With the spring peak season right around the corner, are we heading into a bit of uncertainty in specific markets? While 2024 was a recovery year for the market, there are some factors that could affect stability this spring season. Factors like tariffs, oil prices, seasonal demand, and the strength of consumer markets could affect freight rates for spring.

Whether you ship a lot or a little, we have the insight you need this month to make the best decisions possible for your business.

Ocean Freight: Rate changes are really being monitored this month as contract negotiations between carriers and shippers are underway. Ocean container rates on certain routes from Asia to the U.S. are lower than last month but still higher than last year at this time. Asia to U.S. West Coast rates fell 8% at the end of February. The post-Lunar New Year time frame has seen rates decrease by as much as 30% since January. This dip may be due to the supply levels as factory production is still catching up from the holiday.

The ongoing tariff proposals are also being closely watched as the U.S. proposed expensive port fees on Chinese-built and -operated ships that call on U.S. ports. The Trump administration is assessing port charges on Chinese-operated cargo vessels and considering the following fees:

• Up to $1 million per call for a Chinese-operated ship (based on $1,000 per net ton capacity).
• Between $500,000-$1 million per call for operators with vessels on order at Chinese shipyards.
• Between $500,000 -$1.5 million per call dependent on the number of Chinese-built vessels in the fleet.

In addition, 1% of US. Exports would need to be moved on U.S.-operated vessels, increasing to 3% in two years, 5% in five years, and 15% in seven years. If you are an importer/exporter, now is the time to evaluate your suppliers to see how much your prices for materials will increase with the new tariffs.

Airfreight: This month is a different story from the beginning of this year. The market has been a mixed bag with global demand weakening plus the potential for the U.S. to eliminate the duty-free exemption for low-value shipments from China, which could negatively affect air cargo volumes. Data from the IATA (International Air Transport Association) showed that air cargo volumes were at a 3.2% growth rate, which is a little lower than anticipated. Demand is relatively flat as compared to the first two months of 2024.

Some air cargo experts are anticipating a downturn in business as the new trade restrictions by the U.S. are implemented this year. However, in the short term, there could be a spike in volumes as the importers try to beat the next set of tariffs. Considering about e-commerce shipments account for 50%-60% of China to U.S. air volumes, there could be some downturn in volumes coming in the months ahead. Bigger e-commerce retailers have been hesitant to move large quantities to the U.S. due to the impending tariffs and the de-minimis restrictions.

Ground Transportation: It’s no secret that the USPS (United States Postal Service) has been raising rates for years and continuing to lose money. The new administration is considering merging the USPS into the Department of Commerce, which would give the White House the ability to revamp the operation. With a loss of $9.5 billion in fiscal 2024, the USPS has pushed for administrative and legislative reform to remedy its financial issues.

What Does This Mean for Your Business?

A merger could cause a major disruption in the last-mile delivery network. The USPS delivers to every part of the U.S., including some of the rural areas that other carriers do not cover. The privatization of this agency would undoubtedly raise costs as well as cut jobs, however, there will most likely be resistance from lawmakers so it might be several months before a decision is made.

Small businesses that currently use the USPS for some or all of their shipping needs might find that costs for using this mode of transportation (once again) go up. Businesses should evaluate their current costs of shipping via the USPS and see what other shipping options are available should costs rise significantly.

E-commerce: In response to the pending U.S. tariffs, e-commerce retailers like Temu and Shein will change their business model. Order will no longer be fulfilled and the factory and shipped to the customer. They will change to a more traditional supply chain model that ships large quantities of goods by ocean container to North America and fulfill orders through a distribution center.

The good news is all about the home improvement retailers this month, which are exceeding expectations. Lowe’s exceeded quarterly earnings and revenue expectations to end its sales slump, despite a tough housing market. The company made major investments in its online business to attract more sales from professionals such as contractors and electricians. The same is true for Home Depot, where customers spent more in stores and on the website last quarter as compared with the same time period last year.

Your Trusted Partner

Contact us today to find out how you can mitigate the risks associated with tariffs. We can help you create a game plan to keep your business running smoothly through these uncertain times.

Red Arrow offers the scale and scope of services including air, ocean, and ground transportation to meet the budget and schedule requirements of the largest and smallest companies alike. If we can be of assistance, please email us at [email protected] or give us a call at 425-747-7914.