Key insights:

1. President Trump rolled out 25% tariffs on all US imports from Canada and Mexico last week only to quickly suspend them for a month for all goods covered by the USMCA. This suspension leaves more than $1 billion of imports per day that are not in the USMCA subject to tariffs.

2. The quick suspension – partly accomplished via auto manufacturer pledges to move some manufacturing to the US – reinforced the sense of uncertainty around other tariffs and trade barriers with deadlines set for April including the 60% China tariff, reciprocal tariffs, USTR port call fees and the now reinstated 25% tariffs on USMCA goods.

3. NRF US ocean import data and projections show significant volume strength since November that is expected to continue through May but then drop in June and July, suggesting that frontloading will continue into Q2 but possibly also lead to a subdued peak season.

4. Despite this estimated volume strength, transpacific container rates have fallen below their 2024 low since Lunar New Year. Asia - Europe prices that also recently dipped below last year’s floor rebounded slightly last week.

5 Some of this rate weakness is likely due to the recent carrier alliance reshuffle which is resulting in increased competition and less effective capacity management as carriers are still moving vessels into place for the newly launched services.

6. In air cargo, USCBP has been charged with developing a solution by April 1st for the expected surge in formal entry parcels once de minimis eligibility for Chinese imports is canceled. The lack of a solution was a main reason de minimis was quickly restored back in February, though many are skeptical one can be developed in a short timeframe.

7. In addition to reports of canceled charter flights, China - US air cargo rates that dipped to $4.61/kg last week – 40% lower than at the start of the year – suggest a gradual easing of e-commerce demand on this lane.

Ocean rates - Freightos Baltic Index:

• Asia-US West Coast prices (FBX01 Weekly) fell 25% to $2,659/FEU.

• Asia-US East Coast prices (FBX03 Weekly) fell 16% to $3,754/FEU.

• Asia-N. Europe prices (FBX11 Weekly) increased 3% to $3,064/FEU.

• Asia-Mediterranean prices (FBX13 Weekly) stayed level at $4,159/FEU.

Air rates - Freightos Air index

• China - N. America weekly prices fell 7% to $4.61/kg.

• China - N. Europe weekly prices decreased 7% to $3.02/kg.

• N. Europe - N. America weekly prices stayed level at $2.37/kg.

Analysis

Early last week President Trump rolled out 25% tariffs on all US imports from Mexico and Canada only to issue a one-month reprieve for automotive goods covered by the USMCA a day later and extend that suspension to all imports that fall under the USMCA by Thursday.

An estimated 50% of imports from Canada and 38% from Mexico fall under the USMCA and include automotive goods, food and agricultural products and many appliances and electronics. But that leaves about $1 billion worth of imports per day that fall outside the USMCA and do not face tariffs – and other goods that pay low level tariffs – that are now subject to the 25% hike. This category includes items like phones, computers and medical equipment.

This latest tariff see saw caused importers to pull forward cross-border shipments in February leading to congestion at border crossings, with the implementation and then suspension also disrupting surface volume flows from both Mexico and Canada.

This latest start and stop once again shows President Trump using tariffs and other threats as leverage for his desired trade or other policy goals: border security promises by Mexico and Canada led to the initial tariff pause in February. And though the stated goal of these measures is to stem the flow of fentanyl and illegal immigration, part of last week’s reprieve was reportedly due to auto manufacturer pledges to shift some manufacturing from Canada and Mexico to the US.

Threats about China’s presence along the Panama Canal led to the recent sale of Hutchinson Ports, and the USTR’s proposed port call fee on Chinese-made vessels has already resulted in CMA CGM pledging to invest $20 billion in the US, including some shipbuilding.

Rapidly approaching deadlines for new tariffs or trade barriers include March 24th for the USTR hearing that will inform a decision on the port call fees, April 1st when agencies will issue reports on the range of trade issues requested in the president’s America First Trade Policy memo – including Trump’s proposed 60% tariff on all Chinese goods and after which reciprocal tariffs are likely to follow – and now an April 2nd deadline for 25% tariffs on USMCA goods.

But last week’s roll out and suspension adds to the pervasive state of uncertainty for logistics and supply chains and makes planning and adjustments extremely difficult, with most shippers opting to wait and see before investing in significant changes to their supply chains. That being said, with the likelihood of some tariff increases for imports from China and other US trade partners still high, many US importers have been frontloading shipments to some extent since November boosting ocean demand and freight rates.

The latest National Retail Federation US ocean import report shows that volumes from November through February were about 12% higher than a year prior, suggesting a significant pull forward ahead of expected tariffs. Volumes that are projected to remain level and strong through May, are expected to weaken in June and July, likewise implying weaker demand in what is normally the start of peak season due to the pull forward since late last year.