US Trade Tariffs: Impact on Dry Bulk Trade and Global Trade Patterns

The United States is preparing for a major policy shift as the president-elect announces plans to impose significant tariffs. Beginning January 20, 2025, a 25% tariff will be levied on all imports from Canada and Mexico, alongside a 10% increase on Chinese goods. These developments could lead to two potential scenarios in the dry bulk trade: US imports will remain stable with the additional costs absorbed by the market, or importers will seek alternative trade partners, reshaping global trade patterns over time.

With the inauguration of the new US president just weeks away, discussions of broader tariff measures are already making headlines. These tariffs may result in longer shipping routes if trade partners shift. For instance, instead of Canadian fertilisers dominating US imports, products from Russia or Israel might take precedence, increasing sailing distances and boosting dry bulk demand. Similarly, US steel imports from Mexico and Canada could be substituted with supplies from Brazil, South Korea, or Japan, further lengthening voyages and driving higher employment for Panamax and Supramax vessels, key players in the US shipping market.

Higher tariffs and increased freight costs are expected to raise import prices, fueling inflationary pressures. This inflation could limit the Federal Reserve’s ability to implement significant interest rate cuts. At the same time, a stronger US dollar could intensify risks for central banks in other economies facing potential currency depreciation.

The US economy has demonstrated remarkable resilience in recent years, maintaining a strong Dollar Index despite global economic challenges. While China once rivalled the US in financial strength, recent trends suggest a reversal. The ratio of China’s GDP to the US peaked in 2020 but has since declined, mirroring a shift in global investment flows. China’s share of international dry bulk trade and investment continues to shrink as investment increasingly flows into the US, reinforcing its dominance in the sector.

These evolving trade policies and economic dynamics redefine the dry bulk trade landscape. The US, leveraging its robust economy and investment appeal, is poised to strengthen its role in the sector. Meanwhile, China’s economic slowdown and diminishing influence in global trade mark a pivotal shift in the balance of power.
The long-term trajectory of these changes will hinge on the complex interplay between tariffs, trade flows, and monetary policy. While the immediate effects may bolster US economic growth, the broader implications for global trade relations and economic stability remain uncertain.