Policy: From Free Trade To Fee Trade
Tariff blitz accelerates as Canada and the European Union are informed of new duty rates from 1 August.
Over the past week it has felt like barely a day has gone by without a new tariff announcement from the White House. Having (mostly) restrained himself for the past three months, Trump is back to using his favourite word in the English language like there’s no tomorrow, blasting out new tariff regimes effective 1 August. In just the last few days, we’ve seen 50 per cent tariffs announced against Brazil, 50 per cent tariffs on copper, 25 per cent tariffs against Japan and Malaysia, and even 200 per cent tariffs on pharmaceuticals floated. This is to say nothing of confirmation of ‘Liberation Day’ tariff rates against South Korea, South Africa, Indonesia, and others.
Even where tariff rates have been cut (Bangladesh’s tariff rate has decreased from 37 to 35 per cent, for example), they mostly remain significantly higher than they were a year ago. Unsurprisingly these tariff reductions have done little to allay economic woes for America’s trade partners; the President of the Bangladesh Garment Manufacturers and Exporters Association slammed the 35 per cent tariffs as “absolutely shocking” and warned of profoundly negative impacts for the industry that generates over 80 per cent of Dhaka’s export earnings.
For the next tariff victim, the US President looked north and sent Ottawa a letter confirming that Canada would be facing 35 per cent tariffs late on Thursday night. Whilst previously agreed 10 per cent rates on Canadian energy and fertiliser are not expected to change (for now), the announcement is undoubtedly a blow to Canadian Prime Minister Mark Carney, who had been hoping to secure a trade pact with Washington. One might have expected Canada to be completely inoculated against Trump’s tariff threats by now. But the US is by far Canada’s largest trade partner, and with US customs data recording over USD 760 Bn of trade between the two last year, Ottawa cannot take the threat of tariffs lightly. Canadian economic indicators have not taken the news well, with the Canadian dollar sliding 0.6 per cent against the greenback (before paring losses to 0.3 per cent), and Canada’s benchmark index futures falling 0.2 per cent in response.
Trump’s letter lambasted Canadian tariff and non-tariff barriers, which he said harmed US dairy farmers, and took aim at perceived inaction from Ottawa at curbing fentanyl inflows into the US. Yet Canada has already made significant moves to placate Uncle Sam, from appointing a ‘fentanyl tsar’ back in February and scrapping a planned digital services tax on US tech firms two weeks ago. These actions, though, have failed to materially move the dial, but a full change of tack is a difficult move as, just as with this week’s other tariff announcements, Trump has threatened that any Canadian retaliation would see duties go up.
Discussion of tariffs’ negative consequences has become a common theme on these pages, but especially in the case of Canada, duties could have highly negative consequences for the US. Many North American industries, such as the auto industry, depend on heavily integrated supply chains, and so parts for products like vehicles typically cross borders several times before finishing. The imposition of high tariffs against Canada then could cause significant pain to vehicle manufacturers in the Midwest – with whom Trump has courted with his pledge to revitalise American industry. Cautious proceeding, then, may be advisory for the US President as well.
Trump didn’t stop with Canada, and on Saturday morning announced 30 per cent tariffs against both Mexico and the European Union. With the former, Trump acknowledged that whilst Mexican President Claudia Sheinbaum had cooperated on tackling illegal migration and drug trafficking, her efforts had not gone far enough, and Mexico’s tariffs have risen 5 per cent consequently. As for the latter, which has seen a 10 per cent tariff increase from ‘Liberation Day’, EU officials had become increasingly resigned to the fact that the bloc would not receive as good a deal as the United Kingdom, but officials are nonetheless very disappointed.
Trump’s letter took specific aim at Europe’s trade surplus with the US, which reached EUR 194.4 Bn last year, and demanded the EU reduce its own tariffs against the US. It’s hard to believe other longstanding grievances, such as defence spending and regulations on US tech giants, weren’t on Trump’s mind though. Whether the 30 per cent tariff is indeed final or, as some EU officials believe, a negotiating tactic, remains to be seen, but as ever, division remains on how exactly Europe chooses to respond. EU Commission President Ursula Von der Leyen has threatened countermeasures, Germany is pushing for an agreement to cut the damaging 30 per cent tariffs to safeguard its industry, and France is keen that Brussels does not cave to a one-sided deal on US terms. With a smaller economy and less unified negotiating position, Europe cannot win a protracted trade war with Trump, even if it has a better shot than Canada or Mexico. It is only a few weeks until 1 August, and Europe (and everyone else for that matter) had better get their acts together lest they face the full wrath of tariffs.
Oil: Threats To Supply
Trump-imposed tariffs and more Russian sanctions may decrease supply as summer travel kicks into gear.
As mentioned, US President Donald Trump announced on 11 July that the US would implement tariffs of 30 per cent on most imports from the EU and Mexico from 1 August. This comes soon after Trump threatened South Korea, Japan, BRICS members, and other countries with new tariffs, and several insiders have stated publicly that the president is dissatisfied with various deals proposed to him as the deadline looms.
European Trade Commissioner Maros Sefcovic is optimistic about the prospect of a new deal, but he has also said that a 30 per cent tariff would essentially eliminate US-EU trade; significantly, each polity is the largest trading partner of the other. Retaliatory measures are being decided, and Italian Foreign Minister Antonio Tajani has announced that the EU has already prepared a set of tariffs worth EUR 21 Bn on the US.
From the first mention of tariffs, European diplomats have warned that, given the quantity of trade between the EU and the US, such a policy would reduce Europe’s industrial output. This would diminish the need for gas, putting a dent in a considerable component of oil demand.
Also stateside, last week a bipartisan bill creating new Russian sanctions was being written in Congress. Simultaneously, EU envoys are set to introduce an 18th set of sanctions against Russia, including a lower oil price cap. Should all these sanctions hit at once, world oil supply would likely take a hit, though the actual details of the sanctions would have to be released before the extent of the effect on the oil markets could be understood.
The foreign ministers of Russia and China met on 13 July to discuss, among other things, relations with the US and an end to the war in Ukraine, emphasising the importance of strengthening the relationship between the two countries. The Russian foreign minister will also soon attend a meeting of the Shanghai Cooperation Organization’s foreign ministers in China.
In January, March, and May, several Chinese oil companies either halted or reduced purchases of Russian oil in the wake of new Western sanctions against Moscow. China said that it opposed unilateral sanctions, but the companies still wanted to undertake compliance checks and wait to get a better understanding of the situation.
In other words, Chinese reactions to previous Russian sanctions suggest that it will respond to the new ones by limiting imports of Russian oil, but the recent special meeting between the two foreign ministers seems to imply the opposite – an even closer relationship. As is the case with oil supply, fully fleshed-out sanctions will likely allow for a stronger understanding of the near-future of Russian oil exports to China, its second-largest customer.
Since the conflict between Israel and Iran cooled a few weeks ago, there have been mentions – official and unofficial – of nuclear talks between Iran and the US. At first, it was reported that they would take place the week before last, and then last week, but another seven days have passed and there has been no public announcement of negotiations. The only recent comments have come from Iranian Foreign Minister Abbas Araghchi, who says that his country is willing to re-engage in nuclear talks if there are assurances that it will not be attacked again.
Despite verbally welcoming nuclear talks, in early July, the Iranian government passed a law requiring that International Atomic Energy Agency (IAEA) inspections of its nuclear sites receive the approval of the Supreme National Security Council. Iran cites security and safety concerns, but negotiations over its nuclear programme would probably require cooperation with the IAEA.
Widely analysed of late, the Iranian nuclear programme could be immensely relevant to oil markets. Last decade, Iran used its nuclear capabilities as a way to get sanction relief; it fulfilled various requirements imposed by the IAEA and was rewarded with the removal of several trade restrictions. As a result, its oil exports soared, boosting global supply.
Still, another week without substantial action makes nuclear talks seem less and less likely, and the 12-Day War’s oil-related effects seem only to have been temporary price increases. Time will tell whether Iran and the West are interested enough in a deal to set aside some of their wishes in pursuit of a larger goal.
Sources: Reuters, Politico, TradeWinds, CNBC, The New York Times
Dry Cargo: The Art Of The Tariff
Trump continues his tariff war with major dry bulk partners, extending his reach to the prized commodity – copper.
In a sweeping escalation of trade policy, US President Donald Trump has announced a series of major tariffs set to take effect on 1 August, targeting key trading partners including Brazil, Canada, Mexico, and the European Union. Citing national security and trade imbalances, the measures include steep duties on copper, dry bulk goods, and a wide range of imports. These tariffs mark a dramatic shift in US trade relations and are expected to disrupt global supply chains, trigger potential retaliatory measures, and have significant implications for industries reliant on international materials, particularly the copper and dry bulk sectors.
On 14 July, US President Donald Trump intensified his global trade offensive by announcing a 50 per cent tariff on copper imports and a 50 per cent tariff on goods from Brazil, both set to take effect on 1 August. The copper tariff follows a "Section 232" national security investigation, with Trump arguing the US must rebuild its copper industry to support semiconductors, aircraft, EV batteries, and military hardware. The announcement sparked a rush by companies to import copper, particularly from Chile.
In addition, Trump ordered a "Section 301" investigation into Brazil, accusing the country of unfair digital trade practices, censorship of US social media platforms, and retaliation over the prosecution of former President Jair Bolsonaro. Brazilian President Lula da Silva responded by warning of reciprocal measures under Brazilian law.
The Brazil tariffs are part of a broader campaign, with Trump imposing 25–30 per cent tariffs on imports from South Korea, Japan, the Philippines, Sri Lanka, Iraq, Libya, Algeria, Brunei, and Moldova, also effective 1 August. These measures have pushed the effective US tariff rate to 17.6 per cent, the highest since 1934.
Despite relative market stability, the sweeping tariffs have created economic uncertainty and disrupted corporate planning. Trump claims the tariffs are boosting federal revenues, projecting USD 300 Bn by year-end, with USD 100 Bn already collected in 2025.
On 1 August, Trump will also impose a 30 per cent tariff on EU and Mexican imports, citing the US trade deficit as a national security threat. He accused the EU of non-reciprocal trade practices, targeting goods such as French cheese, Italian leather, and German electronics. In a separate letter, he blamed Mexico for failing to stop drug trafficking into the US.
EU Commission President Ursula von der Leyen warned that the tariffs would disrupt transatlantic supply chains and promised proportionate countermeasures. Mexico’s government confirmed it is negotiating with the US to avoid the levies. The EU is also preparing retaliatory tariffs on US exports, including beef, auto parts, and Boeing aircraft, should talks fail.
Additionally, Trump plans to impose a 35 per cent tariff on Canadian imports, citing trade barriers and concerns over fentanyl smuggling. In a letter to Canadian Prime Minister Mark Carney, Trump criticised Canada's tariff policies and trade imbalance. Carney responded by pledging to defend Canadian workers and businesses, noting ongoing cooperation to curb fentanyl trafficking.
Trump has also warned of a blanket 15-20 per cent tariff on most other countries, beginning 1 August, unless new trade agreements are reached. He defended the tariffs as successful, pointing to stock market gains and progress in ongoing trade talks, including a recent deal with the United Kingdom.
These tariffs are expected to have a significant impact on US dry bulk trade. In 2024, Canada and Brazil alone accounted for 28 per cent of US dry bulk imports, with Canada leading at 17 per cent and Brazil contributing 11 per cent. The US currently imports half of the copper it uses, as domestic mining and refining have not scaled up sufficiently to achieve complete independence from global markets.
Trump’s sweeping tariff strategy signals a bold shift in US trade policy, aiming to reduce reliance on foreign goods and address trade imbalances. However, the economic fallout, from strained diplomatic ties to disrupted supply chains, raises concerns about long-term impacts on global trade stability and the US’s role in international markets.
Sources: Financial Times, Reuters
LNG: Asia Faces Heat, Europe Faces Squeeze
A double-edged sword hangs over Europe this winter as LNG cargoes are diverted toward heat-stricken Asia.
Relentless summer heat across Northeast Asia is driving up LNG demand as gas-fired power plants ramp up to meet soaring cooling needs, Goldman Sachs reports.
The increased draw from Asia is curbing European inflows and tightening supply, prompting heightened scrutiny from global energy traders.
Unusually intense weather across Asia is diverting critical LNG shipments from Europe, Bloomberg reported.
Japanese demand is starting to surface as soaring temperatures drive interest in prompt LNG deliveries. In contrast, other Asian buyers remain cautious, holding back amid elevated price levels.
Japan's LNG inventories held by major power utilities fell 7 per cent week-on-week to 2 Mn T as of 6 July, reaching the lowest level in seven weeks, according to the Ministry of Economy, Trade and Industry.
China’s power grids are under pressure from unprecedented demand, fuelled by extreme heat and revived industrial output. Despite the spike, spot LNG buying remains subdued, with elevated prices and access to alternative fuels keeping demand in check.
Korea Southern Power Co (KOSPO) has issued a tender for one JKM-linked LNG cargo totaling 3 to 3.7 Tr Btu, with delivery slated for 1-15 September.
August JKM rose USc 25.6 to USD 12.758 per MMBtu on 11 July, driven by North Asian heatwaves and a closed arbitrage window. NWE was assessed at USD 11.761 per MMBtu, widening the JKM/NWE spread to USc 99.7.
Traders report August deals are nearing completion, with potential demand spillover into September. Supply remains tight as US flows are constrained, though higher Asian prices could pull cargoes eastward by next month.
The ongoing supply bottlenecks are pushing European utilities to increase their dependence on pipeline gas, including Russian volumes, despite political opposition and existing Western sanctions. This shift adds complexity to the EU’s energy strategy and raises the prospect of elevated costs heading into colder seasons.
Despite record US export volumes this year, limited terminal capacity and extended shipping routes are resulting in smaller deliveries to European buyers during this peak demand season.
Goldman highlights a dual pressure facing Europe: dwindling summer LNG supplies and a potential uptick in pipeline flows that may increase geopolitical risk. If storage arrivals are delayed, spot LNG prices could surge heading into winter.
Industries with high exposure to energy price swings such as petrochemicals and power generation are proactively recalibrating supply contracts and updating hedging strategies.
Facing growing volatility and uncertain LNG availability, companies are renegotiating delivery schedules, exploring alternative suppliers, and diversifying fuel procurement to maintain operational continuity. Financial teams are also intensifying risk management efforts, using futures and options to guard against price spikes heading into winter.
Amid rising supply concerns, focus has shifted to Washington, where market sources say President Trump may use executive powers to boost LNG flows, accelerating export infrastructure in the long run and adjusting tariffs and shipping rules in the short-term to enhance flexibility during peak demand.
A presidential drive to accelerate US terminal approvals or engage in LNG diplomacy might aid in restoring balance to global supply flows. However, traders caution that any policy shift may come too late to alleviate current peak-season pressures.
Sources: Oilprice.com, S&P Global, Reuters
Container: Heads In The Sand
Container volumes have risen to record highs, but uncertainty and consistent ordering as the Red Sea crisis continues darken the outlook.
There is plenty of cause to anticipate a softening in the container freight market over the coming months (and years). In fact, rates have already started to soften, after so much frontloading in response to Trump’s ‘Liberation Day’ tariffs in early April, and after the so-called ‘truce’ between the US and China in the Trump-incited trade war.
According to Container Trades Statistics, global container volumes hit a new all-time high in May, climbing to 16.34 Mn TEU, beating the previous record in March of 16.3 Mn TEU. On the month, volumes in May were higher by 5 per cent and, on the year, by a substantial 18 per cent. Volumes from Asia to Europe have risen sharply, compensating for reduced volumes to North America because of Trump’s policies, but whether this is sustainable remains to be seen.
Rates to Europe have surpassed those to the US for the first time this year, while congestion at ports have resulted in delays, further supporting the freight market. But after channelling so much tonnage into transpacific trade – evidently too much – liners may begin to redirect tonnage into the Asia – European routes, which would take the heat out of the markets.
Moreover, Trump remains as unpredictable as ever, sending out letters to myriad countries outlining the level of tariffs set to be levied on them by the US. But, almost immediately after announcing these letters, Trump lived up to his ‘TACO’ (Trump Always Chickens Out) billing and delayed the implementation date until 1 August. But then he said he’d impose tariffs on copper, and then a 35 per cent flat levy on all Canadian imports, so no one really knows what’s going on.
And that’s bad news for container freight, a market built upon predictability.
Plus, of course, all the flipflopping in the White House weighs heavily on the global economy, meaning less growth and, you guessed it, bad news for containers.
That’s just the demand side.
On the supply side, liners ordered vessels like no tomorrow last year – 381 in total, which followed the 224 orders in 2023, 390 in 2022, and record-breaking 549 in 2021. And the liner companies continue to order new ships.
During the first half of the year, 1.295 Mn TEU was ordered, almost double the 0.75 Mn TEU ordered during the first half of 2024. In fact, it surpassed H1 2022’s level, too, On the “all-time H1 list”, it ranks fourth in history.
In TEU terms, the container fleet orderbook is now equal to 27.6 per cent of the fleet, not far from the (fairly) recent high of 30.2 per cent hit in March 2023. Steady ordering has continued to inflate the orderbook, despite the recent uptick in deliveries. There are now, according to our latest figures, 798 vessels on order, equating to an astonishing 8.8 Mn TEU.
It is an incredible statistic. Liner companies have profited so strongly from the volatility of recent years that they have an abundance of cash in their pockets; where better to put it than in new, modern and efficient vessels? Larger units continue to be preferred, but the recent objectionable Houthi attacks on vessels in the Red Sea have convinced liner companies that the region will remain closed off to much of commercial shipping for the foreseeable future.
Israel has cited the attacks as cause for the US to once again strike Houthi targets, but one swiftly recalls JD Vance’s leaked lament about always having to bail out Europe and then remember that the US and EU are not exactly o the best of terms as they try to thrash out a trade deal that both parties find satisfactory.
In the meantime, although rates are easing on some of the more robust routes, the containership freight market continues to outperform expectations. Barring a significant drop-off, liner companies will continue to order ships, but as long as Trump is around, there will be plenty of volatility.
And as we all know well, a bit of volatility can be very good for shipping.
Sources: Lloyd’s List, TradeWinds