Market Update Q1 2025: No.15
Hi All,
Lots of activity, but still not a lot of clarity in the international shipping markets. There is plenty of chaos in general, and with each new day, there comes a new wrinkle (such as the current proposal to tax specific ships from China calling in the USA). Tariffs are at the top of my mind, of course, coupled with the carrier consortium changes, which are creating lots of schedule issues on import and export, consumer concerns, load factors, and growth concerns. In other words, there is uncertainty about everything these days, and very few want to swim in these very muddy waters.
So, for this installment, we are focusing on what can be done and controlling the variables, in terms of tariffs, as much as possible. We are also doing some forecasting, which will certainly change as we continue to navigate this ever-changing landscape.
Tariffs
I've attached some details that you can review yourself, but for our purposes here, I'm going to simplify this down into a few clear and concise statements that certainly will apply. Then we can all work backward from there on an individual basis, though I've also added the most specific analysis possible directly below:
1. If you are importing Steel or Aluminum from anywhere to the USA, expect and plan for a 25% tariff on your goods from any origin other than China, which will be 35%. This way you are protected, and anything less will be a bonus.
a. These are minimums - any previous tariff that was more than these flat numbers would still be applicable (at least so far)
2. Exemptions are being eliminated, however, if your cargo falls under an exemption currently then there is a 90-day window to petition and lobby for that exemption to be continued.
a. If the country you are importing from is not specifically mentioned in the current tariffs (such as Mexico or China), then that does not mean the cargo will be the same as before. It would still technically be subject to the 25%, so that is what you should plan for.
We are hoping that the current administration will give more country-specific definitions and guidelines in time, but at present, this is all we must work with. We have a team of brokers keeping an eye on this so it is well covered, and we can discuss your specific situation individually
The links are here and also attached above:
https://www.federalregister.gov/documents/2025/02/...
https://www.federalregister.gov/documents/2025/02/...
Executive Summary on tariffs from last week:
On March 12, 2025, all countries will be subject to the 25% tariffs on Steel and Aluminum products and specified derivative products imported into the United States.
An expanded list of derivative products yet to be specified, will also be subject to the tariffs. However, it appears that the effective date of those tariffs is dependent upon the Secretary of Commerce notifying that an adequate system is in place to fully, efficiently, and expediently process and collect the tariffs for the covered articles. As soon as the Annexes listing the expanded derivatives products are available, we will share them.
For Steel, any derivative product in the Annex that is not classified in Chapter 73 of the HTSUS, the additional duty shall only apply to the steel content of the derivative steel article. For Aluminum, any derivative product in the Annex that is NOT classified in chapter 76 of the HTSUS, the additional 25% shall apply only to the aluminum content of the derivative article. Further, for Aluminum products and derivatives, if the primary aluminum is origin is Russia, the duty rate shall be 200%. Primary aluminum is defined as a new aluminum metal that is produced from alumina (or aluminum oxide) by the electrolytic Hall-Heroult process.
However, if the derivative steel product made in another country is made from steel that was melted and poured in the US, and if certification can be provided to CBP demonstrating the melt and pour requirement has been met, the derivative product, regardless of origin, will NOT be subject to the additional duty. Similarly, for aluminum, importers shall provide CBP with any information necessary to identify the aluminum content used in the manufacture of aluminum derivative articles. In both instances, CBP will publish guidance or regulations on the required documentation as soon as practicable.
All previous Steel and Aluminum agreements with trading partners including Argentina, Australia, Brazil, Canada, EU, Japan, Mexico, S. Korea, Ukraine, the U.A.E., or the UK are canceled effective March 12. For Steel products and derivatives from Turkey, a 50% tariff will be applied.
No exclusions or exemptions will be issued effective February 11, and all generally approved exclusions shall terminate on March 12. However, if an importer has an existing exclusion for steel or aluminum products, the Commerce Department has issued a notice that the exclusion is effective until the expiration date or until their excluded volume is exhausted, whichever occurs first.
The Commerce Department is directed to, within 90 days, develop a process for including additional products to be subject to the tariffs and added to the Annexes for both steel and aluminum products and derivatives. Domestic Steel or Aluminum producers or industry associations representing steel products producers can petition the Commerce Department to add a product to the list. Commerce will determine within 60 days of the request whether to add it to the Annex.
No duty drawback will be allowed on these tariffs.
Further, it directs CBP to prioritize reviewing the classification of steel and its derivative products and directs CBP to issue penalties without consideration of mitigating factors if it finds such products misclassified in a manner that avoids the additional tariffs. As penalty, mitigation, and settlement processes all are statutorily recognized, the implementation of the Proclamation in this regard may give rise to judicial challenge.
Notably, the Aluminum proclamation is a bit different, CBP is directed to prioritize reviewing the classification of aluminum articles and derivative aluminum articles and to assess monetary penalties in the maximum amount permitted by law in the event that it discovers misclassification of goods to avoid the duties.
Steel and aluminum products or their derivatives subject to these tariffs admitted into a foreign trade zone on or after 12:01 am March 12 – unless eligible for admission under “domestic status” must be admitted as “privileged foreign status” and will be subject to the duties upon entry for consumption.
Global Growth Projection
The International Monetary Fund (IMF) has revised its global trade growth projections downward in their January 2025 World Economic Outlook (WEO) report. According to Sea-Intelligence, the IMF projected that global trade growth is expected to reach 3.2% in 2025 and 3.3% in 2026, both of which are lower than the historical average of 3.7% measured between 2000-2019.
Trade in advanced economies would see slower growth. The 2025 figure has been revised to 2.1%, dropping by -0.5 percentage points. The 2026 prediction was revised to 2.5%, dropping by -0.3 percentage points. Despite the downward revision in numbers, trade growth on both a global level and for advanced economies is expected to improve in 2026.
Conversely, a slowdown is expected for trade growth in developing economies. Growth in emerging economies is projected to reach 5% in 2025 and then drop to 4.6% in 2026. Alan Murphy, CEO at Sea-Intelligence, said the decline is not encouraging. “Growth from Asia into North America and Europe accounted for a sizeable part of the container growth in 2024, hence a downwards revision in trade growth in 2025 and 2026 is not positive news.”
Murphy also noted China’s economic slowdown as another point of concern. “In 2023, China’s economic output was 5.2%, dropping to 4.8% in 2024, and is projected to drop to 4.5% by 2026. Furthermore, a lot of the major advanced economies are also projected to see a slowdown in economic growth headed into 2026, with the U.S. projected to see a sharp drop in economic growth from 2.7% in 2025 to 2.1% in 2026.”
Market Update
Overall demand continues to be soft coming back from the Lunar New Year and consequently, rates are as well. Continued lack of consistency on all vessel schedules (import and export) due to changing routes and partners. There are GRI's planned for March 15, however, it is doubtful they will occur in totality if at all.
Author
Matthew Crocker / CCO
Additional Resources:
Aluminum Listings
Steel Listings