UWL Freight Market Update | Navigating 2025’s Supply Chain Shifts

Your Monthly Logistics Round Up - Hot news for navigating today's freight markets.

Welcome to the Freight Market Update as we close out January! Stay ahead with key insights on global logistics trends and discover how our World Group companies keep your supply chain moving.

In this issue:

1. Customs and Tariff Developments
2. Geopolitics in Focus
3. Global Freight Rates Trends
4. January Freight Current Recap
5. Sun Chief Express: A Milestone Year for the Service
6. Industry Events We're Attending

Customs and Tariff Developments

Key changes to U.S. trade policy are on the horizon, with potential impacts on supply chain costs and compliance.

De Minimis Rule Changes on the Horizon

On January 17, U.S. Customs and Border Protection (CBP) issued a Notice of Proposed Rulemaking (NPRM) to restrict low-value shipments from duty-free treatment under the de minimis exemption. The new rule would exclude goods subject
to Section 232, 201, and 301 tariffs and require shipments to include the full 10-digit Harmonized Tariff Schedule (HTSUS) classification. Public comments are open through mid-March.

New Tariffs Announced

Following President Donald Trump’s inauguration, the administration announced new tariffs to be effective from February 1:

• 10% minimum additional tariff on Chinese imports, with door open for much higher rates
• 25% additional tariff on goods from Mexico and Canada

Some officials favor a phased approach, but Trump insists on immediate, higher tariffs. Pharmaceuticals, semiconductors, and steel are among the top commodity targets.

Geopolitics in Focus 

Panama Canal

The Panama Canal is back in the news, this time for its geopolitical significance and the forceful rhetoric from President Trump.

• U.S.-Panama Relations: President Trump has expressed concerns over Chinese influence in the Panama Canal, suggesting a potential U.S. interest in reclaiming control. However, the Panama Canal Authority, an agency of the Panamanian government, maintains full ownership and operational control of the canal. Panama has reiterated its commitment to neutrality and efficient management of this vital waterway.
• Chinese Investments: Chinese firms, including Hong Kong-based Hutchison Whampoa, have invested in port facilities near the canal. Despite these investments, Panamanian officials assert that the canal's administration remains under their sovereign jurisdiction, with no foreign interference.
• Panama's Stance: In response to President-elect Trump's statements, Panama's President José Raúl Mulino firmly rejected the notion of U.S. intervention, emphasizing that the canal is Panamanian property and its ownership is non-negotiable. He highlighted the canal's importance to Panama's economy and sovereignty, reaffirming the nation's dedication to its autonomous operation.

These developments highlight the Panama Canal's enduring significance in global trade, particularly for the US, and the complexities of international relations surrounding this crucial waterway. For a deeper dive, check out this summary from the Atlantic Council.

Red Sea and Suez Canal

The Red Sea is a vital maritime corridor for global trade but has faced increasing security challenges in recent years due to geopolitical tensions and militant activity.

Red Sea:

• Houthi Rebel Activity: Since November 2023, Yemen's Houthi rebels have targeted over 100 ships in the Red Sea corridor, disrupting global shipping and forcing companies to reroute vessels around the Cape of Good Hope. These attacks have caused significant increases in transit costs and delays.

• Targeted Attacks: In January 2025, the Houthis announced they would limit their attacks to Israeli-affiliated ships following a Gaza ceasefire agreement. However, security concerns remain, and industry leaders are hesitant to resume use of the Red Sea route due to ongoing risks.

Resumption of Suez Canal Shipping:

• Potential Freight Rate Reductions: If Houthi-led attacks in the Red Sea are curbed, industry experts predict sea freight prices could decrease by 20-25% within the next two to three months. This reduction is attributed to quicker passages via the Red Sea and Suez Canal, lowering transit times and operational costs.
• Cautious Restart Timelines: Maersk does not expect to resume Suez Canal transits until late 2025, while CMA CGM  has resumed certain transits, the company is closely monitoring the security situation and has stated that not all services will systematically sail through the Suez Canal. This caution reflects ongoing security concerns, indicating that while the reopening of this route could relieve freight rate pressures, the timeline remains uncertain due to persistent volatility.

The Red Sea and Suez Canal remain vital but volatile trade routes, with their security shaping global freight costs and operations. While potential freight rate reductions could reshape cost outlooks for 2025, ongoing risks require caution. Collaborative efforts and proactive strategies will be key to restoring stability and ensuring resilient, efficient supply chains can transit these chokepoints.

Global Freight Rate Trends

Trans-Pacific Eastbound (TPEB): 

• Rates: Carriers have reduced short-term rates to stimulate demand ahead of Lunar New Year, with further adjustments expected mid-February.

• Space: Pre-Lunar New Year demand has tightened space, but select routes to the West Coast remain available.

• Blank Sailings: Network adjustments and blank sailings are expected to limit capacity until early February.

Far East Westbound (FEWB):

• Lunar New Year Impacts: Shipping alliances are restructuring to improve efficiency. Rates remain stable but are expected to decline post-holiday.
• European Trade Observations: Demand remains weak, though U.S. tariff changes may redirect trade to Europe, providing a modest boost.
  

Trans-Atlantic Westbound (TAWB):

• Capacity: Space on North Europe to U.S. East Coast routes has improved following labor agreements, but challenges remain for South Europe.
• Equipment Shortages: Persistent shortages in Central Europe continue to impact operations.

Air Freight

• Global air cargo rates remain elevated, up 20% year-over-year, as disruptions in ocean freight drive modal shifts.
• Asia Pacific Trends: Spot rates from Asia to the U.S. have seen minor drops but remain high compared to 2024.
• MESA Region: Rates remain elevated due to ongoing geopolitical tensions, including risks in the Red Sea.

Freight Currents: January Event Recap

Thank you to everyone who joined us for our Freight Currents event in mid-January! The discussion brought together industry experts to provide actionable insights into navigating today’s dynamic logistics landscape. Here’s a quick recap of the highlights:

• Approaching New Tariffs:
  Tom Gould shared strategies for managing the latest tariff changes, offering valuable insights into staying compliant while minimizing supply chain disruptions. Learn more at his blog post, with some key highlights below:

  • Review Contracts: Ensure contracts define responsibilities for duties or quotas, and allow for renegotiation or cancellation if tariffs impact feasibility

  • Diversify Sourcing: Avoid over-reliance on one region. Explore near-shoring, friend-shoring, or reshoring to North America. Mexico's trade alignment with the US under NAFTA adjustments adds new opportunities.

  • Track Tariff Changes: Use reliable tools to monitor updates, evaluate HTS classifications, and assess duty impacts. Stay agile by collaborating with customs brokers on sourcing and routing adjustments.

  • Prepare for Enforcement: Heightened CBP scrutiny accompanies new tariffs. Ensure compliance with HTS codes, country of origin, and valuation to avoid penalties like audits or Notices of Action.

• Trends in TPE and Southeast Asia Trade:
  Harry Stones, President of Swire Shipping North America, provided an in-depth analysis of trade flows in the Trans-Pacific Eastbound (TPE) and Southeast Asia markets, highlighting key opportunities for growth and emerging challenges to watch in 2025. Keep an eye on further supplier diversification away from China across Southeast Asia.

• What to Expect in Q1:
  Martin Karczewski, from UWL, wrapped up the session with a forward-looking outlook for the first quarter of 2025, sharing predictions on market demand, freight rates, and potential disruptions to prepare for.

Watch the Full Event: Missed the event or want to revisit the highlights? Check out the recording on YouTube: