Impact of US Tariffs on Global Supply Chains
The announcement of reciprocal tariffs by US President Donald Trump on April 2 has caused widespread uncertainty in global supply chains. Exporters worldwide are grappling with the implications, and logistics providers are experiencing increased freight rates and unpredictability.
Immediate Effects on Freight Rates
- Freight rates from India to the US East Coast increased by 10% to nearly $4,000 per 40-foot container as of April 4.
- Spot rates from the Far East to the US East and West Coasts rose by 8% and 15% respectively on April 1, despite an overall decline since January.
Long-Term Implications
- Xeneta forecasts stability in freight rates due to the moderation trend seen in 2025.
- The Drewry World Container Index rose for the first time since January, attributed to cancelled sailings.
Strategic Adjustments by Exporters
Exporters, especially in India, face pressure but must adapt through strategic negotiations and diplomacy. The demand for goods persists, and disruptions are anticipated to last a few months before stabilizing.
US Tariffs on Chinese Vessels
- The US has imposed significant levies on Chinese vessels, up to $1.5 million per port call, to challenge China's maritime dominance.
- This poses a risk given China's 60% share in global shipbuilding.
Potential for Supply Chain Realignment
- There is potential for supply chain adjustments, such as rerouting through countries with lower tariffs like Brazil, though this may be costly.
- Sectors anticipate future disruptions and possible rate increases as shippers diversify supply chains.
Opportunities for India
- US tariffs on Chinese goods open opportunities for India, potentially increasing logistics revenues by $10 billion annually.
- India could capture a $5 billion share by replacing Chinese exports with a 54% tariff.
- Forecasted 20% surge in cargo volumes by FY26, driven by $50 billion in IT and infrastructure investments.
