the potential to fundamentally “reshape trade and international transport”, demanding proactive adaptation from shippers, forwarders, and carriers alike.
Drawing parallels with the previous Trump administration’s actions, Drewry highlights the tangible impact of the 2018 tariffs levied against China. Citing historical data, the consultancy points out that these measures effectively stalled growth in containerised goods flowing from China to the US. Over a six-year period encompassing the tariff implementation, volumes saw a net increase of zero percent. In contrast, Vietnam, which was not subject to those specific tariffs at the time, experienced a 45% surge in container volumes to the US during the same period, clearly benefiting from trade diversion.
The sensitivity of trade flows to such protectionist measures is further underscored by academic research cited by Drewry. A 2024 study by Haberkorn et al., examining the 2018-19 US tariff hikes on Chinese goods, found a direct correlation: “A 1% increase in US tariffs resulted in a 1% decline in trade, one year after tariff imposition.” This finding reinforces the significant potential impact of the much higher tariffs proposed under what Drewry terms the “Trump 2.0” scenario.
‘Broad, but uneven’ approach
The tariffs outlined in the potential “Trump 2.0” playbook, as detailed by Drewry, represent a dramatic escalation.
Unlike the more targeted approach of the first administration, these proposed tariffs would apply broadly but unevenly across trading partners. China faces a particularly steep increase, with a proposed 34% tariff potentially being stacked atop the previous 20%, resulting in a effective tariff rate of 54%. Perhaps more surprisingly, Vietnam, a key beneficiary of the previous trade shifts, is now targeted with a proposed 46% tariff, signalling a major policy shift that could reverse its recent gains.
However, the proposed tariff structure isn’t uniformly punitive across Asia. Drewry notes that some nations appear to be treated more favourably under this potential regime. The Philippines, for instance, faces a proposed tariff of “only” 17%, while Malaysia is looking at 24% and South Korea at 25%. This differential treatment is expected to trigger significant strategic realignments within regional supply chains.
Drewry anticipates that the “much higher US tariffs on Chinese goods will prompt favoured Southeast Asian nations like the Philippines and Malaysia to prepare for an influx of factories relocating”. This isn’t merely a speculative possibility; the consultancy observes that countries already well-positioned within global value chains, including Vietnam (despite the proposed tariffs), Thailand, Malaysia, Indonesia, and the Philippines, have been actively courting investment, particularly in high-value sectors like electronics and automotive manufacturing. The proposed tariffs would likely accelerate this trend, forcing companies reliant on Chinese manufacturing for the US market to seriously consider shifting production to these comparatively lower-tariff locations.
The potential fallout isn’t confined to US import dynamics. Drewry notes that major economic blocs, specifically “China and the European Union have said that they will retaliate”. This indicates a strong likelihood of tit-for-tat measures, meaning trade friction could impact goods flowing in both directions between the US and these key partners, broadening the scope of disruption.
While acknowledging that these “new radical trade policies will cause pain to some economies and businesses”, Drewry also points out that “others may gain because of shifts in trade flows”.
This creates a complex landscape of winners and losers. Furthermore, the resulting turbulence within the shipping container industry could have an “asymmetric impact on carriers and shippers in the short run”. This echoes recent market dynamics where disruptions, such as those caused by the Covid-19 pandemic and Suez Canal blockages, coupled with strong demand, led to periods of “supernormal profits for carriers”, often at the expense of shippers facing high rates and capacity constraints.
A crucial distinction Drewry makes between the previous tariff rounds and the potential “Trump 2.0” scenario concerns overall trade volume. “Whereas last time tariffs shifted trading patterns around while volumes continued to grow,” the consultancy warns, “a tariff-fuelled US recession could also see ocean volumes dip.” This raises the stakes considerably; instead of merely rerouting trade, the new policies could lead to an overall contraction in global shipping demand, particularly if they contribute to a broader economic slowdown in the US.
Need to pivot
In this volatile environment, Drewry emphasises the need for strategic adaptation across the logistics chain. “Carriers will need to rethink their strategies and business models”, the analysis states, suggesting a necessary pivot towards “adapting to new realities prioritising protectionism, regional trade and strategic alliances over the previously unfettered flow of goods and services across borders”.
For shippers navigating this uncertainty, Drewry offers several key recommendations. Firstly, businesses must undertake a thorough “review and where possible divert sourcing”, actively exploring alternative suppliers and countries of origin less exposed to high tariffs. This necessitates a deep dive into the “logistics of new sourcing locations”, analysing the transport infrastructure, lead times, and associated costs of shifting production or procurement. The complexity of navigating varied and changing tariff regimes also means companies may need to “hire more tariff experts” to ensure compliance and optimise duty exposure. Crucially, shippers must “anticipate and plan for volatility in transport capacity and rates”, building resilience into their supply chains to withstand potential fluctuations in shipping availability and cost.
Furthermore, Drewry advises shippers to conduct detailed impact assessments. These should consider scenarios such as “possible lower freight rates from lower volume growth” if tariffs dampen overall demand but also brace for “possible higher freight rates from US penalties on China-built ships” – a specific potential measure that could inflate operational costs for carriers using such vessels.
Shippers also need to evaluate the risk of a “possible fall in US port coverage by carriers”, as shipping lines might consolidate services or alter rotations in response to changing trade patterns and volumes, potentially affecting accessibility and inland transport costs.
Carrier concerns
Carriers and forwarders face their own set of strategic imperatives. Drewry suggests they must “recalibrate transport capacity by route to and from the US”, adjusting vessel deployment and service frequencies to match shifting demand patterns. Given the potential friction in the US market, carriers are advised to “look for new markets outside the US”, diversifying their geographical focus to mitigate reliance on potentially contracting trans-Pacific or trans-Atlantic trades. Aligning operations with market realities might also necessitate difficult decisions, including potentially needing to “consider capacity reductions to match lower volume growth” overall if a tariff-induced slowdown materialises.
Addressing the specific threat of penalties on vessels built in China, Drewry suggests carriers should proactively “introduce a fair pass-through mechanism” to transparently manage and allocate these potential additional costs to customers. As a potential mitigation strategy, carriers might even need to “divide their fleet of ships (artificially) between ships ‘subject to’ and ‘not subject to’ US penalties”, creating operational distinctions to manage exposure on US-related trade lanes.
Drewry’s analysis paints a picture of significant potential upheaval. The proposed scale and scope of “Trump 2.0” tariffs, targeting not just China but also previous beneficiaries like Vietnam, coupled with the threat of retaliation, signal a potential move away from predictable global trade flows towards a more fragmented, protectionist, and volatile landscape.
Source: Baltic Exchange
