Reciprocal Tariffs: A New Era for Global Trade and Shipping?

April 4, 2025

The opening salvo of the so-called “reciprocal tariffs” announced by the US on April 2nd took the world by surprise. Both the magnitude and the extent of the announced levies (involving the majority of countries worldwide) were larger than expected. Should these tariffs come into effect as promised, the impact on global GDP could be severe, with large and small economies alike negatively affected (including the US). The negative economic impact would also weigh on global trade and shipping markets, across all commodities and sectors.

At this time, we are focusing on two possible scenarios, emphasizing that we are still at the very beginning of a period of unprecedented trade developments – developments that will evolve and crystallize in the coming weeks and months, for better or worse.

Scenario 1: All-out trade war: US Reciprocal tariffs and retaliatory measures.

This scenario will be dismal for global trade and for the world economy.

Tariff developments to-date:

Should reciprocal tariffs be fully implemented as advertised, Chinese exports to the US will be hit by new 54% levies (20% was already implemented prior to April) and Vietnamese exports by 46%. Countries politically aligned with the US will also suffer significant blows: The EU nations will be hit by 20% reciprocal tariffs, Japan by 24%, and South Korea by 26%. Most countries will see a 10% increase in export duties to the US. Additionally, the US has already implemented 25% tariffs on all steel and aluminum imports (a development primarily affecting Canada, the leading metal exporter to the US), while additional 25% tariffs on all car imports to the US are about to come into effect. However, energy imports to the US (oil and gas) are currently still exempt from tariffs.

Retaliatory measures against the US and widespread trade wars between other nations:

Most countries are still considering how to best respond to the new US trade policies. Leverage against the US varies from country to country. Many nations hope to negotiate better trade terms with the US (see second scenario below) but threaten retaliatory measures against US goods, commodities (mainly agricultural) and services exports, should negotiations fail. In addition, we may see an escalation of trade wars amongst other nations. Cheap Chinese exports (electric vehicles, solar panels, telecommunication products, batteries, steel products, etc.) are likely to flood other countries (outside the US), raising the likelihood of new tariffs and trade wars between China and Europe, Canada, India, Turkey, Brazil, Southeast Asia, etc.

Impact on shipping:

This scenario is similar to the Low Case described in our 25Q1 market release. Specifically, we see global GDP growth adjusting 0.4% lower in 2025 and 0.5% lower in 2026 compared to 2024 growth, with all major advanced and developing economies negatively affected. These developments are likely to negatively impact industrial and consumer demand to the detriment of trade volumes across all shipping markets. We expect to see fiscal and monetary government support in Europe, the US and China, but stimulus developments are unlikely to offset wounds resulting from trade wars.

Today, we do not yet know how retaliatory measures will weigh on shipping demand (in addition to the aforementioned economic impact). We generally expect the largest trade impact to be felt in the containership markets (especially in conjunction with likely new fees on ships calling at US ports). US containerized trade imports will be compromised, and this should be a major drawback for global containerized trade volumes (US is the world’s largest importer of goods and US import developments have shaped containership markets in recent years). On the other hand, the industry will face a new round of supply chain changes as tariff differentials favor some countries at the expense of others. Will Mexico continue to attract Chinese manufacturing investment—and in turn boost shipments from Asia to North America—as it did over the past four years in the wake of the initial U.S.-China trade war? Will Vietnam remain a leading supplier of goods to the US markets, or will India and/or Philippines gain market share?

In dry bulk, US imports of steel products (primarily from the EU) and cement & aggregates from regional partners will likely decline under the new tariffs. While these are relatively minor trades, we expect to revise import forecasts downward. The greater risk, however, may come from yet-unannounced retaliatory measures: US agricultural products and metallurgical coal—both major long-haul trades— are likely targets for countermeasures by China and others. Retaliation and resulting shifts in trade flow patterns could ultimately outweigh the direct impact of the US tariffs themselves.

In the tanker market, Asian nations could target US oil exports to the detriment of long-haul oil trades. However, this is less likely to be the case in the gas markets, as Asian countries (including China) rely on US LNG, LPG, and ethane exports. Nevertheless, we may see a gradual shift toward Middle Eastern exports (particularly from Qatar); and slower economic growth will likely be manifested in lower import demand.

Scenario 2: Watered-down tariffs: The US reaches bilateral agreements with select trade partners.

This is a more benign scenario. It presumes a period of negotiation between the US and its leading trade partners commencing during the next two weeks and culminating with bilateral trade agreements prior to year-end. Several of the new trade accords could specify lower trade barriers between the trade adversaries but will not completely abolish tariffs.

The broad implementation and differentiation of new tariffs by the US against so many nations, products and commodities (cars, pharmaceuticals, steel, etc.) makes it difficult to be sure of what will develop in the coming weeks and months.

Under the watered-down tariff scenario, we assume that the world economy and shipping markets enter a 4-to-6-month period of upheaval and likely downturn (including the likelihood of a brief US recession), but with economic and trade growth accelerating by year-end.

Today, we consider these two scenarios to be equally likely. We are monitoring developments and will adjust our outlook accordingly.