In May, the US reduced its base tariff on Chinese exports from 145% to 30% for 90 days, triggering a surge in transpacific ocean freight demand and sending container freight rates to the West Coast soaring to over $6,000 per FEU as shippers scrambled to get their cargo to the US before the August expiration date.
A recent Freightos survey of approximately 80 supply chain professionals found that about half expected the White House’s recently announced 90-day extension of the 30% base tariff to trigger another peak season. However, the other half believed that even with the extension, this year’s peak season was already over—and so far, container freight rates appear to support these expectations.
Last week, transpacific freight rates to the West Coast fell 8% to below $2,000 per FEU, the lowest level since the start of the Red Sea crisis. So far this week, daily rates have fallen back to the $1,700/FEU level seen before the Houthi attacks began in late 2023. Last week, US East Coast rates fell 3% to $3,472/FEU, but so far this week, they have fallen to $2,700/FEU, also within striking distance of pre-Red Sea levels.
Transpacific container freight rates are declining due to tariff-driven frontloading volumes that were higher than normal earlier this year, leading to a brief front-loaded peak season surge in June. However, the decline in freight rates to pre-Red Sea crisis levels—despite the ongoing attacks—suggests that excess freight capacity is also influencing rate behavior.
Developments in the Asia-Europe spot market may also support the possibility that overcapacity is already impacting rates.
Carriers are reporting strong peak season demand from Asia to Europe. However, despite strong volumes, continued congestion at several major European container hubs, and the continued direct absorption of capacity on this route by Red Sea rerouting, container freight rates remain 60% lower than a year ago, when the Red Sea crisis was blamed for a surge of approximately $7,000 per FEU in Europe-to-Europe rates and approximately $8,000 per FEU in Mediterranean-to-Mediterranean rates.
As of last week, freight rates on the Asia-Europe route remained flat at around $3,300 per FEU, the peak season level since early July. Rates on the Asia-Mediterranean route have fallen to around $3,100 per FEU from a peak season high of $4,800 per FEU reached in mid-June. Shipping lines will reduce capacity on these routes in September to prevent further price declines.
In air cargo, the Air Canada flight attendant strike that began last weekend froze passenger operations and disrupted cargo flows. However, a preliminary agreement between the airline and the union was reached late Monday, signaling a gradual resumption of operations.
Air Freight Index rate data shows that air freight prices remained generally stable last week. China-US prices rose slightly to $5.44/kg, China-Europe prices fell 4% to $3.53/kg, and transatlantic prices dropped 2% to $1.73/kg.
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