US Logistics Update [Apr 12, 2025]-English

U.S. Economy

President Trump appears to be shifting the target of his tariff war to China, announcing tariffs on China of 125% (confirmed by the White House to be 145%) within 13 hours of the reciprocal tariffs going into effect, and a 10% “base tariff” on all other countries for the next 90 days. Both President Trump's decision to focus his firepower on China and Chinese President Xi Jinping's decision to respond are unlikely to reach an easy compromise, given the political and economic circumstances at stake, as well as the pride of both countries. Instead, other countries have taken a big breath and are expected to start negotiating with the US in earnest over the next 90 days. In addition, cargo shipments from South Korea, Japan, and Vietnam to the U.S., which had been canceled due to Trump's reciprocal tariffs, have rebounded since the announcement of the 10% base tariff. However, bookings from China to the U.S. and from the U.S. to China were largely canceled due to canceled and postponed purchase orders. Meanwhile, a Fed survey showed that the U.S. manufacturing base has been in recession since China's WTO accession (see graph below).

The WSJ reports that the U.S. has a shortage of skilled workers, a weak supply chain, and high

labor costs, making President Trump's expectation that factories producing labor- intensive goods

will relocate to the U.S. unrealistic.

The U.S. Consumer Price Index (CPI) for March rose 2.4% year-over-year, according to the Labor Department's March report released today. The underlying CPI, which excludes energy and food prices, rose 2.8% year-over-year, the slowest rate of increase in four years since March 2021. While consumer price inflation slowed significantly and unexpectedly, the market reaction was muted as the data was released before the full impact of the Trump administration's tariff policies were realized. The unemployment rate trended upward to 4.2% in March from 4.0% in January and 4.1% in February. The graph below shows the evolution of the US CPI and unemployment rate over the last 5 years.

Meanwhile, the warnings of a recession in the US economy are growing louder. JP Morgan, the

largest U.S. financial institution, said that the probability of a U.S. recession has risen to 79%, while

Goldman Sachs raised the probability of the U.S. economy falling into recession in 12 months to

45% from 35%. Fed Chairman Powell said on April 4 that “tariffs have the ability to raise inflation

and lower growth, but it's too early to talk about a policy shift,” suggesting a wait-and-see approach

for now.

Maritime Cargo Market Trends

White House Issues Executive Order to Change Harbor Maintenance Fee (HMF) Application
On September 9, the White House issued an executive order titled “Restoring America's Maritime Dominance” to close loopholes in the application of the Harbor Maintenance Fee (HMF) to rebuild U.S. commercial shipbuilding capacity and strengthen the maritime workforce. HMFs are collected to maintain U.S. ports and waterways, but many shippers avoid paying them by unloading their cargo at ports in Canada or Mexico instead of shipping directly to U.S. ports, then transferring it by truck or rail to the U.S. for transit. The executive order provides that foreign cargo transported to the U.S. by land through Canada or Mexico without special processing will be subject to the same duties, taxes, and fees, including HMF, as cargo that is transshipped directly to a U.S. port, plus an additional 10% CBP processing fee.

Gemini Demonstrates Near 90% On-Time Rate
Maersk and Hapag-Lloyd's Gemini Cooperation is on track to deliver on its public promise of schedule reliability of more than 90% since its launch on February 1, according to new data. Gemini's on-time performance is 86%, significantly outpacing that of its competitor Alliance and the on-time performance of Mediterranean Shipping Co. (MSC), a standalone company that is not part of the Alliance. According to eeSea and Sea-Intelligence Maritime Analysis, Premier Alliance had an on-time performance rate of 31% in the first quarter, compared to 25% for Ocean Alliance and 22% for MSC. Non-MSC alliances had an on-time rate of 30%. Gemini's Hub & Spoke system is a groundbreaking attempt to break the myth of shippers traditionally averse to transshipment, and its future success is highly anticipated.

Trucking Market Trends

US LTL freight classification system to be revamped - density standards to be tightened, finalized in July
The National Motor Freight Traffic Association (NMFTA) has announced more than 90 changes to the National Motor Freight Classification (NMFC), the US Less Than TruckLoad (LTL) freight rate system. The changes will significantly tighten the way freight is classified based on density. The reform is expected to require shippers to completely reorganize their palletization and shipping procedures. The changes are expected to be finalized by July, and we will continue to update the details through the ‘PLP News Letter’.

Air Cargo Market Trends

De Minimis Cargo Tariffs from China & Hong Kong to Rise to 90%
President Trump's decision to eliminate de minimis tariffs on e-commerce shipments from China and Hong Kong, which account for about 50% of U.S. air traffic from Asia, will be followed by a 90% tariff, Bloomberg reported on April 9. The move comes amid China's announcement of a 34% retaliatory tariff (later changed to 84%) in retaliation for the U.S. reciprocal tariffs on China, which will take effect on May 2. The administration also announced that it will increase the fee per piece of incoming mail from $25 to $75 between May 2 and June 1, and after June 1, the fee, which was scheduled to be $50 per piece, will increase to $150. With tariff policy in flux, de minimis is certain to remain in place until May 1, which is expected to spike airline demand due to frontloading in April.