Shipping costs soar as retailers try to secure orders ahead of fresh tariffs
Christmas is coming early this year. And it's pushing up shipping rates.
A glut of early wholesale orders for everything from holiday decorations to home furniture has propelled maritime shipping costs to four-year highs as a result of tariff uncertainty and the Iran war, with potential repercussions for consumers.
Industry specialists say retailers and importers — especially in the United States — are rushing to book shipments to get ahead of a potential fresh round of U.S. tariffs on dozens of countries that's expected near the end of July.
The surge in demand is boosting seaborne transport prices across the globe.
"Taken together, the early start to peak-season demand is the main cause of spiking freight rates," said Judah Levine, head of research at shipping platform Freightos, in an email.
He attributed the "front-loading" primarily to presumed tariffs, but also to fuel price increases that stem from the months-long closure of the Strait of Hormuz.
Large shippers have long-term contracts with carriers under which fuel costs are adjusted quarterly. The higher fuel costs those carriers incurred over the past three months will be passed along to shippers starting this summer, Levine said.
Similar arrangements between importers and manufacturers — whose costs have also gone up due to the spike in energy prices — give shippers all the more motivation to get their orders in now.
"In this sense, part of the early jump [in shipping] is an indirect impact of the Hormuz closure," Levine said.
According to the Platts Container Index, global shipping rates for containers leaped about 80 per cent in the 30 days ended June 24 to hit their highest level since April 2022, when pandemic-related supply chain problems peaked.
Rates close to home have vaulted even higher. The average price of a 40-foot container hauled from East Asia to North America's west coast climbed 120 per cent over the past six weeks to $6,200 US, according to Freightos.
"People are stocking up," said John Corey, president of the Freight Management Association of Canada.
Angst over potential U.S. levies of at least 10 per cent on countries undergoing an American probe into forced labour practices makes up part of the explanation. So does the fragility of the Canada-United States-Mexico Agreement, whose July 1 renewal deadline just passed.
"It's the uncertainty of what's going to happen," Corey said.
The White House said last month Canada is among the 59 countries plus the European Union that should be subject to an additional tariff over allegations they allow goods produced by forced labour into American supply chains. However, the vast majority of merchandise exported to the U.S. from Canada is compliant with the existing continental trade pact and exempt from levies.
As for the July 1 renewal deadline on that deal, Corey considers it "much ado about nothing," as do most business leaders. Nonetheless, the uncertainty lingers, prompting companies to play it safe and order supplies before the situation shifts.
"All this ambiguity creates a frenzy of booking, which drives prices up," said Lisa McEwan, co-owner of customs brokerage Hemisphere Freight.
"I'm telling all of my clients, 'Get it booked, get it shipped."'
She says her clients are ordering everything from clothing and holiday decor to tables, televisions and tiles earlier than usual, and that customers will pay the price at the checkout counter.
"The people who are going to be affected the most are going to be the average household consumer," she said.
"They will bear the brunt of it."
cbc.ca
