Shipping set to be reshaped by Trump tariffs

Global seaborne trade flows are set for choppy conditions in the wake of President Donald Trump’s decision on Saturday to levy  25% tariffs on imports from Canada and Mexico and 10% on goods from China starting tomorrow. For energy imports from Mexico and Canada, the tariff level has been set at 10%.

Canada and Mexico have ordered retaliatory measures, while China said it would challenge tariffs at the World Trade Organization and take unspecified countermeasures. Trump, meanwhile, has said the European Union will be up next in his tariffs campaign. 

Trump also implied over the weekend that he will take more trade actions as soon as mid-month targeting computer chips, pharmaceuticals, steel, aluminum, copper, oil and gas.

The de minimis exemption, which permits imports under $800 without duties, is also being eliminated for all goods from Mexico and Canada, and potentially China too. 

According to analysis from Freightos, Mexico and Canada combined to supply nearly $900bn of US imports in 2023 and about 28% of total US imports through November for 2024. 

Container shipping is expected to be hit by a contraction in seaborne volumes as the tariffs take hold leading to higher prices and a decrease in demand.

In the tanker markets, the effects are also potentially seismic. 

In 2024, analysis by broker Braemar shows Mexico exported around 500,000 barrels per day of crude and 100,000 barrels per day of fuel oil to the US, and imported around 320,000 barrels per day of gasoline and 160,000 barrels per day of diesel from the US – all by sea. By the end of 2024 Canada was exporting around 330,000 barrels per day of crude oil to the US via seaports in the east and west of the country. It exported another 3.5m barrels per day of crude overland to the US. It exported around 120,000 barrels per day of gasoline and 65,000 barrels per day of diesel to the US via seaports.  

Braemar suggests Canada will likely seek to divert its energy exports to China and Europe while US replacement for Canadian pipeline flows to the US Gulf would most likely come from the Middle East and South America, all positive from a tonne-mile perspective.

In the first Trump trade war in the previous decade, the Chinese targeted US farmers and reduced imports of US grain. China is able to substitute this with more imports from Brazil, with minimal net tonne-mile impact.

According to data from Clarksons Platou Securities, dry bulk, particularly grain and steel products, was the most impacted from the first Trump trade war with China, followed by LNG and LPG.

Overall shipping tonne-mile growth fell 0.5% in 2018, then again by 0.5% in 2019, according to Clarksons data.