Ocean Freight
The ocean freight market for US-bound cargo is undergoing a dramatic “whipsaw” shift, reminiscent of the early COVID-19 disruptions. When U.S. President Donald Trump announced sweeping tariffs on Chinese imports earlier this year, companies across a myriad of business sectors swiftly issued stop orders to their overseas suppliers, halting a significant volume of ocean shipping. In response, ocean carriers began blanking sailings – either skipping scheduled departures or suspending lanes entirely – due to underutilized vessels.
Following the President’s announcement of a 90-day pause on further reciprocal tariffs (effective mid-May), companies quickly lifted those holds, prompting a sudden and overwhelming surge of cargo to U.S. ports. Ocean carriers, caught off guard, scrambled to reinstate previously idled vessels to meet demand. This mismatch between space and volume led to sharp fluctuations in spot rates. However, there are signs that the cargo surge may be easing. With more vessels back in rotation, capacity on Asia – U.S. routes has improved. The container spot rate spike may prove short-lived, as freight forwarders anticipate a decline in volume by mid-summer due to extensive frontloading earlier in the year and the impending August 14 expiration of the tariff pause.
While the summary above highlights the impact on the U.S. market, Canadian shippers are also affected. Since cargo destined for North America moves on shared vessels, Canadian businesses are likewise exposed to space constraints and rate volatility.
Air Freight
The May 2 elimination of the U.S. duty-free exemption for low-value shipments from China under so-called “De Minimis” rules has led to a drop in air cargo demand on the Trans-Pacific lane. Previously, goods valued at $800 dollars or less and shipped to individuals were exempt from duty and detailed documentation for customs clearance.
This rule enticed online retailers to fulfill orders from the factory and send directly to consumer residences.
Over the past few years, airlines have prioritized surging e-commerce shipments on Trans-Pacific and Asia-Europe routes, at the expense of general air freight. Air cargo posted a record 2024, that saw 12% growth in global volume, with much of the demand generated by e-commerce.
While the full effect of the elimination of the exemption remains to be seen, China to U.S. e-commerce shipments alone account for about half of the cargo capacity on this eastbound corridor, and around 6% of global air freight demand. A disruption to this demand will free up a significant part of this corridor’s cargo capacity and spread its impact to the rest of the market.
Finally, another point to address is the fact that overseas shippers, utilizing both ocean and air modes, are starting to shows signs of frustration with the volatile U.S. position on tariffs and are now looking at alternative markets. While the U.S. has been the traditional market for such exporters, given the uncertainty with the existing government mandate on trade, they are left with no choice but to look elsewhere for business opportunities, which experts predict will disrupt long standing trade partnerships and traditional cargo lanes.
For more information, contact David Lychek, Director – Ocean & Air Services, or Cathy Fong, Director – Freight Pricing.
