Tariffs Update and Implications for Shipping

US trade policy has emerged from the US Supreme Court in a legally weaker, politically stronger form. The age of frictionless globalisation is fragmenting into competing legal and political blocs.

The Trump administration’s key trade policy of protectionism has survived the US Supreme Court. The administration is rebuilding the tariff wall through narrower statutes, sectoral duties and bilateral coercion. For shipping, the result is not one clean shock but a rolling pattern of front-loading, pauses, inventory hangovers, rerouting and regional diversification.

Legal situation

The Supreme Court has knocked out Mr Trump’s IEEPA tariff route. In Learning Resources v Trump, decided 20 February 2026, the Court held that IEEPA does not authorise the President to impose tariffs; tariff power sits with Congress, not inherent executive authority. The administration’s workaround has been to use other statutory hooks, especially Sections 122 of the Trade Act of 1974, under which the White House imposed a temporary 10% ad valorem import duty for 150 days, effective 24 February 2026.

Section 122 was originally written during the 1970s Bretton Woods / dollar-crisis era. It allows the President to impose tariffs of up to 15%, and/or import quotas for up to 150 days if the U.S. faces “large and serious” balance-of-payments deficits, or serious dollar/currency problems. Whether either condition is valid is debatable, but is not up for debate in a mostly acquiescent Congress. The administration continues to argue that persistent trade deficits amount to a national economic emergency. Section 122 tariffs are broad and economy-wide. They suppress import volumes; distort inventory cycles; encourage front-loading; and can hit container demand quite quickly. The April US containerised imports data are not out at the time of writing but March imports were down 1.1% year on year, while year to date imports were down 4.8% compared to Q1 2025, and imports from China for March alone were down 6.7% year on year.

The administration has also invoked Section 232 of the 1962 Trade Expansion Act. This was introduced to allow for steel and aluminium tariffs under the auspices of national security. It allows the President to restrict imports using tariffs, quotas, and licensing systems for steel, aluminium, automobiles, copper and other strategic minerals. Because “national security” can bear a wide range of interpretations, it can also cover shipbuilding, defence supply chains, semiconductors, energy transition materials, etc. The Supreme Court tends to defer to the Executive on matters of national security, so this has become an important tariff lever. The effects could be felt on bulk commodities, metal import and export, auto logistics, ro-ro volumes, and breakbulk cargoes. The tariffs introduced can encourage regionalisation of trade, including re-shoring, near-shoring and friend-shoring, none of which are tonne-mile positive for shipping.

In addition, the Administration invoked Section 301 of the 1974 Trade Act, “Punishment for Unfair Trade Practices” – the legal engine behind Mr Trump’s original trade war with China. Under this instrument, the US Trade Representative (USTR) can investigate whether another country discriminates against US commerce, steals IP, forces technology transfer, subsidises unfairly, and / or blocks market access. If the USTR judges one or more of these discriminations to be in place, the US can impose tariffs, sanctions, and / or trade restrictions.

The 2018–2020 tariffs on China were Section 301 tariffs. They originally focused on IP theft, industrial subsidies, and technology transfer, all of which would be familiar complaints to other governments. In the US, Section 301 evolved into a general strategic-economic containment tool. Section 301 takes more time than IEEPA to enact due to the investigative element but it is legally durable. Unlike Section 122 of the 1974 Trade Act, Section 301 is not temporary and can remain in place indefinitely.

After the Supreme Court ruling, the dream of a single sweeping presidential tariff power has weakened, but the Tariff State survives. The administration has shifted from IEEPA to older, narrower trade statutes. The more fragmented regime can be viewed as more permanently protectionist.

Already, Section 301 has reshaped global trade. Chinese exporters have relocated manufacturing or assembly to other nations, from Vietnam to Mexico. ASEAN nations have enjoyed growth in their manufacturing. Transhipment trades have employed every available sub-Panamax container ship, supporting exceptionally strong charter markets for smaller tonnage. Copy-cat legislation in other countries has added further inefficiencies into global supply chains. As I wrote in my recent article on decarbonisation, short-term inefficiencies can be good for shipping demand. However, as the wider economy is focused more on outcomes than on freight rates, any long-term disruption is likely to reduce overall tonne mile demand for a variety of cargoes.

How have the US’s major trade partners reacted?

European Union

EU-US Relations are deteriorating again, although I will resist the temptation to muddle up Iran/NATO disputes with trade disputes. The most urgent trade issue comes in Mr Trump’s threat to lift car and truck tariffs on imports from the EU from 15% to 25%, as he accuses the EU of not implementing last year’s Turnberry trade deal. EU negotiators say there has been progress, but there is “still some way to go” to implementation. Some European lawmakers want tougher safeguards if the US fails to comply.

On 5 May, Ursula von der Leyen, the EC President, rebuffed Mr Trump’s threats, saying “a deal is a deal” and that the EU is merely in the final stages of “final stages of implementing the remaining tariff commitments.” Ms Van der Leyen countered Mr Trump’s chief criticism by declaring that that US “alignment with the agreed ceiling [on trade volumes] is still outstanding.” Meanwhile French President Macron followed suit, saying, “Agreements have been signed and must be honoured; if they were called into question, it would reopen everything…and if a country is threatened with fresh tariffs, the EU has the tools to respond, and should use them, because that’s what they are for.”

On 5 May in Paris, France, the EU Trade Commissioner Maroš Šefčovič met US Trade Representative Jamieson Greer, on the eve of EU trade minister meetings in the same city. While the outcome of the Šefčovič – Greer meeting has not been reported, it has been reported that the EU meeting ended with no agreement as some members sought to add new conditions to the deal, particularly around steel and the status of Greenland. Bernd Lange, the EU trade committee chair, admitted that more time is needed for the EU to harmonise its approach. On the US side, Washington’s ambassador to the EU says that waiting for a deal is not on the cards: “If a deal isn’t a deal, then I think the United States would walk away from it.”

China

As the Iran-delayed Trump-Xi summit now scheduled for 14-15 May approaches, China appears to be less intimidated than it was in 2018–19. Chinese exporters are said to be increasingly working around US tariffs, partly passing costs to US consumers while expanding into Africa, Latin America, Southeast Asia and Europe. China is also using rare-earth/export-control leverage. China’s industrial production growth has accelerated this year (see my recent article, “Dry Bulk’s Chinese Steel Signal Has Changed”). China has not responded to US demands that it assist in re-opening the Strait of Hormuz, seeing its closure as a made-in-America, solve-in-America challenge.

In April this year, after a meeting between Jamieson Greer and China’s Vice Premier He Lifeng, the State Council introduced a USTR copy-cat regime, authorising trade officials to investigate and act against foreign countries, companies or international bodies that “adopt discriminatory measures” undermining Chinese industrial supply chains. Beijing also authorised countermeasures against foreign powers’ “unlawful extraterritorial jurisdiction.”

A 4 May paper from the Federal Reserve Bank of New York reports that “Over the past year, US trade policy with China has undergone enormous changes, but with surprisingly little effect on overall trade balances. In fact, the US’s twelve-month trade deficit, while highly volatile due to import front-running early in the year, ended 2025 at $1.2 trillion, almost unchanged from 2024.” The authors note that while the US trade deficit with China has fallen, China’s trade surplus with ASEAN has grown, while ASEAN’s trade surplus with the US has grown. The implication is clear.

At the forthcoming summit, China will doubtless dangle trade concessions in return for a more explicit statement from the US that it opposes Taiwanese independence from China. The current US position is that it “does not support” such independence. Neither side is likely to be distracted by the war with Iran, though China will probably reiterate that both sides should prefer negotiation via international institutions. As I wrote in this recent article, China has several options to work around the US blockade of Iranian oil exports.

Canada

Canada is in industrial policy defence-mode. Ottawa had already imposed retaliatory tariffs on US made vehicles, steel and aluminium in October last year, after seemingly positive negotiations fell apart. Mark Carney’s Davos speech this year left little to the imagination; Canada-US relations are in their worst condition ever. In April, Jamieson Greer told Congress that Canada was “doubling down on globalisation when we’re trying to correct for the problems of globalisation…. There are two countries that have retaliated economically against the United States in the past year - the People’s Republic of China and Canada.” Canadian PM Mark Carney countered by saying that the US could not “dictate the terms” of trade negotiations and that “It’s not a case where there is someone making demands, and a supplicant.”

On 4 May 2026, Ottawa announced a C$1 Bn loan programme for tariff-hit sectors, especially steel, aluminium and copper, plus regional tariff-response funding. Canada is focused on Section 232 in the short-term while the two nations have until 1 July to decide, along with Mexico, whether to renew the US-Mexico-Canada trade deal for another 16 years, though the current deal is not due to expire until 2036.

Mark Carney, facing criticism for not having achieved a trade deal yet, said in May that “We need a good deal in the right time, and what we don’t need is chasing a small deal that disadvantages us.” Meanwhile his appearance with EU heads of state at the summit of European leaders in Yerevan, Armenia on 4 May, will not have gone un-noticed in Washington. At that meeting Mr Carney pointedly said, “It’s my strong personal view that the international order will be rebuilt, but it will be rebuilt out of Europe.” Canada is negotiating a new trade and strategic partnership with the EU, with both sides indicating completion this year.

Although most trade between the US and Canada moves overland, friction can cause both sides to look to other partners; Canada particularly has moved in this direction. This could be interpreted as positive for tonne miles, for instance for timber, oil and gas exports from Canada’s west coast to the Far East or from Canada’s east coast to Europe.

Mexico

Mexico is trying to keep USMCA alive while avoiding direct escalation. The 2026 USMCA review has become a major pressure point; analysts note Trump can still use Sections 301, 232, 201 and 338 even after the Supreme Court ruling weakened IEEPA tariffs. As with Canada, much of Mexico’s trade with the US moves overland. But the Trump Corollary to the Monroe Doctrine has made clear that Mexico must reduce its trade partnership with China. For now, Mexico seems to be acceding to such demands.

Visible shipping implications

Shipping has now had over a year to digest and react to the dismantling of global free trade. The surprise for some observers, but not for those who have been in shipping for long enough to remember a pre-globalised world, is that trade has not collapsed. Instead, trade has become less efficient and more expensive. The implications come in two phases: the short-term (say, for the lifetime of the current US administration) and the long-term.

Short-term, shipping has benefited from the short-term disruptions to trade via re-routing, trans-shipment, trade duplication, inventory buffers and higher freight rates. US container imports have fallen after a tariff-avoiding early peak season last year. But liner shipping is still profitable; time charter rates reflect high levels of utilisation; and trade disruptions have added to transhipment volumes, increasing the number of logistical phases from factory gate to consumer. Chinese exporters are diversifying markets, which supports China–Africa, China–Latin America and intra-Asia trade lanes while weakening the US-bound growth story.

This disruption-effect applies to raw materials and energy as well as manufactured goods. The signal is harder to perceive through the additional distortion of conflict, but it is there. The EU was already buying more US LNG exports before the current Middle East crisis. China had ceased buying US oil but is now back in the market for it. Global steel markets have been upended not only by tariffs but by how quickly tariff regimes have changed.

But even in the here and now, the visible shipping effect is not yet a simple “tariffs up, freight rates up” story. Shipping in microcosm reflects a more complicated world in which the movement of goods, capital and labour face more restrictions than previously. The future global economy could well feature lower GDP elasticity of trade, weaker consumer demand, slower industrial growth and lower capital efficiency. In this context, shipping may face longer-term challenges around access to finance, or variable environmental and regulatory regimes, as globally applied shipping conventions come under pressure. Shipping initially benefits from friction, but suffers if friction becomes structural economic decline.

Since “Independence Day” on 2 April 2025, the US’s trade partners have responded quickly to tariffs by striking trade deals with each other to offset the increased costs of doing business with the US. Trade flows will reorganise over time as businesses sniff out new export opportunities. Shipping demand is likely to be volatile and less predictable until the political context becomes less erratic. That makes planning fleet renewal harder. For now, shipowners still appear willing to bet that trade will adapt rather than collapse. Orderbooks suggest that many believe the world economy is becoming less efficient, not less interconnected. Whether that proves to be a profitable distinction may become one of the defining questions for shipping in the second half of this decade.