The election of Donald Trump as the new U.S. President is generating multiple reactions, one of the fears that have risen is the application of new tariff hikes to US imports, especially those coming from China.

Maritime industry analyst Lars Jensen told Mundo Maritimo that this makes him foresee “an additional increase in demand for imports in the US in the short term, as importers of non-time-sensitive products will increase their orders before new tariffs are imposed.”

Jensen adds that “given that it is not known exactly how large these tariffs might be, or when or where they will be applied, they could amount to a large increase in demand.”

It should be recalled that Trump proposed across-the-board tariffs of 10% to 20% on most of the $3 trillion in annual U.S. imports and a minimum tariff of 60% on all imports from China.

In 2018, during his first administration, Trump's announcements of tariff increases prompted a significant front-loading of maritime imports as importers rushed to bring in goods before they went into effect in early 2019.

As quoted by Judah Levine, head of research at Freightos, the Baltic Freight Index (FBX) showed that container rates on the Transpacific route doubled from July to November 2018 as volumes and marine inventories grew, while 2019 rates and volumes were moderate in comparison.

Levine, coinciding with Jensen, predicts that just the expectation that Trump will deliver on these campaign promises could be enough to spur some increase in demand, but also in shipping rates and indicates that “it is possible that these trends will intensify once tariff increases are announced.”

As for the impact on container shipping rates, Levine recalls they are already above a record low, despite a significant drop as pressure eases following the end of the peak season. For example, rates on the Transpacific to East Coast (USEC) are almost 50% lower than their July peak of US$5,200/FEU, but more than twice as high as their level at the same point last year, while West Coast (USWC) rates are more than triple what they were last year and that in October 2019.

A new factor for the USEC and the Red Sea

Trump will start his administration next January 20, a few days before, on January 15, the deadline for renegotiations between the International Longshoremen's Association (ILA) and the United States Maritime Alliance (USMX) expires, which, if they fail, could involve a new port strike in the USEC and USGC.

However, the new administration, according to Jensen, could influence events whether or not it decides to invoke the Taft-Hartley Act (which restricts the ability to take union action) and the degree to which it engages with the conflicting entities to find an agreement.

As for the Red Sea crisis, he notes that Trump's agenda is very much “America first,” and the fact that most merchant ships are not U.S.-flagged could influence his policy decisions when the issue specifically concerns shipping matters.

In the longer term, the analyst explains that more changes in supply chain patterns should be expected. “In the case of U.S. imports, this will most likely involve more changes in sourcing patterns, such as what, for example, we have seen with Chinese goods in recent years routed through Mexico.”

On the other side, he anticipates, “we could expect this to add a negative impact to U.S. exports due to retaliatory tariffs and, in turn, increase the imbalance between full and empty container flows.”