Freightos Weekly Update: Trade deals bring welcome stability

With the US’s August 1st reciprocal tariff pause expiration date days away, the White House has announced a series of last minute deals with several of its major trade partners including the EU and Japan.

The agreement with the European Union will feature a 15% baseline US tariff on most EU exports – up from the current 10%, but down from the recently threatened 30% level. This rate will apply to automotive exports from the EU as well, which, along with all global automotive exports to the US, have faced 25% duties on vehicles and parts since April and May respectively. The pact may also include a quota-based reduction in US steel and aluminum export tariffs for the EU.

The deal also has the EU committing to significant energy purchases from and investments in the US, and to zero or very low tariffs on most US exports. These terms should start taking effect on August 1st once a joint statement is finalized, though full details and a legally binding text will take more time.

The US-Japan deal similarly sets US tariffs at 15%, including for automotive exports, with Japanese commitments for investment in the US. President Trump has also said that the US has agreements with Vietnam at a 20% tariff rate and with Indonesia and the Philippines at 19%. Including the earlier deal with the UK, the US now has agreements or tentative deals with countries accounting for about 30% of total 2024 US goods imports by value.

The degree of progress on deals with the US’s three largest trade partners – Canada, Mexico and China which make up another 41% of total goods imports according to US Census data – still varies.

Talks with Mexico and Canada – both facing August 1st 30% tariff threats – are ongoing. US and China officials are meeting in Stockholm this week ahead of an August 12th tariff deadline, and talks are expected to result in an additional 90-day extension of the trade status quo following recent progress and deescalation of tensions. US tariffs on China have been set at a 30% baseline since mid-May, with the effective rate much higher for many types of goods already facing first Trump administration tariffs.

From a freight perspective, this year’s tumultuous mix of tariff announcements, pauses and deadlines, has disrupted typical seasonal demand and rate trends as many shippers rushed to frontload goods ahead of these deadlines or, for importers from China, paused activity when duties were sky high. The pull forward was mostly to hedge against the threat of tariffs higher than the interim 10% if negotiations failed. But the last few weeks suggest that even with deals, the US is seeking a tariff range of about 15% to 20%.

Though importers and exporters will not be happy about the tariff increases these deals entail for most goods on these lanes, they’ll likely welcome the certainty and clarity that the agreements provide. Those with inventories elevated from frontloading may not return to typical booking patterns until necessary. After that point though, freight seasonality should return, with those higher tariff costs eventually felt by consumers.

Transatlantic ocean freight volumes were about level with 2024 through April, though automotive tariffs that went into effect in April may have driven the 7% year on year drop that month. And tariffs on auto parts introduced in May could also explain why there did not seem to be much frontloading on the lane when reciprocal tariffs were paused from April through July.

This week’s deal reduces automotive tariffs for EU exports by 10% and could spur some moderate rebound in volumes on this lane. The agreement’s 15% tariff level means most EU exports – though the status of wine and spirits remain unclear – are facing a 5% increase in duties compared to levels since April, and so it is unlikely to spur any sharp near term rebound. Transatlantic ocean container rates have been level at about $1,900/FEU since May.

For transpacific ocean freight, the US’s reduction of tariffs on China from 145% to 30% in mid-May triggered an early and brief peak season surge. Asia – US West Coast rates hit a peak of US$6,000/FEU by mid-June but by mid-July had fallen back to April and early May levels of about US$2,300/FEU. Prices have remained unchanged since as carriers have removed capacity to meet lower volume levels, making it unlikely carriers will implement planned August GRIs.

Another 90-day extension of the 30% baseline tariff would run through the end of the typical peak season period. This development could spur some shippers who rushed to move goods in May and June or others who were waiting for more clarity to resume peak season bookings, which could push demand and rates up somewhat. But with the significant frontloading to date, the peak of peak season is still likely behind us.

Asia – N. Europe container rates dipped 4% last week to US$3,419/FEU, about level with the start of the month but still 45% higher than at the end of May on peak season demand and persistent congestion at several of Europe’s major container hubs. This volume strength and congestion that could get worse as peak season containers continue to arrive could support PSSs of about US$500/FEU planned for August by some carriers.

Even so, rates that have about leveled off to Europe, and Asia – Mediterranean prices that by last week had fallen 30% from a mid-June high to US$3,400/FEU – with rates for both lanes more than 55% lower than a year ago – suggest fleet growth and resulting overcapacity may already be impacting rate trends.

Air cargo volumes out of Japan or the EU to the US could see some bump from the lower tariffs on auto parts. Overall though – as there wasn’t much last minute front loading by air ahead of the deadlines and for most trades tariffs are now higher than a week ago – the air cargo markets, like ocean freight, may not be shaken up much by the recent trade developments.

Freightos Air Index data shows China-US rates increased 3% to US$5.31/kg, about level with rates in May and June. Transatlantic prices were unchanged at US$1.77/kg and China – Europe rates climbed 11% to US$3.72/kg, back to levels seen in June, possibly on some moderate bump ahead of the tariff deadline.

Written by: Judah Levine, Head of Research, Freightos Group

The post Freightos Weekly Update: Trade deals bring welcome stability appeared first on Container News.