International Chamber of Shipping — 2025-05-30
News from Brussels
As the US imposes sweeping tariffs on the auto trade, industry leaders warn of higher sticker prices, eroding competitiveness, and a scramble to adapt to a changing landscape.
On 3 May, the US imposed a 25% tariff on all imported auto parts, completing a two-stage package that already targeted finished vehicles. While those with at least 85% North American content are exempt, most cross-border supply chains face upheaval.
With warnings that the new duties could increase car prices by US$2,000 to US$12,000, consumer confidence dropped for a fifth straight month in April, hitting 86.0—its lowest level since COVID-19.
Freight forwarders are already seeing the fallout. In April, major US freight forwarder Flexport reported ocean bookings from China to the US were down, some 60% industry-wide, and the Port of Los Angeles expects a 35% drop in trans-Pacific containers before June 2025. Global freight giant DSV, now merged with Schenker, noted “customer order timings are already shifting because of tariff uncertainty”.
Höegh Autoliners CEO Andreas Enger told ICS Leadership Insights the ro-ro carrier is taking a “clinical business approach.” About 12% of its inbound and 13% of its outbound tonnage touches US docks. While customers remain calm, he noted that Chinese exporters can quickly absorb any reduced US demand. The bigger concern, he said, is that in the long term, it will raise the cost of serving the US market.
Enger has been shuttling between Asia, Detroit and European OEMs to fine-tune schedules. The mood, he reports, is “remarkably calm” as customers weigh options. One reason is that China’s exporters are still “very loose”. He said: “Any shortfalls from US volume drops will probably, to a large extent, be picked up by Chinese cargo going elsewhere.”
The sector has navigated a pandemic, Suez blockage, Panama drought and Baltimore bridge collapse in the past five years, but Enger sees a particular sting in this latest disruption: “It will increase the service cost of the US market and that will add cost to consumers. It will make US products less competitive in the world market.” A deeper slump in US demand could release surplus vessel capacity, he warns, destabilising freight rates.
Contract cover offers some cushion. Höegh is “basically sold out for 2025-26,” Enger says, having traded a slightly lower earnings run-rate for longer-term certainty ahead of a wave of new-build deliveries. Even so, US-linked contracts may need tweaking if customers win tariff relief that shipowners cannot.
In October, when US port fees target all non-US-built car carriers, virtually the entire global fleet. “There is only one US-built car carrier,” Enger noted. Höegh is modelling fleet splits and lobbying alongside clients to soften the blow, warning that even US-flags carrying military cargo could be penalised.
On the ground in the US, companies are working to adapt. “People are frustrated, trying to figure strategies in so much uncertainty,” said Kirsten Deeds, Partner and International Tax Practice Leader at RKL LLP. She told ICS Leadership Insights that a year ago, many executives couldn’t quote their tariff exposure, but now everyone is asking questions.
Deeds predicts a potential rush into Foreign-Trade Zones (FTZs), the bonded sites where duties can be deferred or, for parts assembled into finished vehicles, reduced. Regulators are weighing a flat 25% rate on parts and cars, threatening to nullify the usual FTZ savings. This could lead to court challenges and uncertainty. “We could get a red-light, green-light situation. Yes, the tariffs are on, no, they’re off, until the judges decide months from now,” she warned.
The changing policy landscape is impacting US investment. Some German-owned suppliers, said Deeds, have decided to exit the US rather than absorb the duty hit. Several Chinese-owned firms are still expanding, but with heavy automation that creates few local jobs. “Trust is becoming a long-term issue. Companies have to reassure partners they’re still in the game,” she added.
Automakers are cautious. Volkswagen said it is still “assessing the impact”, while Honda Canada stressed its Alliston plant remains at full capacity, supplying 99% of Canadian demand for the brand. GM and Ford posted strong Q1 US sales, but GM is trimming Canadian truck output while boosting Indiana production. Stellantis withdrew its 2025 guidance due to tariff uncertainty.
Shipowners could face a few different realities over the coming year: a drop in US demand could free up capacity, which Chinese cargo may absorb. Lines with flexibility in Latin America or Asia could take advantage of new opportunities than those only working on North Atlantic routes. Port fees and tariffs could raise costs, but pricing power may be limited if capacity surges.
Enger sees a broad lesson: “The desire to balance out China and bring more manufacturing home to the US is bipartisan, it’s not likely to end with the Trump era.” If other regions retaliate, the instability could spread far beyond US shores,” he said.
Amid ongoing change and political volatility, shipping faces continued uncertainty, particularly if prices rise, consumer sentiment dips or courts begin to rule on the increased tariffs. Owners will need to remain agile and stay abreast of developments with clients on both sides of the Pacific to weather possible business disruptions.