Import and Export Companies Forced to Accept Shipping Pressure

Import and export companies are now under tremendous pressure to adapt to these rising shipping costs. The combination of geopolitical tensions, tariff changes, early peak season demand, and logistical challenges has created a perfect storm.

Detours Due to Red Sea Crisis: The crisis in the Red Sea has forced ships on European routes to take longer detours around Africa. This shift has placed additional strain on the already limited capacity of the African route, resulting in extended voyages, increased transshipment, and severe port congestion. Many containers are now delayed, contributing to a widespread container shortage.

South American Tariff Impact: In response to escalating US-China trade tensions and a newly announced 100% tariff on Chinese electric vehicles (EVs), Chinese EV makers, including BYD, are rushing to ship vehicles to Mexico and Brazil to circumvent upcoming tariffs and trade restrictions. Brazil has reinstated EV tariffs, which will increase gradually until 2026, while Mexico, under pressure from Washington, has halted incentives for Chinese EV production. This rush has caused shipping costs from China to Brazil and Mexico to soar, as reflected in the rising container freight index. This has caused vessels to be redirected from West Africa to South America, leading to increased shipping rates in West Africa and overcrowded destination ports.

Companies must strategically navigate these obstacles to manage their shipping schedules and costs, despite facing low profit margins and increased operational pressures. I hope all import and export companies can weather this storm smoothly.