February 2025 | Rough Ride Ahead for Shipping: Tariffs, Trade Shifts & Tanker Turbulence

The global shipping industry enters 2025 with one foot on dry land and the other on ice. Over the past few years, the industry has demonstrated resilience in the face of mounting challenges—navigating sanctions, embargos, terrorist threats, and increasingly stringent environmental regulations. Now, a new force is set to reshape maritime trade: tariffs.

The imposition of tariffs has long been a contentious economic strategy. Some argue they function as a necessary tool for financial leverage, while others see them as an act of economic warfare. Regardless of perspective, one fact remains—tariffs act as a double-edged sword, simultaneously protecting domestic industries while disrupting global supply chains. The latest U.S. trade policy aims to impose up to 60% tariffs on Chinese imports and 10-25% on other nations' goods, setting the stage for significant retaliation from trading partners and further supply chain volatility.

Implications for Chemical Tankers

Unlike the energy sector, which deals in crude oil, refined petroleum, and LNG, the chemical trade operates under a tight supply chain discipline. Just-in-time inventories, specialized vessels, minimal storage facilities, and short shelf lives make the chemical shipping sector particularly vulnerable to market disruptions. The new tariffs will likely trigger a domino effect in trade routes, costs, and market access.

• Mediterranean Market Shifts
• The chemical tanker market is already adjusting to changing trade dynamics. In the Mediterranean, ENI's decision to shut down two major ethylene crackers in Italy will leave the country increasingly dependent on imports of key chemical commodities such as benzene, toluene, and mixed xylenes. Smaller chemical tankers that fit the infrastructure of Mediterranean ports are poised to benefit, with Italy likely sourcing imports from Ukraine, Belgium, the Netherlands, and Algeria. Additionally, Italy may look to import phenol and styrene during periods when domestic production is unprofitable.
• U.S. Chemical Trade in Flux
• Meanwhile, demand for benzene in the U.S. remains strong, but sourcing challenges are growing. Supply from Korea is shrinking, increasing reliance on European exports. However, European chemical producers may struggle with competitiveness due to tariff pressures, further complicating an already strained supply chain.

Product Tankers & the Surge in Newbuilds

The product tanker segment is also experiencing significant shifts. Market data shows an unprecedented influx of new Medium-Range (MR) tankers, with deliveries expected every three days throughout 2025. New orders account for 10% of the existing fleet, adding three million deadweight tons (DWT) of capacity, much of which is replacing aging vessels over 25 years old.

This influx of new tonnage raises questions about market equilibrium. While some regions may benefit from increased product tanker availability, others may face oversupply, downward pressure on freight rates, and a competitive landscape that could erode profitability.

Tariffs: A Balancing Act of Pros and Cons

The imposition of tariffs comes with both advantages and consequences.

Potential Upsides:

? Boosting Domestic Industry – Higher import tariffs can make domestic products more attractive, supporting local manufacturing and job creation.

? Government Revenue – Tariffs generate income that can be allocated to infrastructure, public services, and economic stimulus efforts.

? Strategic Leverage – Tariffs can be a geopolitical tool, influencing international decision-making and negotiations.

Significant Downsides:

? Supply Chain Disruptions – With chemical tariffs up to 60% on Chinese imports and baseline rates of 10-25% on others, companies will reroute trade flows, adding complexity and delays.

? Increased Shipping Costs – Shippers will face higher operational costs due to port congestion, customs duties, and administrative burdens.

? Loss of Market Access – U.S. chemical producers will struggle to sell into China, while European chemical exports to the U.S. may lose competitiveness.

? Downstream Industry Impact – Higher input costs from tariffs and retaliatory measures could suppress chemical demand, ultimately affecting industrial production and end-user markets.

The Road Ahead

The combination of tariffs, shifting trade routes, and fleet expansions will define the maritime industry's trajectory in 2025. Chemical tankers must adjust to regional trade shifts, while product tankers navigate an increasingly competitive landscape. The full impact of these changes remains to be seen, but one thing is certain: adaptability will be the key to survival in this rough ride for shipping.