Global Trade Landscape Under Tariff Pressure: Stability and Volatility Coexist

Recently, renewed U.S. tariff policies have once again rattled global trade. However, market reactions have been inconsistent, revealing a complex economic picture with stable shipping rates, declining corporate profits, and small business owners struggling to survive.

Container Rates Stabilize

In the lead-up to the new round of tariffs set by Trump on August 7, the trans-Pacific freight market was surprisingly calm. Shippers, who previously rushed to load cargo during tariff “windows,” appeared relatively subdued this time, primarily because early “front-loading” at the beginning of the year had already exhausted capacity.

Dynamics

• West Coast Routes: Rates remained stable at $2,300 per 40-foot equivalent unit (FEU) for three consecutive weeks.

• East Coast Routes: Dropped to $3,950 per FEU, marking the sixth consecutive week of decline.

• Asia-Northern Europe and Mediterranean Routes: The former held steady at $3,400 per FEU, while the latter fell 4%, declining for seven consecutive weeks.

Despite slight increases in export prices in some countries, such as Indonesia, the overall market did not experience the price surge anticipated from the tariff policies.

Increased Pressure on Large Corporations

❑ Matson: Double-Digit Profit Decline

Matson, a company primarily focused on trans-Pacific routes, was directly impacted by the U.S.-China trade war:

• Q2 net profit decreased by 16% year-over-year to $94.7 million.

• China cargo volume dropped by 14.6%, dragging down overall ocean transportation revenue.

• Despite growth in Hawaii and Alaska operations, it couldn't offset the impact of declines on major routes.

❑ E.l.f. Beauty: Cosmetics Business Hit

E.l.f. Beauty, with 75% of its main products manufactured in China, faces pressure from the new round of cosmetics tariffs:

• Net profit decreased by 30% year-over-year to $33.3 million.

• Sales growth slowed to single digits.

• The company has raised product prices to offset costs and suspended its full-year profit guidance, highlighting market uncertainty.

Small Businesses Struggling to Survive

Under the new tariffs, small and medium-sized enterprises face immense pressure:

• Soaring Import Costs: Products may incur tariffs as high as 41%, with transshipped goods even facing an additional 40% punitive tariff.

• Inventory Shortages: Early “hoarding” strategies have depleted inventory, and the cost of reordering has significantly increased.

• Eroding Profits: Operators are forced to borrow money, lay off staff, or resort to crowdfunding to cover employee wages and tariff expenses.

Business owners widely state that shifting production to the U.S. is not a short-term viable solution, as a lack of price competitiveness and manufacturing infrastructure makes this transition difficult to achieve.

Trump's New Targets

Trump's new targets are high-tech and pharmaceutical industries: chips and medicines.

❑ Semiconductor Tariff Escalation

• Plans to impose 100% tariffs on chips, encouraging companies to return to the U.S.

• Companies like Apple, TSMC, and NVIDIA have pledged to expand investments in the U.S.

• Details of the chip tariff policy remain unclear, subjecting companies to uncertainty.

❑ Aggressive Pharmaceutical Tariff Escalation

• Trump proposed tariffs of up to 250% on pharmaceuticals.

• Pharmaceutical companies widely oppose this, fearing increased costs and supply chain disruption.

• The government is pushing pharmaceutical companies to commit to lowering prices and shifting production back to the U.S.

Tariff Fluctuations Have Become the New Normal

The new wave of global tariffs is profoundly impacting trade flows, business operations, and consumer lives, and has become the new normal.

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