US reciprocal tariffs' fallout: Supply chains brace for disruption

US President Donald Trump’s April 2 reciprocal tariffs have triggered a frenzy in global supply chains, with exporters across the world uncertain about the future. This has also spurred ambivalence among transporters and shippers, who have to plan their logistics months in advance to service global trade.

  Since Trump’s announcement, spot market freight rates from India to the US East Coast have jumped by 10 per cent to nearly $4,000 per 40 feet container (as of April 4), according to Oslo-based analytics firm Xeneta.

  Experts in India and abroad feel while the situation is currently manageable, the next 2-3 months will be extremely crucial for global logistics, with risks of a sudden rush due to changing geopolitics, a lack of clarity over shipping routes due to conflicts, or a large scale restructuring of supply chains in the offing. Average spot rates from the Far East into the US East Coast increased 8 per cent and the US West Coast 15 per cent on April 1. They are, however, down 43 per cent and 49 per cent since January 1 respectively.

  For context, global sea freight rates had been going down over the past few months due to a previous build up which had caused rates to spike abnormally in 2024. Many US shippers are right now at the point of agreeing to new long-term ocean container freight contracts coming into effect on May 1, so this puts them in an extremely difficult position.

  Xeneta does not foresee freight rates going up in the near-term, particularly due to the moderation trajectory that has been prevalent in 2025.  However, the Drewry World Container Index — a global benchmark index which measures weekly ocean freight rates for eight major east-west routes — rose on April 3 for the first time since January, which the firm said was due to cancelled sailings.

  “Business will go on, come what may. American buyers have started seeking discounts from Indian manufacturers. The situation will have to be dealt with deftly by exporters. There will be a knee-jerk reaction and upheaval, but the country requires goods. Manufacturing capacity cannot be created overnight. The supply chain will go on. There will be disruptions for a couple of months, but in the long term, negotiations and diplomatic channels will take over,” said Dushyant Mulani, chairman of Federation of Freight Forwarders’ Associations in India.

  Moreover, the US has also called for a major levy on Chinese vessels calling at US ports — up to $1.5 million per port call — a move to counter Chinese dominance in the maritime economy.  This could be a risk as China dominates global shipbuilding with a nearly 60 per cent share, and all major economies are dependent on Chinese shipbuilding for their own trade needs.

Supply chains could also get disrupted by changes in shipping routes as countries absorb the tariffs and realign their supply chains, according to Peter Sand, chief analyst at Xeneta. “(The) 26 per cent (tariff on India) is a tall wall to climb. A way around it could be extensive use of logistics centres in other parts of the world,” Sand told Business Standard over email. For example, Brazil has a 10 per cent tariff rate, and there could be realignment of goods by making them go through Brazil, or other such economies. 

 

Sector observers feel that any large scale restructuring like this may be unlikely in an Indian context because even rerouting goods through countries which have lower tariffs would be counterproductive as the additional freight costs will neutralise or outweigh the tariff savings. “Once the tariff situation gets clearer and shippers begin to diversify supply chains across regions, it is possible we could see disruption in ocean supply chains and upward pressure on rates, but this may be a little further down the line,” said Sand.

  There is an opportunity for Indian transporters to benefit from the disruption for Chinese goods. According to estimates, US tariffs could dent India’s logistics revenues by up to $10 billion annually. With US importers seeking alternatives to China’s 54 per cent tariff-laden exports, India stands to gain a $5 billion window of opportunity. 

  “We expect a 20 per cent surge in cargo volumes by FY26, driven by $50 billion in IT and infrastructure upgrades across supply chains,” said Lancy Barboza, MD at Flomic Global Logistics.