Tariffs in motion: Navigating the shifting trade patterns

US tariffs have captivated headlines worldwide, pre-dating the new US administration. And, they will have consequences… some short-term and some long-term.

Short-term impact – a slowdown in demand?

Pre-emptive buying, which became rampant in the past few weeks with companies acting fast to procure supplies ahead of tariffs, and retaliatory measures which led to a spike in dry bulk rates over recent weeks, have already slowed down. All of a sudden, the momentum is making way for restraint demand. Hopes that negotiations could ease the brunt of these trade policies have led most of the stakeholders to patiently wait and hold back on procurement, slowing the demand. This may not directly translate into lower charter rates since there are more issues, such as tighter vessel supply, concerning the dry bulk market.

Long-term implications

If tariffs continue and retaliatory actions increase, world trade flows might witness a strategic shift. High-tariff corridors might be reduced to obsolescence while low-tax routes could become more prominent.

For example, Vietnam, the US’ second-largest cement trading partner, now pays a whopping 46% tariff. This might encourage American importers to shift to Turkey, the US’ biggest cement supplier, reducing Turkey’s exports to the EU or Israel and thereby paving the way for Vietnamese cement.

A similar pattern could play out in the steel industry. As US tariffs on EU steel goods now stand at 20%, imports from the EU could drop. At the same time, Brazil—America’s largest supplier of steel, subject to relatively lower 10% tariff—might increase exports to the US.

The ripple effects on dry bulk shipping will impact trade routes and tonnage demand in unprecedented ways. A detailed analysis of the developments will be presented in the forthcoming Dry Bulk Forecaster report.

Watch this space…