Shipping Rates Continue their Decline, Despite US Trade Agreements Remaining Unsuccessful
The ocean container shipping industry, which has been experiencing significant changes, is currently facing a downturn, according to industry experts. This sluggishness in the market is a persistent issue, despite some carriers' attempts to increase rates.
Recent U.S. trade agreements, including the EU-US tariff agreement and the US-China negotiations, have not significantly revived demand or halted the steep decline in ocean container freight rates in 2025. Drewry's World Container Index fell for the sixth consecutive week last week, down 3.3%. Freight rates from China to the U.S. West Coast have dropped 59% since June 1, landing at $2,268 per FEU. Rates to the U.S. East Coast also dropped by 43% during the same period, now at $3,796 per FEU.
While tariff reductions, such as the 90-day US-China tariff easing, may temporarily increase shipping volumes and freight rates due to a rush to import, they are not sufficient to restore pre-trade war levels of demand or costs. The impact of tariffs continues to suppress shipping demand, with the overall ocean container market remaining subdued despite these new trade deals.
The potential October tariff implementation on Chinese-operated ships could further impact the already struggling ocean container shipping sector. Industry observers express doubt about General Rate Increases sticking due to sluggish demand, suggesting a continued downward pressure on freight rates.
Xeneta’s Chief Analyst Peter Sand notes that the 90-day tariff reduction between the US and China could cause an earlier peak season for shipping in 2025 due to accelerated imports, potentially causing short-term upward pressure on freight rates. However, carriers have already redeployed capacity away from the China-US trade lanes, so rapid capacity adjustments may make shipping temporarily more expensive despite increased demand. Additionally, the persistent tariffs mean some low-margin goods may see slower demand recovery.
The Baltimore Bridge collapse did not cause a spike in shipping rates, indicating that other factors, such as tariffs and demand, are more influential in shaping the market. This incident serves as a testament to the resilience of the ocean container shipping industry, as it managed to maintain stable shipping rates during the challenge.
Alliances like the Gemini Alliance aim to improve schedule reliability, which remains below pre-pandemic levels, further influencing how shipping companies operate amid these trade changes. Meanwhile, shippers need to adapt to prolonged supply chain disruptions with better tools, real-time insights, and flexible procurement strategies to navigate ongoing volatility and shifting trade patterns effectively.
In summary, according to Xeneta, recent U.S. trade agreements have limited positive impact on ocean container shipping demand and freight rates in 2025, with tariffs and global trade disruptions continuing to weigh heavily on the sector. The industry observers' skepticism about the effectiveness of General Rate Increases suggests a continued downward pressure on freight rates.
- The ocean container shipping industry, due to its persistent sluggishness in the market and the impact of tariffs, is still struggling despite recent U.S. trade agreements.
- The downturn in the ocean container shipping industry, which has been experiencing significant changes, is primarily influenced by tariffs and trade disruptions, rather than the crafting of new trade deals or policy-and-legislation.
- The automotive industry, along with other sectors reliant on container shipping, may experience slower demand recovery due to the ongoing influence of tariffs on the ocean container shipping industry.
- As global trade continues to face challenges, shippers must adapt to prolonged supply chain disruptions with better tools, real-time insights, and flexible procurement strategies to navigate ongoing volatility and shifting trade patterns effectively.
