President-elect Donald Trump’s expected policy mix, including raised tariffs may lead to lower demand for container-shipping services in 2025, according to Bloomberg Intelligence (BI).

Container shipping's order book stands at 18% of the global fleet, according to Hapag-Lloyd, about 2x higher than pre-pandemic. This may be due to the industry's improved profitability during the pandemic, as shipping companies used cash generation to place orders for bigger and more cost-efficient ships. It takes 2-3 years on average to build a new container ship, which could translate into important deliveries in the next 12 months. That may, in turn, put pressure on freight rates and industry profitability in 2025.

Stephane Kovatchev, Credit analyst at BI, commented: “The rise in container-shipping freight rates this year can be largely explained by Houthi rebel attacks on vessels in the Red Sea and the brief dockworker strike on the US East Coast in October. This has supported the profitability of container-shipping companies such as Maersk and Hapag-Lloyd. A possible re-stocking of inventories in the US, ahead of rising tariffs, could increase demand for shipping services and support industry profitability in the near term. Outside of geopolitical risks, industry overcapacity, weaker consumer demand and high inventory levels, which led to softer trends in 2023, remain key risks for the sector in 2025.”

Inflation and restrictive monetary policies could translate into weaker consumer demand for container-shipping services in 2025. The University of Michigan's consumer-sentiment index hit an all-time low in 2022, mainly due to inflationary risks, and remains below pre-pandemic levels. Data published by the European Commission paint a similar picture, possibly exacerbated by geopolitical risks in Eastern Europe.

Weaker freight rates and softer volume, due to new ship deliveries and macroeconomic uncertainty, could be key reasons for a decline of profitability at Maersk in 2025, particularly if tensions in the Middle East de-escalate. The Danish company may record a cash burn of about $1 billion next year, Bloomberg consensus suggests. This could represent an important turnaround from the record $27 billion free cash flow achieved in 2022.

Despite softening credit metrics, it's worth mentioning that Maersk's balance sheet remains robust. Liquidity, which stood at $27 billion in 3Q, may buy the Danish company valuable time to face some of the macroeconomic risks ahead.

In his first term in office, Donald Trump imposed additional tariffs of up to 25% on billions of goods imported from China. Using data on customs duties collected by the US government, BI estimates it raised the average tariff rate on all goods imported into the US from just over 1.5% ahead of the trade war with China to around 3% on average in the last five years.

Stephane Kovatchev added: “Trump has floated various tariff proposals while on the campaign trail - mentioning 10% or 20% universal tariff rates on all goods imported into the US and a higher rate of 60% on goods from China. Whether these tariffs would actually be imposed or used as a bargaining chip is not clear, but if they are, these pledges point to a much more broad-based rise than that observed in his first term. This could take US average tariffs to rates not seen since the 1940s.”