Tariffs and trade war fears have put the American economy on the defensive. Cross-border spot rates continue to increase, thanks to shippers front-loading inventories before their sourcing markets get tariffed, and supply chain stakeholders are worried about how the situation will unfold and impact freight and trade flows.
In this edition of our newsletter, we bring you the latest news on the issues everyone in supply chain is talking about.
US-Canada Trade War Drives Up Trucking Rates
Freight volumes across the U.S.-Canada border reportedly slowed down last week, but the cost of moving goods surged. Spot rates from Toronto to Chicago jumped 18%, while freight volumes on that route dropped 20%. The opposite trend played out along the southern border, where shipments from Mexico increased 12% weekly but rate hikes were marginal.
A rush to move goods ahead of the new U.S. tariffs squeezed Canadian trucking capacity, which had already been shrinking. On March 4, the U.S. imposed a 25% tariff on Canadian and Mexican goods, which disrupted shipments, prompting some businesses to pause cross-border movements while waiting for clarity. The White House rolled back some of those tariffs two days later, but shippers are bracing for another surge in freight activity as the new deadline of April 2 nears.
Trump’s Tariffs, Shipping Fees Put Pressure on Trade, Ports
Importers are rushing shipments ahead of the U.S. tariff hikes. A 20% increase has already been applied to Chinese goods, and the back-and-forth on duties for Canada and Mexico has led to uncertainty, though most goods move by truck or rail rather than through ports.
Beyond tariffs, a proposal from the U.S. Trade Representative could add up to $1.5 million in fees for ships built in China berthing at U.S. ports. Given that much of the global container fleet is Chinese made, this would raise costs for cargo owners and consumers. If implemented, shipping companies may be forced to shift to larger vessels and consolidate shipments to limit port calls, which could hurt smaller ports. Import volumes are expected to rise in the short term but may dip by midyear, partly due to early shipments ahead of labor disputes on the East and Gulf coasts last fall.
Trump Plans Executive Order to Boost US Shipbuilding
The Trump administration is drafting an executive order to revive the U.S. shipbuilding business and challenge China’s hold on the global maritime industry. The plan consists of 18 measures, including fees on Chinese-built ships and cranes entering U.S. ports, raising wages for U.S. nuclear shipyard workers, and creating a new office at the National Security Council to strengthen the domestic maritime sector.
A key proposal involves using revenue from these fees to fund maritime investments through a Maritime Security Trust Fund and Maritime Opportunity Zones. Lawmakers from both parties have supported efforts to expand the U.S.-flagged fleet, citing national security concerns over the country’s dependence on foreign-built ships. Shipping companies outside China have resisted the proposed fees, warning that higher costs could force carriers to limit services at smaller U.S. ports.
Maersk Warns of Inflation as Tariffs Loom
Maersk has warned that new U.S. tariffs on Mexico, Canada, and China will push prices higher, contradicting the White House’s claims that inflation won’t be affected. Retailers like Target have echoed similar concerns, warning that prices on essentials, including produce, could rise within days.
The United States’ 25% tariff on Mexican and Canadian goods (except energy and potash) are set to go into effect on April 2. China already has a 20% tariff on all its goods entering the country. Canada is expected to retaliate with tariffs on more than $100 billion of U.S. goods, and Mexico’s government plans to announce its measures soon.
Despite concerns over inflation, Maersk’s North American president, Charles van der Steene, pointed to strong consumer spending in the U.S., which has remained steady for six straight quarters. Meanwhile, some manufacturers are shifting production to India, which has attracted new investment from global companies, including a $5 billion expansion from Maersk.
US Tariffs Shake Up Air Cargo Market
New U.S. trade policies are impacting air cargo markets, with tariffs on China, Mexico, and Canada starting to disrupt supply chains worldwide. Airfreight demand, which had been growing steadily, is now slowing, with rates on key China-U.S. routes falling 29% in February. Industry experts warn that removing duty-free treatment for small parcel shipments from China, Canada, and Mexico could weaken cross-border e-commerce, which has been a key driver of air cargo growth since 2023.
Freight forwarders and retailers are adjusting, with some shifting fulfillment centers to other parts of Asia and increasing their reliance on ocean shipping. Meanwhile, global trade tensions fuel inflation and economic slowdown concerns, with rising costs expected to be passed on to consumers. Airlines are holding back on long-term cargo agreements and waiting to see how market conditions unfold. Some are repositioning planes to other regions, which could pressure rates in trans-Atlantic and Southeast Asian markets.
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