Global trade braces for structural friction under updated US tariffs

According to an executive order signed by US President Donald Trump, the updated tariffs – ranging from 10% to 41% – will apply to imports from multiple countries and are scheduled to take effect on 7 August. This latest development follows a flurry of trade agreements between the US and several key partners, including the EU, Japan and South Korea.

However, the overall trade landscape remains uncertain. BRS Shipbrokers head of dry bulk research, Wilson Wirawan, told Riviera several jurisdictions remain in question – particularly China, which is being treated as a separate case and is unlikely to receive a tariff rate lower than India’s current 25%.

“Some other countries may also face secondary sanctions linked to Russian trade, with the timeline now shortened from the original 50-day period to just 10 days. In short, the situation remains somewhat fluid,” Mr Wirawan said.

Structural friction ahead

Looking ahead, Mr Wirawan noted it is reasonable to expect increasing structural friction in global trade, including dry bulk, as bilateralism and strategic alignments take hold. “Once these tariffs are formally established and begin generating revenue for the US, they may prove politically and fiscally difficult for future administrations to unwind,” he explained.

Meanwhile, recent deals signed with the EU and Japan aim to address their bilateral trade imbalances with the US. “If these surpluses are to be reduced, then – under a status quo scenario – these economies may need to shift imports away from other trade partners, such as China,” Mr Wirawan added.

He also pointed to the significant investment pledges associated with the agreements – amounting to hundreds of billions of dollars directed into the US market – as a potential trigger for a crowding-out effect on capital inflows to developing economies.

Focusing on dry bulk shipments, Mr Wirawan highlighted some countries are now committing to increased agricultural imports from the US, which could reduce their reliance on alternative suppliers and reshape global trade flows. However, many specifics – such as the volumes and duration of these commitments – have yet to be fully disclosed.

Container shipping at risk

Turning to container markets, Intermodal head of research Yiannis Parganas told Riviera the most immediate impact of the tariffs will likely be a drop in US imports, reducing demand for containerised shipping on key trade lanes.

“While frontloading ahead of the tariff deadline may create a temporary spike in freight volumes, this will likely be followed by blank sailings and falling rates,” Mr Parganas explained.

In the medium term, he noted, rerouteing strategies and transhipment through third countries could alter regional trade flows and potentially support feeder services.

Although some US exports may benefit on routes to favoured partners, the overall impact is expected to be contractionary for global freight, Mr Parganas concluded.

LNG trade feels the pinch

On the LNG front, ICIS senior analyst Alex Froley told Riviera China has not imported any US LNG cargoes since early February, with the tariffs making US imports more expensive. “However, China’s gas demand had already begun to slow before the tariffs came into play,” he added.

More broadly, market concerns that tariffs could weigh on the global economy have driven down gas prices. ICIS data shows that Europe’s TTF gas price has been trading around €35/MWh in recent weeks, down from levels above €40/MWh prior to President Trump’s tariff announcements.

As for the recently announced EU-US trade deal – which includes a goal of increasing EU energy purchases from the US to approximately US$250Bn per year – Mr Froley expressed scepticism about its near-term feasibility. “It’s hard to see how those numbers will be met in the short term,” he said. “The US only sent around US$25Bn of LNG to Europe last year. Even including oil, the larger target seems hard to meet.”

Nevertheless, Mr Froley noted LNG trade is expected to continue despite the tariffs. The main factor currently affecting LNG tanker rates is the influx of newbuilds into the market, he explained. “New ships are being delivered faster than new LNG production, weakening charter rates.”