On the eve of the 2024 presidential election, the freight industry is bracing for potential shifts in trade policy that could significantly affect logistics and shipping operations in the United States.

Donald Trump has promised that, if he returns to the White House, he would swiftly introduce a 60 percent tariff on Chinese goods and a 10 percent tariff on other imports into the United States.

If the Republican takes the reins in January, his policy could raise US tariff levels to 17.7 percent, the highest level since 1934, sparking fears of a worse rerun of the US-China trade war that took place in 2018/19, hurting US farmers and raising prices.

In 2018, when tariffs were announced, shippers of affected goods began to pull their orders forward. This resulted in an increased demand for ocean freight, higher freight rates, and a shift in the timing of those shipments. For instance, tariffs were announced in July 2018, coinciding with peak season, which created a particularly strong peak season for freight.

While the rates during that time might seem modest compared to the dramatic increases seen during the pandemic, they did double, with Freightos Baltic Index Data showing rates increased from around US$1,500 to nearly US $3,000 per container. After the tariffs took effect in January, there was a significant decrease in rates.

The following year saw a lack of a meaningful peak season in terms of rates and volumes, largely because many shipments that would have occurred in 2019 were pulled forward to 2018. Data from the National Retail Federation shows that after the financial crisis, ocean import volumes had been growing steadily year-on-year until a dip in 2019, influenced by the prior year’s tariff activity.

“While the economic impact of tariffs may be small overall, announcements of upcoming tariffs often lead to higher freight rates for everyone. Shippers aiming to avoid tariffs often find it financially sensible to pay more for ocean freight than to face higher duties later. This trend is expected to continue if significant new tariffs are announced, under Trump, who has indicated broad and significant increases,” Judah Levine, Head of Research at Freightos, stated.

Democratic implications for De Minimis

Based on statements, it appears that if Vice President Kamala Harris wins, new tariffs may not be a primary focus of her administration. However, the Biden administration did announce additional tariffs in May, which have kept many of the tariffs from the Trump era in place. Specifically, they imposed tariffs on approximately $18 billion worth of goods that went into effect in August. This could have contributed to heightened activity during the early ocean peak season, alongside concerns about potential delays in the Red Sea and the threat of a port worker strike on the U.S. East Coast.

These factors likely played a more significant role in driving freight patterns than the tariff increases alone.

Regarding air cargo, the bigger focus on the airfreight side could be the White House’s announcement to curb the de minimis exception for many Chinese imports, which could remain in place under Harris.

This exception has been crucial for facilitating direct-to-consumer e-commerce transactions, allowing low-cost goods to enter the U.S. without customs duties if their value is below US$800. As a result, there has been a surge in e-commerce volumes, contributing to elevated air cargo rates, which have reached peak season levels even outside the traditional peak season.

“The announcement to eliminate this exception for goods subject to Section 301 tariffs—an extensive list of items—could have major implications for air cargo. If implemented, this change may disrupt the current flow of low-value goods shipped by air, as it would no longer be financially viable for many shippers,” Levine outlined.

“With air cargo peak season getting underway, and rates already elevated by the surge of e-commerce goods, we may see extremely high air cargo rates and tight capacity in the coming weeks. Looking toward next year, the potential change to De Minimis rules is a significant development to watch, as it may drastically alter the economics of air freight, potentially making it less feasible for e-commerce platforms to rely on air cargo for their imports.”

What comes next?

Regarding the De Minimis issue, the timing for any potential rule changes is still unclear, as even once introduced the review and approval period could take several months. However, regardless of who wins the election, the intention behind the rule is expected to remain.

The industry recently experienced a strong ocean freight peak season, influenced by various factors including the potential for tariffs and concerns related to strikes and the situation in the Red Sea. It’s possible that some of this strength was driven by anticipation of a Trump administration and the associated risk of higher tariffs. Projections indicate that volumes may decrease significantly in the coming months, but if concerns about tariffs remain, it could keep some volumes elevated.

“If Trump wins the election, we could see an impact on freight before he even takes office. Trump has explicitly stated that increasing tariffs would be part of his plan,” Levine explained.

“This anticipation might encourage shippers to pull forward orders to avoid future duties, although this strategy comes with increased inventory and warehousing costs.

“Leading up to the election, the primary concerns for shippers are the issues in the Red Sea and the possibility of labour disruption on the East Coast and Gulf again in January. While many shippers were aware of how the election might affect their operations, it hasn’t significantly changed their behaviour yet.”