Freight in a fog: How US-China tariff clash is reshaping shipping costs

Container freight rates declined again in mid-April, reversing their early-month rebound triggered by the initial tariff chaos. Carriers are adjusting operations to match weaker demand through blank sailings, while a revised plan to ease port fees on China-linked ships reduced the risk of US port congestion and rate spikes. Still, tariff uncertainty and supply chain disruptions continue to drive market volatility.

Tariffs bring uncertainty to rates

Drewry’s world container index decreased by 3% to $2,192 per 40ft container on April 17. The index was indeed on a steady downtrend from early January to early April. When the US tariffs first wreaked havoc on the markets earlier in the month, a two-week rebound followed in world container prices given the uncertainty; however, this appeared to be short-lived as the prices returned to the bearish zone again.

Ex-China routes were the main drivers behind the decline. Drewry’s China to US West Coast rates decreased by 5% last week to $2,683 per 40 ft container, while US East Coast rates were down by 7% to $3,706 per 40 ft container.

Drewry’s China to Northwest Europe route declined by 2% last week to $2,344 per 40 ft container, while rates to Southern Europe were also down by 2% to $3,018 per 40 ft container.

Meanwhile, Drewry expects rates to continue to decline in the coming week due to reduced capacity and uncertainty stemming from tariffs.

US softens port fee plan on China-linked ships

On April 17, the Trump administration scaled back its plan to impose steep port fees on Chinese-built ships. The initial policy aimed to impose fees of up to $1.5 million per US port visit on cargo ships owned by Chinese firms and foreign-flagged vessels built in China.

The initial proposal faced strong opposition from the maritime industry, including US shippers and port operators, who cautioned that it could disrupt global trade and saddle consumers with $30 billion in additional import costs. Transferring exports on US-built and US-flagged vessels would particularly hit the chemical industry, as there are no US-built LNG carriers currently in operation or on order, and only a limited fleet of under 200 US-flagged cargo vessels.

Under the revised plan, empty vessels arriving to load US exports will be exempt from charges. Rather than a flat fee, rates will be based on net tonnage or the number of containers discharged. Starting October 14, Chinese-built and owned ships will be charged $50 per net ton, while vessels built in China but owned by non-Chinese companies will face a lower fee of $18 per net ton. The fees will increase annually.

Moreover, vessels will no longer be charged at every US port visited, a move that is expected to reduce the incentive for carriers to cut port calls, an action that could have caused significant logistical disruptions.

Will the revised plan offer relief to the industry?

The new plan reduces the risk of severe port congestion and rising freight rates that could have resulted from the initial plan. According to Xeneta Senior Shipping Analyst Emily Stausbøll, the fact fees will not be imposed on every port call is particularly important because it lowers the risk of congestion had carriers decided to cut the number of calls on each service into the US. This port congestion had the potential to cause severe disruption and upward pressure on freight rates.

Although the new model reduces this risk, she warned that costs will still be substantial for Chinese carriers and those operating Chinese-built ships, especially those with large capacities. Stausbøll noted that the six-month window before implementation is critical, allowing carriers to reassess how they deploy vessels across alliance networks and possibly steer their largest China-built ships away from US services to reduce exposure.

The latest announcement should still be viewed in the context of the original proposal, which offered dire consequences. The situation has changed for the better, but it isn’t a great victory for the ocean container shipping industry because these fees still add further pressure at a time when businesses are already trying to navigate the spiralling tariffs announced by the Trump Administration, added Stausbøll.

China’s shipping industry condemns the move

China’s shipbuilding industry has condemned the new US port fees targeting China-linked vessels as short-sighted. The China Association of the National Shipbuilding Industry expressed "extreme indignation and resolute opposition" to the US measures, joining protests from the government and the country’s shipowners.

The association warned that the US measures would disrupt global shipping networks, drive up freight costs, worsen inflation in the US, and ultimately hurt American consumers. Calling on the global maritime industry to oppose what it called "discriminatory" and "non-market" behavior, the group urged Chinese authorities to take strong countermeasures. The Ministry of Commerce also issued a protest, vowing to "resolutely take necessary measures" to defend China’s interests.

Meanwhile, Chinese shipping giant COSCO also rejected the recent actions targeting maritime, logistics, and shipbuilding sectors, calling the measures discriminatory and based on false information. According to the company, the US actions not only disrupt stability and sustainability in the sector but also pose a risk to the security and resilience of global industrial and supply chains.

The tariff effect

Blank sailings rise on China routes

The US-China trade war has led to an increasing number of canceled freight sailings out of China, as ocean carriers grapple with a decline in orders due to President Trump’s tariffs and escalating trade tensions.

Ocean carriers are adjusting their operations to maintain vessel capacity, with strategies such as canceling sailings, omitting routes, using smaller vessels, or slowing down ships. These measures aim to match reduced container volumes with the available capacity. However, while fewer sailings could lead to lower shipping costs, the effects of canceled sailings during the pandemic, when rates spiked as high as $30,000, highlight the potential volatility of pricing in the ocean freight market.

Alan Murphy, CEO of Sea-Intelligence, noted that the majority of containers on transpacific routes come from China, and while volumes will decrease, the long-term impact could be widespread.

Vietnam emerges as an alternative, Indian exporters frontload

This shift is also prompting a rise in shipping activity from Vietnam, which has benefited as China’s trade with the US falters. The cost of shipping from Vietnam to the US has jumped significantly, with spot rates from Ho Chi Minh City to Los Angeles increasing by 24% in early April, CNBC said. Meanwhile, Indian exporters are also bracing for a sharp rise in freight rates as the tariff pause has led to a surge in export activity. Industry experts expect freight rates to spike into double digits during this period.

Looking ahead, the current uncertainty in the supply chain is expected to continue to evolve rapidly, with tariff-related shifts driving sharp price swings and forcing shippers to adapt to the unpredictable global trade environment.