Posted on April 2, 2025
How have the new U.S. tariffs on Chinese imports affected shipping volumes and container traffic so far?
MS: Importers front-loaded goods between the US election and early February, leading to a temporary spike in container traffic in Q4. Now we’re seeing the start of reduced demand as businesses adjust to the tariffs.
What retaliatory measures do you anticipate from China, and how might they impact global shipping lanes and freight rates?
MS: China has already imposed new tariffs on US agriculture, coal, LNG, crude oil, and agricultural machinery. More retaliation could follow – agriculture will continue to be targeted, along with individual US companies that may be considered sensitive, which will further increase global shipping costs and disrupt freight capacity.
We would also expect raw materials, especially rare earth metals, to continue to be a lever in China’s pushback.
Are you seeing an increased interest in alternative sourcing strategies, such as shifting imports to countries with free trade agreements?
MS: Since the first administration, most large retailers and manufacturers have adopted a ‘China+1’ strategy, which involves maintaining production in China while expanding operations to secondary hubs to minimise tariff exposure.
Now, smaller importers have no choice but to institute a similar strategy, while larger companies are stepping up by going so far as to implement a China +3 or even +4 strategy to stay ahead.
There’s a noticeable shift towards Vietnam, Malaysia, and India, but supply chain relocation isn’t instant. China’s world-class infrastructure and integrated supply chains mean complete relocation isn’t always viable, particularly for electronics and consumer goods industries.
How can businesses leverage the ‘First Sale’ rule to mitigate the impact of these tariffs, and what challenges do they face in implementing it?
MS: The ‘First Sale’ provision allows businesses to value their goods at the manufacturer’s price rather than the marked-up middleman price. This is a helpful strategy to reduce duty exposure, but it can be risky if not implemented correctly, because customs security will be high.
Compliance requires robust documentation, and businesses must ensure transactions are legitimate, especially in related-party sales where transfer pricing rules add complexity.
How are shipping companies adjusting freight rates to account for the new tariffs on Chinese imports?
MS: Demand is falling, which means rates likely will continue to fall, despite the carriers’ aims and initiatives to prop the rates up.
Are you seeing an increase in transshipment strategies or tariff engineering to minimise costs?
MS: Some brands are getting creative by exploring ‘tariff engineering’, which involves adjusting product specifications to fit a different customs category. But watch out as customs scrutiny will be high.
However, most companies are tightening their belts through initiatives such as layoffs, eliminating new CAPEX, reducing OPEX and finding new efficiency gains. They’re reducing expenditures wherever possible because it’s impossible to plan when the geopolitical situation constantly changes. And moving supply chains isn’t a quick fix.
What are the biggest operational challenges shipping lines and freight forwarders face due to these tariff changes?
MS: There is considerable uncertainty amidst falling global demand and trade. If the situation persists, the “rules” of global trade will be rewritten. Will today’s trade routes still be the core trade routes in the future?
What long-term effects do you foresee these tariffs having on the global maritime industry, particularly in terms of supply chain resilience and investment in alternative logistics hubs?
MS: Global trade is being rewritten in real-time. Southeast Asia is rapidly becoming home to major logistics hubs, with ports expanding to handle new trade flows. The longer these tariffs stay in place, the more permanent these supply chain shifts will become.
Businesses are also rapidly finding new markets and customers for their products, pivoting away from America. If this trend continues, will those shifts ever come back?
Michael Starr, Vice President of Growth and Expansion at digital freight forwarder Zencargo, has decades of experience advising retail and e-commerce companies on navigating supply chain disruptions. Michael is an expert in the intricacies and impact of U.S. tariffs on the domestic economy, North American trade, and European businesses. At Zencargo, he provides speed-to-market solutions for customers.
