The six-week first stage of the Israel – Hamas ceasefire began on 19 January bringing a reprieve to the fifteen months of fighting which were also the pretext for Houthi attacks on vessels in the Red Sea.The Houthis released statements announcing that as long as the ceasefire holds they will not attack nearly all Red Sea traffic. The group claims it will not target vessels making Israeli port calls or partially owned by Israeli companies or individuals, but will attack vessels wholly owned by Israeli entities or flying the Israeli flag and would also attack US or UK vessels in response to any new US/UK strikes of Houthi positions in Yemen.Some experts are sceptical that the Houthis – who may have significant financial as well as geopolitical incentives to keep the Red Sea unsafe – will refrain from additional attacks even during the first stage of the ceasefire. Their current commitment only to attack Israeli vessels is similar to their stated scope of targets in late 2023 which quickly expanded to include virtually any passing ship.Another challenge to optimism that the current quiet marks the beginning of the end for the Red Sea crisis is that, even assuming the Houthis stand down for the next six weeks, sustained quiet is contingent upon Hamas and Israel agreeing on terms for the second and then third stages of the ceasefire. Negotiations for the second stage are set to begin on 5 February, but President Trump has already stated that he is not confident the ceasefire will hold into the, in many ways more challenging, later stages.Ocean carriers see current developments as a promising first step towards the resumption of Red Sea traffic. But despite reports that CMA CGM is planning to increase its use of the Suez Canal, most carriers – as well as many shippers and forwarders – will not take the costly and complicated concrete steps to return to the Red Sea until they are confident that the route is and will remain safe.When Red Sea transits do resume though, the adjustment period to the shorter route for traffic from Asia to Europe and the Mediterranean as well as some volumes to North America could last for several weeks or longer. Schedule disruptions and vessel bunching in Europe and Asia, as ships start arriving early, will cause some congestion and delays at these hubs, which could put upward pressure on rates in the short term.In the longer term though, the capacity that was absorbed by Red Sea diversions and that was responsible for container rates of at least double the norm throughout 2024 will be released back into the market. This surge in capacity will put significant downward pressure on rates. Some carriers have expressed confidence that slow steaming and an increase in scrapping, idling and blanked sailings will prevent a rate collapse. However, the possible supply surplus could result in loss-making prices as low as those seen in late 2023 when transpacific rates dipped to US$1,200/FEU and Asia-Europe and transatlantic prices slumped to about US$1,000/FEU.For the time being, ex-Asia rates are easing as the lead-up to the Lunar New Year has ended. As the new alliances prepare to launch, some of the rate decreases may also be due to increased competition between carriers. Transpacific prices could rebound somewhat just after LNY on some backlog of shipments not moved before the holiday, though a backlog and price bump are less likely for Asia-Europe as shippers moved goods earlier than usual this year.Trump Trade Memo, Tariffs and De MinimisThe other major developments for freight markets this week were linked to President Trump taking office. Though the president stated he is not ready to announce a global tariff just yet, he said he aims to place his promised 25% tariff on Mexico and Canada by 1 February 1st. Despite that short timeline, which some observers think is possible via the International Emergency Economic Powers Act, Trump’s America First Trade Policy memorandum, issued just after the inauguration, implies a longer runway before those new tariffs.Among other things – and in addition to calling for a review of the USMCA and an assessment of fentanyl imports, both relevant to the proposed tariffs on Canada and Mexico – the sweeping trade memo directs the relevant federal agencies to investigate and make recommendations regarding the state of US manufacturing and the overall trade deficit; review exemptions to steel and aluminum tariffs; determine China’s degree of compliance with existing trade agreements; and assess the losses to tariffs as well as the risks linked to the ongoing surge of de minimis imports.These requests for investigations and recommendations echo those Trump issued during his first administration, and which were the first step in the often months-long process culminating in the actual implementation of new tariffs or trade policies during Trump’s first administration. This week’s memo sets April deadlines for the requested reports and recommendations, which may make a 1 February tariff hike less likely.Back in September, the Biden administration announced plans to significantly close the de minimis exemption to Chinese goods. That directive resulted on Friday in a US Customs and Border Protection notice of proposed rulemaking that triggers a 60-day review period and which could result in those sweeping changes to Chinese imports’ eligibility for the de minimis exemption. Trump has not spoken much about the de minimis issue specifically previously, but the topic’s inclusion in the memo makes it likely that the rule change could move forward under the new administration.The flood of de minimis parcels from China – often from e-commerce platforms Temu and Shein – since mid-2023 is the main driver of air cargo rates that, even post-peak season, remain highly elevated at more than US$5.00/kg from China to North America, and more than US$3.00/kg to Europe. Legislation that bans many of those packages from entering the US via the quick and inexpensive de minimis route could significantly curb air cargo volumes into the US, freeing up capacity and putting downward pressure on rates as a result.
This article was written by Judah Levine, Head of Research at Freightos
The post Ceasefire sparking Red Sea hope; Trump sets tariff, de minimis changes in motion appeared first on Container News.
Ceasefire sparking Red Sea hope; Trump sets tariff, de minimis changes in motion
