Expert Column Impact of U.S. Tariff Policies on the Shipping Industry

Impact of U.S. Tariff Policies
on the Shipping Industry:
Demand, Supply, and Uncertainty

The shipping industry has traditionally been shaped by the dynamic balance of supply and demand. However, recent geopolitical conflicts, rapid changes in the global trade environment, and particularly the United States' tariff policies fundamentally challenge this premise. Particularly, the U.S. tariff policies not only increase transaction costs but also distort shipping demand, and make uncertainty become a sustainable and institutional characteristic, not a temporary phenomenon. Such policy interventions have shifted the focus from the "Just-in-Time" production paradigm of the past to a resilience-centered operational strategy of "Just-in-Case." As a result, the shipping industry is being redefined as a strategic sector that responds sensitively to policy shocks, moving beyond transportation infrastructure.

This column examines the impact of U.S. tariff policies on demand, supply, and freight rate structures of maritime logistics by focusing on three key axes.

1. The Impact of Tariff Policies on Demand

Tariff policies do not merely adjust rates but also act as a variable influencing the psychology and decisions of market participants. In particular, in the shipping market, the phenomenon of "front-loading" or "pull-forward" is repeatedly observed before the imposition of tariffs. This is a response caused by companies attempting to avoid predictable policy risks by securing large quantities of cargo in a short period.

After the U.S. government announced a pause on tariffs, the container volume of the China-U.S. West Coast route in February 2025 increased by 18.7% year-on-year. This is a typical nonlinear demand response, where a policy signal overexpands demand in the short term. However, since this increase in demand is not due to structural expansion of consumption but rather a temporally distorted early demand, a sharp contraction afterward is inevitable.^[3]

In April 2025, container trade volume on the same route fell by 24% year-on-year. This was because companies pre-imported large quantities of inventory before the imposition of tariffs, leading to a short-term oversupply of inventory and a sharp contraction in new demand.^[3] Such fluctuations in demand can be explained by the "whiplash effect," where small changes in consumer demand amplify as they move through the supply chain, resulting in significant impacts. This effect incurs port congestion, inefficiencies in vessel space operations, and short-term spikes and drops in freight rates, creating a chain reaction across the entire market.

In this context, tariff policy should not be viewed as a simple trade policy, but as an institutional variable that triggers dynamic demand cycles in the shipping market and structuralizes the uncertainty of market forecasts. Shipping lines implement temporary blank sailing or increase services in response to short-term demand fluctuations. However, this leads to inevitable over-capacity and voyage losses due to a sharp increase in demand followed by a rapid fall, directly affecting port operation plans, terminal allocation, and distribution of unloading equipment.

[Container Volume from China to the U.S. West Coast]

(Source: Container Trade Statistics^[3])

2. The Impact of Tariff Policies on Supply

Tariff policies not only induce fluctuations in demand but also cause structural responses on the supply side of inland and maritime logistics. In particular, tariff policies act as decisive factors in readjusting freight space deployment strategies, sailing schedules, and even the overall operation patterns of the entire supply chain.

One example is a bottleneck in inland transit due to the U.S. government's announcement of tariffs on Mexican imports. In March 2025, truck traffic at the Laredo customs checkpoint on the U.S.-Mexico border increased by a staggering 48.5% year-on-year ^[4]. This is not just an increase in cargo volume but rather a result of companies adjusting their inventory procurement timelines to before the policy implementation to avoid tariffs. This demonstrates that policy uncertainty has become a key variable in determining shipping timing itself.

Meanwhile, the steep decline in demand and the uncertain policy environment have led shipping companies to reduce their supply strategically. In particular, on the Pacific route from China to the U.S., there have been frequent blank sailings, a typical supply adjustment strategy. According to Sea-Intelligence, as of May 12, 2025 (Week 16), the voyage cancellation rate for the Asia-East Coast route stood at 42%, while the Asia-West Coast route increased to 28%.^[5]

This should not be seen as a passive response to a simple decline in demand, but as a strategic control of supply by carriers to defend freight rates and optimize resources under an uncertain policy situation. In other words, tariffs act as a dual pressure variable that distorts demand while imposing structural constraints on the elasticity and stability of supply.

As such, tariff policies function not only as disruptors of the market's demand-supply balance but also as an institutional “Trigger” that reshapes the overall distribution logic of the supply chain. For shipping lines, it requires strategic reframing at the governance level, including short-term capacity adjustments, long-term redesign of routes, renegotiation of terminal contracts, and modification of equipment rotation strategies. From the perspective of supply chain resilience[6], this also underscores the importance of building a flexible operating system based on responses to supply chain disruptions rather than relying on a traditional method of prediction-based operation.

[Asia–U.S. East Coast Cancellation Rate (%), Weekly Record (Weeks 12–16)]

(Source: Sea-Intelligence^[5])

3. Policy Uncertainty and Supply Chain Disruptions

The global container shipping market has entered a structurally oversupplied state. This is primarily the result of large-scale ship orders placed during the pandemic, which began to be delivered in earnest from 2023. Notably, for vessels of 8,000 TEU and above, 130,000 TEU were added in May 2023, 230,000 TEU in June, 170,000 TEU in July, 120,000 TEU in August, and 150,000 TEU in December. These volumes marked 458%, 99%, 169%, 406%, and 191% year-on-year increases, respectively^[7], proving that the scale of physical capacity entering the market has reached an abnormal level.

Between 2024 and 2025, the capacity grew at an annual rate of around 10% compared to the previous year, further solidifying the supply-dominant structure. According to traditional supply-demand models, such an increase in capacity should exert downward pressure on rates. However, in reality, the Shanghai Containerized Freight Index (SCFI)—which tracks the weekly container freight rates for major routes departing from Shanghai— does not reflect this trend. Instead, it showed a sharp upward trend. This discrepancy cannot be explained solely by weak demand or strong supply.

These causes are due to the expansion of supply chain disruptions, including policy uncertainty. In particular, institutional and political factors such as changes in tariff policies, geopolitical conflicts, and port strikes significantly influence the determination of freight rates. This means that rates are no longer set solely by the supply and demand balance. In other words, the modern shipping market is being restructured into a system where institutional nonlinearity—the phenomenon where the impact of institutions or policies on society or organizations does not manifest linearly, but unfolds in an imbalanced and unpredictable manner—operates beyond economic fundamentals, the key aspects for any system or subject to be stably maintained. As a result, supply chain uncertainty has emerged as a key variable in the mechanism of determining freight rates.

Ultimately, the impact of policy uncertainty and supply chain shocks on freight rates tends to become increasingly structured and institutionalized, suggesting that traditional variables alone are insufficient for forecasting future models and policy interventions. The shipping market must now be understood as a complex dynamic system that inherently incorporates institutional risks in the supply chain, requiring strategic operations and policy design based on this understanding.

[Global Container Capacity]

(Source: Clarksons^[7])

[Composite SCFI]

(Reference: Clarksons^[7])

4. Conclusion

Today, the shipping market is transitioning from a model explained by the classical demand and supply mechanism to a strategic market where policy uncertainty and supply chain disruptions are structurally embedded. Particularly, U.S. trade policy is acting as a systemic risk beyond transaction costs, transforming market dynamics through a dual mechanism of short-term demand distortion and supply adjustment.

The phenomenon where a single policy signal, such as tariff implementation or deferral plans, spurs a domino effect by affecting shipping schedules, route planning, vessel allocation, and inland transit. It showcases how deeply the shipping market is associated with institutional risks. In this process, sharp fluctuations in freight indices like the SCFI should not be viewed as simple market responses but rather as outcomes of adaptation to institutional shocks.

Moreover, the gap between the rapidly expanded post-pandemic supply capacity and actual demand should be understood not as a supply-demand balance issue, but as the institutionalization of unpredictability resulting from policy changes. This implies that the shipping industry has entered an environment that can no longer be addressed by its traditional static supply-demand optimization models.

In the case of South Korea, the recent agreement with the United States has resulted in the adjustment of the tariff rate at 15%, and a new reciprocal tariff system will take effect from August 7, 2023, at 00:01. Especially, as South Korea plays a pivotal role as an intermediary hub between China and the United States, the U.S. tariff rate adjustments and policies are expected to directly impact changes in transshipment patterns and the restructuring of competitiveness in South Korean ports. This indicates that policy uncertainty goes beyond individual countries and becomes a systemic issue affecting the global supply chain as a whole.

Therefore, the analysis, forecasting, and policy design for the future shipping industry should be based on the following two transformative perspectives. First, it should be based on the fact that rate fluctuations and cargo volumes can be significantly distorted not only by economic fundamentals but also by institutional signals and political risks. Second, participants in the shipping market should shift away from their existing forecast-centric operational approach to resilience-centric strategies, considering causes of supply chain disruptions, such as nonlinear shocks.

[1] To minimize short transport, it comprehensively reviews economic feasibility, safety, and efficiency, reducing on-site material storage to enable a no-inventory system.
[2] When risks such as future freight rate increases, tariff impositions, and supply chain disruptions are anticipated, it’s a strategy for companies to ship more than usual quantities in advance.
[3] Container Trade Statistics, TEU Volumes
[4] CNBC, “Trump tariffs anxiety hits peak in global economy as Chinese freight market crashes to two-decade low.” https://www.cnbc.com/2025/04/02/trump-tariff-liberation-day-trade-data-supply-chain.html
[5] Sea-Intelligence, “Transpacific blank sailings rise rapidly”
[6] The ability for the supply chain to respond, recover, and maintain or restore normal operations in the event of an unexpected crisis or disruption.
[7] Clarksons

JunWoo Jeon

Professor

Current Professor in the Department of
Global Logistics at Sungkyul University
Major Research Performances:
System Dynamics in the Predictive Analytics of
Container Freight Rates
(Transportation Science, SCI, 2021),
Prediction of Ocean and Air Freight Rates (Samsung SDS, 2021-),
Development of liner freight rate forecast model
(Korea Ocean Business Coporation, 2024~)