Tariffs, politics drive uncertainty for shipping

For the shipping industry, the theme of 2025 is uncertainty — whether it be in relation to tariffs, interest rates or the economy as a whole. Also, there are external pressures, such as the resumption of Israel’s attacks on Gaza in March following a short ceasefire, as well as continued strife in the Red Sea.

In short, it’s hard for shippers to plan ahead.

“The constantly changing environment around tariffs is making it pretty impossible for shippers — and therefore their supply chain partners — to really plan and prepare efficient supply chains,” says Rachel Shames, vice president of pricing and procurement at Norfolk-based freight-forwarding company CV International.

In terms of tariffs, shippers and other businesses are trying to keep track of President Donald Trump‘s flurry of tariff announcements targeting all foreign imports, as well as higher levies on imported steel and aluminum, foreign-made vehicles and automobile parts. China issued a 34% retaliatory tariff on U.S. goods, after being hit with a 34% U.S. levy in early April.

It’s unclear, though, how long all of these measures will remain in place and what their ultimate impact will be on the Port of Virginia and the rest of the Virginia economy.

“The uncertainty regarding tariffs is just that: uncertainty,” says Joe Harris, a spokesperson for the Virginia Port Authority. “Given that, we are focusing on what we can control, which is the efficient movement of cargo across our terminals.”

Shames notes that shipping companies typically absorb a lot of import costs when they go up, but right now, there are “a lot more tariffs,” and they’re much higher percentages, she adds.

“There’s not much room left in the supply chain or on the supplier side to absorb any costs now,” Shames says. “A lot of it comes down to what the U.S. consumer can bear, and companies trying to figure out how to make their business models work with product cost increases going up so much.” It’s also challenging for companies to plan volumes for the year and secure more space on vessels, trucks and warehouses, she adds.

Separately, shippers have for the past couple of years changed routes to avoid terrorist attacks in the Red Sea. The Houthis, a group backed by Iran that oppose Yemen’s government, launched attacks on dozens of merchant and naval vessels in the Red Sea beginning in October 2023, at the start of the war in Gaza.

While the conflict continues — and the United States carried out airstrikes on military targets in Yemen in March — some U.S. and U.K. ships returned to the Red Sea in late January after a partial end to attacks on commercial ships coinciding with a ceasefire in Gaza. However, The New York Times reported in March that other shippers are wary about returning to the Red Sea and the Suez Canal.

Despite the overall impact of political instability on the worldwide shipping industry, Jeremy Bridges, president and chief negotiator of the Hampton Roads Shipping Association, says the impact on the Port of Virginia has been “minimal throughout the crisis” in Gaza and the Red Sea.

What could be more disruptive to shipping companies and the Port of Virginia is a White House proposal to charge for every Chinese-built vessel that calls at a  U.S. port. This could cost up to $1.5 million per port call.

It’s expected that in order to avoid paying hefty port call fees, ocean carriers would reduce the number of calls and the number of ports they call on, says David White, executive director of the Virginia Maritime Association. That could lead to a consolidation of cargo at just the largest ports in the U.S., and some smaller ports may lose business, he says.

“Then you end up with the potential for the ports where the cargo is consolidated to have congestion issues and [issues] having sufficient equipment — things that are disruptive to supply chains,” White says.

In other words, Bridges adds, “it could be less attractive to call the Port of Virginia, and we could see reduced shipping activity as shipping lines decide to limit or reduce port calls and focus on larger ports.”

Meanwhile, a new master contract was finalized in March between the United States Maritime Alliance (USMX), which represents ship lines as well as port and terminal operators, and the International Longshoremen’s Association, which represents 45,000 port workers on the East and Gulf coasts. In a deal reached in October 2024 following a three-day strike that temporarily closed down cargo operations at every major port on the East and Gulf coasts, port employers will pay a 62% increase in wages over the next six years.

That will undoubtedly cause a financial impact at ports, including the Port of Virginia.

Bridges says there hasn’t been “any significant or noteworthy impact on Virginia” yet in terms of higher labor costs passed along to customers. But it could be too early to tell how costly this could become for the shipping industry.

“Those wage increases are going to be passed along, and so they will become part of the cost of doing business,” White says. “There’s always pressure to absorb those costs, but only so much can be absorbed — and the rest gets passed on to the ultimate consumers.”