Tariff Man: what does shipping have in store with a Trump presidency?

Trump making a speech at an LNG export terminal in 2019. Credit: Scott Dalton / Bloomberg / Getty Images

Shippers are used to changing winds and having to be flexible with plans, and that will likely be a useful skill going into four more years of President Trump in the US.

As the administration-elect builds between now and 20 January 2025 – the date of the Presidential inauguration in Washington DC – How do those in the industry think the new regime will impact the shipping sector?

It’s well understood that without container ships, bulkers, and tankers, the interconnected global economy simply wouldn’t work at the pace that has been achieved over the past 50 years.

While free trade has benefitted many, it has also led to the protectionist backlash the world witnessed emanating from Washington DC during Trump 1.0. Tariffs on imports were a central promise in the 2024 Trump campaign, and concern about their effect on the transport sector is hard to avoid in maritime circles.

Of all the transport sectors, shipping is most affected by rising tariffs. Judah Levine, chief analyst at freight trading platform Frieghtos, describes the impact on the industry.

“In 2018, Trump’s announcement of tariff increases led to a significant pull forward of ocean imports as shippers rushed to bring in goods before the tariff increases went into effect in early 2019,” he reminds Ship Technology Global.

With global rates as high as 20%, and 60%-100% increases on Chinese goods threatened during the campaign, Levine is certain that tariff fears will again lead to significant front-loading at US ports – perhaps even before any official announcement is made.

“Anticipation that Trump will follow through on these campaign promises could be enough to spur some increase in ocean freight demand and rates starting now, with these trends possibly intensifying once tariff increases are actually announced,” Levine says.

A significant difference from the 2016 term will be the “already elevated floor” of the spot rate market due to additional political strains, most notably the Red Sea crisis that has pushed East-West trans-Suez rates to at least double their price in 2023. Although these rates have halved since the peak of the crisis, some journeys, especially to the US West Coast, are triple their previous price.

Data from Xeneta – another ocean and air freight intelligence platform – shows that Trump’s ramping up of tariffs on Chinese imports in 2018 caused ocean container shipping freight rates to spike more than 70%.

“The knee-jerk reaction from US shippers will be to frontload imports before Trump is able to impose his new tariffs. Back in 2018, the tariff on Chinese imports was 25%, now it is increasing up to 100% so the incentive to frontload is even greater,” Xeneta’s chief analyst Peter Sand explains.

“If you have warehouse space and the goods to ship, frontloading imports is the simplest way to manage this risk in the short term – but it will bring its own problems. A sudden increase in demand on major trade lanes into the US when ocean supply chains are already under pressure due to disruption in the Red Sea will place upward pressure on freight rates."

But some would argue that US ports and importers are used to this kind of fluctuation – after all, we saw serious frontloading earlier this year as stakeholders prepared for a mass strike of dock workers.

Margaret Kidd is a professor teaching supply chain and logistics technology at the University of Houston and explains the reason for rising rates as the shipping sector prepares for January.

“There is no question retailers and manufacturers alike have been frontloading imports ahead of anticipated tariffs. This is similar to what we witnessed from May to August of this year in anticipation of the ILA strike," she says. 

"Frontloading tends to cause an acceleration of ocean rates based on increased demand for containers and vessels, which then also impacts demand for trucking and warehousing. While tariffs increase the cost of global trade, the devil will be in the details as to how these tariffs will be implemented.”

But even if ports, shipping firms, and importers all know the change is coming, there remains little they can do to stop its negative effects.

“We saw the negative impact of tariffs during Trump’s first term in office in 2018 when ocean container shipping rates spiked 70%. Shippers will be fearing more of the same this time around,” Sand says.

“In the longer term, another Trump presidency will reignite the trade war with China and provoke retaliatory action. In 2018, we saw China respond to US aggression by imposing tariffs of its own, which added even more fuel to the fire, so there is a risk this situation could escalate further in the months and years to come."

Another similarity to 2016, or at least the political promises that were laid ahead of the Trump administration taking office, is the focus on US infrastructure restoration. Maritime lawyer at law firm McGlinchey Stafford José Cot says that ports are expected to be part of Trump’s wider infrastructure spending plans, potentially paid for by higher rates for foreign operators.

“Trump has pledged increased spending on American infrastructure, including port facilities," Cot explains. "This is likely to be part of a broader agenda, including infrastructure funding and tax incentives for American companies, and additional fees and oversight regarding foreign shipping companies.”

Kidd, however, disagrees. In spite of the much-needed and much-lauded Biden-Harris IRA spending and Clean Ports Programme, she does not think ports would be high on Trump’s agenda.

“The US port sector under the Biden/Harris Administration has seen an influx of much-needed infrastructure investment. Most recently through the Environmental Protection Agency $3bn Clean Ports Programme grants. The transformative nature of these investments from the Inflation Reduction Act was generational in nature," explains Kidd.

"I envision the incoming administration reigning in government spending and definitively not supporting infrastructure investments that combat the climate crisis."

While they might disagree on the likelihood of ports directly benefitting from federal money, Cot shares a similar view to Kidd on the environmental focus –or lack thereof – from Trump and his team. However, Cot argues that this could benefit parts of the maritime sector.

“Trump’s pledge to remove regulatory obstacles to oil and gas exploration and production will benefit the marine and energy sectors, including supply companies supporting offshore exploration and drilling in the Gulf of Mexico," he says. "This could drive additional investment and job creation in these sectors."

While this could create growth in the offshore sector, it might be seen by some as akin to moving deck chairs on the Titanic. Wind and other offshore power systems have not overtaken oil and gas in the energy sector, but maritime investments have started to shift toward those energy streams.