Ocean freight market faces prolonged weakness despite some trade clarity

The global ocean freight market is under pressure as shifting US trade policies and new tariff agreements fail to spark a meaningful recovery in demand or container rates. Analysts warn that neither the EU-US tariff agreement nor the ongoing US-China trade talks are likely to revive ocean container shipping demand or halt the steep decline in freight rates in 2025.

US trade deals fail to uplift sentiment

In the past week, the White House struck last-minute deals with several key trading partners, including the European Union and Japan to avoid the steepest tariff hikes that were due on August 1. These agreements set a 15% baseline tariff on most EU and Japanese exports to the US, up from 10% but below the threatened 30%, and maintain 25% duties on automotive exports that have been in place since the spring.

The EU also committed to major US energy purchases and investments, while the US reached preliminary agreements with Vietnam, Indonesia, and the Philippines at 19-20% tariff levels. Negotiations with Canada, Mexico, and China continue, with US-China discussions in Stockholm expected to yield another 90-day extension of the current 30% baseline tariff.

Slump gained speed till mid-July

Despite these agreements, ocean container markets remain weak. Trans-Pacific rates have been especially volatile. A temporary reduction of US tariffs on Chinese goods from 145% to 30% in mid-May triggered an early and short-lived peak season surge, with Asia-US West Coast spot rates spiking to $6,000 per 40ft container (FEU) by mid-June.

By mid-July, rates had collapsed to about $2,300 per FEU, where they have since stabilized as carriers reduced capacity to match falling volumes. US East Coast rates have also plummeted, down 43% since June 1, while West Coast rates are down 59% in the same period.

Asia-Europe routes are also showing signs of strain from overcapacity. Even with persistent congestion at several major European container hubs and planned peak season surcharges of around $500 per FEU, the combination of muted demand and global fleet growth continues to cap any sustained upward movement in prices.

Decreases are slowing as August kicks in

Meanwhile, Drewry’s World Container Index (WCI) decreased 1% to $2,499 per 40ft container on July 31.

Spot freight rates from China to the US West Coast declined by 2% to $2,632 per 40ft container, while rates to the US East Coast also slid 2% in a week to $4,135.

Rates from China to Northwest Europe remained unchanged this week at $3,290 per 40ft container, while the South Europe route also stayed level at $3,362. With a temporary halt on higher US tariffs for Chinese products ending in mid-August, shipping lines are cutting back on services across the Pacific by cancelling more sailings. Since the big rush to ship cargo before the tariff increase is now over, Drewry expects spot rates to remain less volatile in the coming week.

No revival in sight for shipping demand

Analysts warn that neither the EU-US tariff agreement nor the ongoing US-China trade talks in Stockholm this week are likely to revive ocean container shipping demand or halt the steep decline in freight rates in 2025.

“US trade deals are not a magic bullet,” said Emily Stausbøll, Senior Shipping Analyst at Xeneta. “A 15% tariff on EU imports is not good news for shippers—it is simply less bad than the 30% that had been threatened. And US-China negotiations will not bring import costs back to pre-April levels, before Trump introduced sweeping reciprocal tariffs.”

Stausbøll added that subdued demand and the lingering impact of tariffs are weighing heavily on the market. “Spot rates on US trades have plummeted and are likely to fall further, even though carriers have slowed the decline in recent weeks by removing capacity,” she said. “Any savings from lower rates are being overshadowed by the financial hit from tariffs, and even the most optimistic shippers must face the reality of US trade policy.”

H2 2025 outlook weaker

Xeneta noted that carriers are now battling a market distorted by earlier frontloading. “Shippers rushed imports into the US in April and May during the temporary tariff relief. That cargo rush is over, and rates are falling hard, particularly on fronthaul lanes from the Far East,” Stausbøll said. “Carriers are withholding capacity to stem the slide, but significant global fleet overcapacity means they may be fighting a losing battle. After several years of exceptional profits, the era of easy gains could be ending if freight rates continue their dramatic decline.”

Shippers who frontloaded cargo in April and May are now holding elevated inventories, and carriers face a challenging mix of subdued demand and significant overcapacity. Additional 90-day extensions of current tariff levels could generate modest bumps in late-season demand if some importers resume bookings, but the peak season appears to have already passed. Without a meaningful recovery in underlying trade volumes, ocean freight rates are likely to remain under pressure in the coming months.