“Unfortunately, even if Trump were to lift all his tariffs, the damage has already been done.”
In an interview published in the beginning this year, I discussed, among other things, the development of cargo volumes this year. I stated that my crystal ball is blurry, but there will be a lot of turbulence. However, even in my wildest imaginations, I would not have believed that Trump would cause a global economic recession and a significant decline in the cargo market – if not a collapse.
So what has happened since the beginning of January? Donald Trump took office as US President on January 20. The first hundred days passed on May Day. Europe has been closely following Trump’s policy regarding the war in Russia and Ukraine. From a shipping perspective, however, the biggest measures have been aimed primarily at the world power of China.
The world’s most famous economist, Adam Smith, wrote in 1776 in his book The Wealth of Nations, as have done all the great economists since him, that international trade increases the wealth of all nations. The basic idea is that when countries produce and export what they are most skilled or most competitive at, everyone wins.
Contrary to generally accepted principles of free trade, US President Donald Trump imposed tariffs of 10–50 percent on international trade in April, to which many countries have responded in kind. The tariffs imposed on China were as high as 200 percent, depending on how they are calculated. Although many of these tariffs have since been postponed or reduced, their effects are already visible in the operations of companies and in global shipping. Right now, many products are entering the United States, the prices of which are feared to rise when the tariffs come into effect. On the other hand, China has already reduced the amount of goods it transports due to the high tariffs. At the same time, we are seeing a lot of shipments, but also cancellations of already agreed deliveries.
The prices of many US products have already risen in the domestic market, and their demand abroad has decreased as a result of the retaliatory tariffs. International trade will therefore decrease due to the tariffs. This weakens the ability of export-driven companies to pay wages and may lead to layoffs. As a result, domestic demand will decrease when people have less money at their disposal.
The United States has long been the world’s most significant economic power. It is now foreseeable that the country will fall into an economic recession, dragging a large part of the world with it. The question remains, what will be the impact of the rising tariffs on China, the world’s second largest economy. China has already redirected some of its exports to other countries, such as Europe. Will it manage to avoid a recession in this way?
Companies in Europe are naturally in a very different position depending on how dependent they have been on US trade. Companies that have had significant operations in the US are now considering even partially relocating production to the US. Unfortunately, even then, imported subcontracted components are subject to tariffs. Other companies are looking for new markets domestically, in Europe or elsewhere in the world. However, the decline in demand in the United States will lead to at least some degree of economic recession in Europe as well.
How will this affect shipping and the maritime industry? When the global economy falls into recession, people everywhere have less money to spend on consumption. At the same time, as demand falls, shipping companies offer cheaper transportation. Consumers can hope to benefit from cheaper transportation prices, as long as they themselves avoid the threat of layoffs and unemployment. However, shipping companies are suffering from falling freight prices and ports from declining volumes.
The situation is bad for the maritime industry. The decline in consumer purchasing power, the decrease in the amount of cargo transported and the poor results of shipping companies reduce the desire to invest in new ships – be they cruise ships or cargo ships.
Unfortunately, even if Trump were to cancel all his tariffs, the damage has already been done. International supply chains are built on trust. In order for companies to enter into contracts to buy or sell products to other countries, they need to be able to trust their partners and the terms of transport – for example, how much transport costs and how reliable it is.
As we are now seeing, the rules of the global economy can change very quickly and unexpectedly, so trust in partnerships between countries is disappearing. Rebuilding international supply chains will take years – at worst, decades.
This article was previously published in Finnish in Navigator Magazine, an online magazine for maritime professionals, on May 9, 2025.
Tales of Talsinki 