A tsunami of uncertainty
The first few weeks of 2025 started off quite positively, with averted strike action on the East Coast of the United States and a ceasefire in Gaza, which sparked hope for a resolution to the crisis in the Red Sea. However, this was quickly replaced by what can best be described as an exceptionally high level of uncertainty.
Let's take a closer look at the foundations of this uncertainty, how it will unfold, and what shippers—if possible—can do in this situation.
Geopolitical uncertainty and customs tariffs
The two main elements are, of course, the crisis in the Red Sea and the new Trump administration in the United States. Two elements that have even become intertwined in recent weeks.
Let's start with the new American customs tariffs, about which we actually know very little. The United States imposed a 25% import tariff on Mexico and Canada, only to temporarily withdraw it after just one day. Additionally, the US introduced an extra 10% import tariff on China and abolished the de minimis rule, meaning small shipments are no longer exempt from customs clearance. The 10% tariff still applies, but the abolition of the de minimis rule has been postponed until a customs system is developed that can support this change in practice. China has already responded with tariffs on certain American goods.
Subsequently, a 25% American import tax on steel and aluminium was introduced. This was followed by an announcement that US customs tariffs for all goods and all countries would be adjusted so that American tariffs are not lower than those of trade partners. This was further complicated by Trump's statement that VAT on goods is also considered an import tax, which the US will retaliate against. How all of this will affect existing trade agreements remains unknown.
All of this has happened within just a few weeks. The best way to describe the situation is that it is unclear and unstable. Realistically, it is not possible to predict which new customs tariffs the US will implement, who else will be affected, and what the rate will be. We've already seen how tariffs can be both imposed and lifted with just a few days' notice. It is also unknown how long this unstable situation will persist.
Supply chain challenges during geopolitical shifts
For shippers, it is nearly impossible to develop well-considered, long-term supply chain plans in this situation. Currently, there are examples of cargo being expedited to enter the US before it might be impacted by new tariffs, but this is only a short-term solution.
It seems logical—and almost inevitable—to develop a new long-term supply chain strategy, but if the US is involved, this is currently not feasible. Now, there is a lack of predictability to determine which countries might be the most suitable suppliers. Nor can it be accurately assessed through which potential third countries it would be advantageous to route cargo. For such plans, clarity about the customs situation is essential.
Shippers therefore have the choice to stick to their current setup and wait until the situation stabilises and more clarity emerges. Another option is to make short-term and tactical decisions to capitalise on unexpected opportunities. Of course, it is also possible to choose a combination of both approaches.
Additionally, there is the crisis in the Red Sea. As long as this continues, the diversions around Africa will continue to consume large amounts of shipping capacity, keeping freight rates at a high level.
Navigating uncertain markets
Recently, we have seen significant declines in spot rates from Asia to Europe, as well as in the Pacific. Part of this drop is seasonal, due to the Chinese New Year, but certainly not all of it. The additional downward pressure on prices is likely due to the shift of shipping lines to new alliances as of 1st February. During this transition period, the focus is more on operational aspects, and at the same time, the shipping lines will be cautious not to lose market share while the transition is underway.
If the crisis in the Red Sea continues, the current drop in freight rates will likely turn into increases as we approach the summer and peak season. Unless the US trade war causes consumers to suddenly tighten their belts. If that happens, the demand for freight will quickly collapse, and the same will apply to spot rates, even if ships are still sailing around Africa.
If the crisis in the Red Sea is resolved and shipping through the Suez Canal resumes, we will likely see a temporary sharp drop in freight volumes from Asia to Europe. When the Suez Canal route is restored, supply chains to Europe will become 10 to 14 days shorter. This means that importers' inventories will suddenly be 10 to 14 days too large. This will naturally correct itself as importers temporarily order fewer goods, leading to a very sharp drop in freight volumes. This, in turn, will result in a sharp decline in spot rates—possibly even to pre-pandemic levels.
Just like with the American customs tariffs, it is extremely difficult to accurately predict the consequences of the crisis in the Red Sea. The new proposal to transform Gaza into an American territory has only contributed to making the situation even more unpredictable.
Shippers therefore face the almost impossible challenge of setting a budget for supply chain developments in 2025. The reality, however, is that it is currently completely uncertain whether we will experience strong freight rates during the peak season or rather a significant downturn.
All these uncertainties are driven by geopolitical forces over which shippers, freight forwarders, and shipping lines have no control. It is therefore crucial to remain flexible, have clear contingency plans for different scenarios, and avoid rigidly sticking to a plan that could suddenly be overtaken by geopolitical reality.
