Since becoming US president, Donald Trump's stance on revenue raising, protectionism and reducing trade deficits through tariffs have garnered much attention. His trade policies are characterised by increased government intervention, more mercantilism and promoting ‘unfree’ trade. 

The fuller effects of this policy on China, and steel and aluminium imports, remain to be seen, as does the effect on US consumers, businesses and inflation. But we expect these policies to likely weigh on trade volumes growth in 2025.

Global shipping has undergone some significant changes in recent years against a backdrop of surging hostilities in the Middle East and attacks on containerships in the Red Sea, which is a systemically crucial trade route connecting Asia and Europe, and through which 15% of global maritime trade volumes pass.

The disruptions in the Red Sea have forced ships to take much longer routes via the Cape of Good Hope, leading to a significant fall in goods passing through the Suez Canal and Bab el-Mandeb Strait (the narrow body of water separating Djibouti from Yemen, and which connects the Mediterranean Sea to the Indian Ocean via the Red Sea and Suez Canal). 

In fact, volumes passing through the Suez Canal have fallen by around 52% since the end of 2023, while volumes going through the Bab el-Mandeb Strait are down by around 60% over the same period. Volumes passing around the southern tip of Africa, by contrast, have risen 65% compared with before the crisis.

Reshuffling of traded volumes after Red Sea attack

But the Red Sea isn’t the only hotspot that the shipping industry contends with. The conflict between Russia and Ukraine, which began in February 2022, has contributed to the volume of goods passing through the Bosporus Strait, a key maritime corridor connecting the Black Sea with the Mediterranean, by 18%. This has been offset by increased shipping through the Straits of Gibraltar (+15.1%) and Dover (+18.8%).

Average volume of goods passing through key chokepoints before and after the Ukraine-Russia war (24 February 2022)

Container volumes in the second half of 2024 were much higher than in previous years, and were up 5.3% year-on-year in November. This increase could be the result of frontloading by shippers ahead of potential port strikes and concerns about potential tariffs. Volumes are also likely to have risen in December given these factors and the traditional increase ahead of the lunar new year. While port strikes have largely been avoided so far, we believe the threat of higher tariffs could put upwards pressure on volumes for much of 2025.

The disruptions to shipping resulted in global container prices peaking in July 2024, since when they have fallen back by around 35%, although they remain 13% above the same time last year. The average price so far in 2025 has been $3,798 per 40ft container, which is $924 higher than the 10-year average of $2,874 (which is itself inflated by the spike in prices between 2020-22 due to the pandemic). 

Meanwhile, freight prices out of China were up 6.8% month-to-date as at 23 January, but they may moderate after the Chinese new year. The Baltic Dry Index, which tracks rates for ships moving dry bulk commodities such as iron ore, coal and grain via more than 20 freight routes, is down 22% year-to-date.

Global containerised shipping freight costs

Overall, global containerised freight prices are down from their recent peaks and the potential reopening of the Red Sea trade routes could lead to further falls. In an environment fraught with uncertainty, the ceasefire between Israel and Hamas offers hope for increased trade via the Red Sea and Suez Canal. 

Trade via the Suez route returning to previous levels would probably bring back excess capacity, exerting further downward pressure on freight prices. However, uncertainty about how long the conditional ceasefire will hold suggests that risks will persist in the near term.

Global trade growth down in Q4

World trade volumes were up by 0.3% month-on-month in October and 0.4% in November, according to the latest CPB Netherlands World Trade Monitor. As a result, quarterly growth is expected to ease from 0.8% quarter-on-quarter in Q3 to 0.6% in Q4. 

The components of November’s growth figure were mixed. While there were notable increases in imports to the US (+4.2%) and advanced Asia ex-Japan (+2.4%), they were down by 5% to Japan. Meanwhile exports from the US (+3.3%), Latin America (+3%) and advanced Asia ex-Japan (+1.3%) were all up, whereas exports from Asia ex-China (-2.5%) and Japan (-2.3%) moderated. 

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