The smoke of trade wars is spreading across global shipping markets at an unprecedented pace. The continuous escalation of U.S. tariffs on Chinese goods, like an arctic blast, has rapidly chilled cargo demand on Pacific routes, triggering a chain reaction from plummeting freight rates to canceled voyages. The entire industry is undergoing an extraordinary stress test.
Cliff-like Demand Drop: The Direct Impact of Tariffs
The latest weekly report from Linerlytica reveals the severity of the situation: cargo bookings from China to the U.S. are projected to plunge by 30% to 60% over the next three weeks, with other Asian regions facing 10% to 20% declines. These figures clearly demonstrate how U.S. tariff policies are delivering direct and substantial negative market impacts. This abrupt demand contraction presents additional challenges for already strained shipping companies.
Capacity Adjustments: Forced Cancellations
Confronted with collapsing demand, carriers are implementing emergency measures. Linerlytica anticipates that upcoming Labor Day holidays will further suppress May cargo volumes, compelling more international air freight cancellations in coming weeks to prevent additional rate erosion. Three trans-Pacific services have already been withdrawn, including MSC's Mustang and Premier Alliance's PN4 routes—both canceled before launch. TS Line has also suspended deployment of smaller vessels on its AWC2 service.
Market Imbalance: Freight-Charter Rate Disparity
Yet these capacity reductions appear ineffective in restoring market equilibrium. Linerlytica suggests these tentative adjustments have minimal impact on balance restoration, with further turbulence expected. The widening gap between charter rates and freight prices continues to compress carrier profitability, exemplified by Singapore's Vasi Shipping commencing bankruptcy proceedings last week.
Tariff Exemptions: Limited Relief
While the U.S. administration announced certain tariff exemptions to ease trade tensions, their effect remains marginal. Under policies announced on "Liberation Day," the U.S. will reduce tariffs on all non-Chinese nations to a 10% base rate for 90 days. Additionally, 20 product categories—including smartphones, computers, and various electronics—are excluded from both China's 145% tariff and other nations' 10% baseline rates.
Persistent Tariff Effects: Carrier Vulnerabilities
Despite these measures, Linerlytica estimates 30%-40% of trans-Pacific container imports remain tariff-affected. These primarily impact carriers with significant China-U.S. exposure, including Hede, Matson, SeaLead, TS Lines, and COSCO—all currently evaluating countermeasures under mounting pressure.
Industry Outlook: Adaptation and Transformation
U.S.-China tariff policies are reshaping trade patterns while presenting monumental challenges for global shipping. Faced with demand erosion, overcapacity, and rising costs, carriers must strategically optimize networks, enhance efficiency, and pursue diversification. Simultaneously, governments and trade associations should collaborate to foster sustainable industry development. This tariff-induced "adverse climate" may ultimately catalyze the sector's transformation.