How the Ongoing Trade War Affects the Maritime Industry Part 1 — What Are Tariffs and How Are They Impacting the Current Economy
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The global economy is trembling due to the ongoing trade war. On April 5th, the current administration announced a 145% tariff on Chinese goods, posing higher rates along with a 10% tax on goods from various other countries (Updates).
Tariffs are a form of tax imposed by a country, typically on imported goods, to protect the domestic goods and the supply chain. Tariffs are typically paid by importers when goods pass a national border.
The maritime sector is in the front-end of the trade war storm. As the whole sector navigates through the chaos and uncertainties, it is crucial for maritime professionals and shipping companies to understand tariffs, the possible short- and long-term effect, and how to respond to the resulting consequences.
Global trade funnels millions of shipping containers stuffed with couches, clothing and car parts from foreign factories to the U.S. (Source)
The economy contracted, and consumer sentiment is at all-time low
The ongoing trade war has already weakened the U.S. economy. In Q1 2025, the US economy decreased by 0.3 per cent, a first decline in three years. This is largely due to front-loading by businesses who are trying to get ahead, and avoid the higher costs associated with the escalating tariffs. At the same time, consumer sentiment has plunged, consumer confidence in where the economy is headed has hit a 12-year low.
Would Tariffs lead to inflation?
In theory, the Federal Reserve indeed sees tariff-driven inflation as a one time price level increase, not necessarily contributing to core inflation (reflecting long-term inflation trends in the economy). In other words, a one-time price increase is considered transitory inflation. However, by definition, all inflation will be transitory eventually. It’s simply a matter of time. In reality, it could still mean months to years of additional price increases for the consumers.
Many are implying that tariffs will only cause a one time price increase and prices will not continue to rise. Some cites the 2018 tariffs impact on the trend of the price of washing machines. However, It is tone-deaf and misleading to oversimplify the impact of the 2018 trade war as merely a “one time price increase”.
Looking at the historical data, over the course of 2018, import tariffs were imposed on approximately $283 billion of U.S. imports, with rates ranging between 10% and 50%. In response, U.S. trading partners – especially China – retaliated with an average 16% tariff on approximately $121 billion of U.S. exports. This pushed the U.S. into the first episode of large-scale reciprocal tariff protection since the Great Depression of the 1930s.
By the end of 2018, tariffs were estimated to cost U.S. consumers and importers an additional $3 billion per month in added tax burdens and another $1.4 billion per month in deadweight welfare (efficiency) losses. Unlike the price of washing machines, the financial impact of the 2018 trade war on consumers, particularly low-income consumers, has had a long-lasting effect, and its aftermath could be detrimental.
2025 Trade War Can Go Further Than Before
Historically, tariffs have not significantly contributed to core inflation. However, Economists argue that this time around, things might be different. The price level shift caused by tariffs is very likely to constitute inflation, due to three key factors:
This time, the tariffs have a broader impact (more than $1 trillion). According to the Tax Foundation, the total impact will increase to $1.4 trillion if temporary exemptions for some Canadian and Mexican products lapse in early April.
Unlike in the previous 2018 trade war, the U.S. is already facing elevated inflation. As a result, it is going to be much more difficult to pass the increase in goods price through consumers.
The tariff increase is also accompanied by other significant policy shifts, including changes in trade and fiscal policy. The net effect of these measures will have significant implications for the U.S. economy.
