U.S. Economy
President Trump signed an executive order on April 6 exempting imports from Mexico and Canada from 25% tariffs until April 2 on goods covered by the U.S./Mexico/Canada Trade Agreement (USMCA). The exemption follows a one-month tariff exemption on automobiles the day before. The U.S. will impose reciprocal tariffs on April 2, taking into account the tariff rates and non-tariff barriers of countries around the world, and the 25% tariffs on Mexico and Canada will eventually converge into reciprocal tariffs after the grace period ends. Meanwhile, a recent Credit.com report found that 19% of adults, or one in five, are engaging in Doom Spending (impulse buying out of anxiety and fear about the future). In fact, 28% of consumers have already spent big on appliances and household items, and 22% are stockpiling emergency food, toilet paper, medicine, and more. This tariff impact is evidenced by the record-high U.S. trade deficit of $131.4 billion in January, marking a 34% increase compared to December 2024, along with the highest-ever cargo volume handled at major West Coast ports.
Gross domestic product (GDP) growth in the fourth quarter came in at a preliminary 2.3 percent (annualized rate), driven by strong consumption, the Commerce Department reported on Feb. 27. This was a slowdown from 3.0% in the second quarter and 3.1% in the third quarter of last year. The annual growth forecast for 2024 remains unchanged at 2.8%, unchanged from the preliminary estimate. However, the likelihood of a recession in the booming U.S. economy is increasing due to uncertainty over tariffs and deteriorating economic data, Bloomberg reported on March 5. The probability of a recession was 31% as of March 4, nearly doubling from 17% in November last year, according to an economic analysis model by JP Morgan, the largest U.S. bank. Goldman Sachs, a major U.S. investment bank, also put the probability of a recession at 23%, up from 14% in January. Meanwhile, U.S. tariffs on China, Mexico, and Canada will boomerang, pushing up retail prices for almost everything, including food, beer, vegetables, and cars, experts say. If inflation continues to worsen, the Federal Reserve (Fed) will be reluctant to cut interest rates, leading to speculation that no rate cuts will be made this year. On the other hand, if the economy slows down in the aftermath of the tariff war, the Fed may lower rates despite inflationary concerns, so the next few months will continue to be uncertain and chaotic.
Maritime Cargo Market Trends
North America Vessel, Rail Dwell time (Week 10 / Flexport)
Pacific Line Carriers Seek to Increase Annual Service Contact Prices in 2025-26
Pacific line carriers are seeking 20-30% year-over-year rate increases for 2025-26 annual SC pricing with shippers, with targets of $2,000 per FEU on the West Coast and $3,000 on the East Coast (compared to $1,500-$1,600 on the West Coast and $2,500-$2,600 on the East Coast in previous years), JOC reported. Many importers plan to finalize contracts by March, while some large retailers are delaying negotiations with carriers in anticipation of stagnant import volumes and increased vessel supply. Meanwhile, general freight rates are currently falling to $2,450 per FEU (-37% y/y) to West Coast ports and $3,575 (-38% y/y) to East Coast ports. Spot rates are currently below $2,000 per FEU, although carriers are using GRIs and peak season surcharges (PSS) to stabilize prices.
U.S. Chassis Manufacturers Petition for Antidumping Duties on Chassis from Mexico, Thailand, and Vietnam
US-based Cheetah Chassis and Stoughton Trailers have petitioned for antidumping and countervailing duties on chassis from Mexico, Thailand, and Vietnam. They claim that since tariffs were imposed in 2021 due to an influx of low-cost chassis from China, similar trade practices have continued and are hurting U.S. manufacturers. The petition calls for antidumping duties of 32.37% on Mexican goods, 234.06% on Thai goods, and 304.68% on Vietnamese goods, noting that CIE Manufacturing, an affiliate of China's CIMC, has evaded duties through its Thai factory. The petition comes amid a growing number of cases of Chinese goods being exported to Maxico, Vietnam, and other countries, or being imported into the U.S. after being manufactured under the guise of being exported, so it will be interesting to see if such cases will increase in the future.
Maersk-Hapag-Lloyd 'Gemini Cooperation' achieves over 90% schedule on-time performance
Maersk and Hapag-Lloyd's Gemini Cooperation has achieved more than 90% schedule on-time performance since its launch on February 1, it was announced at the TPM25 Conference in Long Beach. Gemini now operates 45 services through its 340-ship, 3.7M TEU Hub & Spoke Network, and while initial shippers were skeptical of achieving the target due to concerns about linkage to transshipment cargo, Gemini claims to have increased its transshipment share from 35% to 40% while achieving 90% punctuality. In a shipping industry where low schedule punctuality (see table below) has become an industry standard, Gemini's It will be interesting to see if the experiment will end as an experiment or if other carriers will follow suit and make it an industry standard.
Air Cargo Market Trends
Air cargo market to grow in 2025, but trade tensions, tariff changes add uncertainty
TIACA Director General Glyn Hughes warned on March 5 that trade tensions and changes in the global economy pose a threat to industry forecasts of a 5% increase in air cargo demand this year, based on global GDP growth of 3.2%. Hughes highlighted a number of risks, including moves in the US and Europe to eliminate so-called “de minimis” exemptions for low-cost imports from China, falling consumer confidence in the US, tariffs and retaliatory measures, directional imbalances, the Red Sea diversion and the uncertain outcome of peace talks in Ukraine. IATA Director General Willie Walsh, on the other hand, offered a more positive outlook in his monthly air cargo update on Thursday, pointing to favorable factors for air cargo, including trade growth, falling fuel costs, and expanding e-commerce. However, he also expressed concern about the Trump administration's tariff-driven trade policies, predicting a market downturn if the tariff war escalates. According to IATA, air cargo is on track for a record performance in 2024, with global volumes up 12%, but both demand and freight rates are starting to fall. In its update, IATA stated, "January marked the 18th consecutive month of growth in air cargo, but the 3.2% year-on-year increase reflects a slowdown from the double-digit growth seen in 2024." It also mentioned, "The load factor in January decreased by an average of 1.5 percentage points, down 9.9% compared to December."