Will Trump Tariffs Transform Trade Routes?  

Incoming American President Donald J. Trump has long said he will impose sweeping tariffs on goods imported from China, but recently he also vowed 25% tariffs on China and Mexico. Will Trump’s tariffs transform trade routes and the global supply chain?

Quantifying the Present to Understand the Future 

Windward looked at monthly port calls by cargo vessels* from January-November 2024. Results: 

• China to the U.S. – 140 port calls
• Mexico to the U.S. – 240 port calls
• Canada to the U.S. – 164 port calls 

Mexico and Canada are obviously strong trade partners with the U.S. and sometimes act as transhipment hubs for goods coming from China. That will be shut off if President Trump makes good on his recent promise, further changing global trading and supply chain patterns…

The Reimposition of Tariffs on Chinese Goods 

Trump’s administration has consistently advocated for greatly reducing U.S. dependence on China through the imposition of tariffs, to improve America’s standing in the great power competition. During his previous stint, tariffs on Chinese goods reached over $550 billion, covering key sectors such as electronics, machinery, and textiles. If reimposed or expanded in 2025, these tariffs are likely to prompt further shifts in manufacturing and sourcing strategies.

The maritime ecosystem will feel this impact almost immediately. Chinese ports such as Shanghai and Ningbo – currently among the busiest in the world – may see reduced U.S.-bound cargo volumes. Instead, alternative manufacturing hubs in Southeast Asia and India could experience growth. For example, Vietnam’s exports to the U.S. surged by 36% during the height of the U.S.-China trade war in 2019. A similar pattern is likely to repeat, further diversifying global shipping routes.

The geopolitical tensions between the U.S. and China have already prompted many Chinese manufacturers to establish plants in Mexico, basically turning Mexico into a huge transshipment hub to maintain China’s market presence in North America. 

Trump’s tariffs are expected to accelerate supply chain diversification efforts, now possibly not including Canada and Mexico. Companies reliant on China for manufacturing may increasingly look to “China+1” strategies, where production is distributed across multiple countries to mitigate risks. This strategy was more widely adapted pre-COVID. Diversification reduces vulnerability to geopolitical tensions, but it also introduces complexity. 

From a cost perspective, the tariffs are likely to raise shipping expenses, as longer routes and increased transshipments become necessary. For example, moving goods from Vietnam or India to the U.S. often requires additional transshipment points compared to direct shipping from China. These added layers increase costs, which may be passed on to consumers, worsening inflationary pressures.

Freightos lead analyst Judah Levine was quoted by Loadstar: “In 2018, then-president Trump’s tariff announcements led to a doubling of freight rates as shippers rushed to move goods ahead of increased costs…tariff announcements have historically altered the timing of shipments.” 

The Challenges for the Ecosystem

But Trump’s 25% tariff pledge could lead to a rush of imports into America before this takes effect (assuming it happens), especially for goods that don’t expire (so it wouldn’t include some types of pharmaceuticals, for example).

The U.S. shift away from China will present logistical challenges. Alternative ports likely lack the infrastructure to handle massive increases in freight traffic. Congestion and delays could become common in the short term, impacting overall supply chain efficiency. Artificial intelligence tools will be important for optimizing route planning, avoiding chokepoints, and identifying emerging trade flow patterns.

Enforcing these new tariffs could be difficult, considering Trump’s stated plan to make severe cuts to federal spending. A key feature of Donald Trump’s proposed policies for 2025 is the establishment of the Department of Government Efficiency (DOGE). This initiative is aimed at streamlining federal operations by reducing bureaucratic overlap, consolidating agencies, and cutting wasteful spending. Drastic cuts may profoundly impact maritime and supply chain sectors, industries reliant on government oversight and collaboration, and could spark demand for automated solutions that increase efficiency. 

The reimposition of tariffs will necessitate tighter compliance measures. In 2018-2019, the U.S. Customs and Border Protection (CBP) increased inspections to ensure that goods were not fraudulently labeled to bypass tariffs. A similar uptick in enforcement is expected in 2025, emphasizing the need for advanced risk management tools. AI-powered solutions, capable of efficiently and automatically identifying deceptive shipping practices (DSPs), reducing person-power, will be necessary for navigating this landscape.

U.S. law enforcement agencies work to ensure the safety, security, and efficiency of maritime operations. Budget reductions could diminish their capacity to inspect vessels, enforce compliance with environmental and sanctions regulations, and respond to emergencies.

Trump’s reimposition of tariffs on China would require the CBP to play a key role in ensuring compliance with import regulations and preventing transshipment laundering. Reduced funding could delay inspections, create bottlenecks at ports, and increase the risk of fraudulent practices slipping through undetected.

What do you think is likely to happen regarding Trump’s proposed tariffs? 

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