TLDR
- Trump’s trade threats add uncertainty to global ocean shipping and Canadian oil sectors
- New tariffs on China, Mexico, Canada, and EU could reduce international trade
- Container shipping costs have fallen 75% from pandemic peak
- Canadian drilling sector experiencing slowdown due to tariff uncertainty
- Employment in Canadian oil services could be at risk after partial recovery since 2020
The global shipping industry and Canadian oil drillers are feeling the effects of President Donald Trump’s recent tariff threats. The threats come at a time when the shipping industry is already dealing with challenges from climate change and geopolitical conflicts.
Trump has already put a 10% tariff on Chinese goods. He’s now talking about imposing 25% tariffs on products from Mexico and Canada.
These moves could happen as early as Tuesday, affecting items like avocados, tequila, beef, lumber, and oil.
The president has also suggested adding another 10% tariff on Chinese products. His administration plans to increase tariffs on steel and aluminum.
There’s even talk of 25% duties on goods from the European Union.
All this is creating what Peter Sand, chief analyst at transportation pricing platform Xeneta, calls “unprecedented uncertainty” in global shipping markets.
The shipping industry handles about 80% of world trade. It’s now preparing for the fallout from these protectionist policies.
This week’s S&P Global TPM container shipping conference in Long Beach, California marks the beginning of contract negotiation season. Big players like MSC, Maersk, Hapag-Lloyd, Walmart, DSV, and DHL are attending.
These companies must navigate the effects of increased protectionism. This trend could reduce international trade and weaken the negotiating position of container ship owners.
Shipping prices have fallen significantly
Shipping prices have already fallen significantly. The Drewry World Container Index shows the spot rate for a 40-foot container was $2,629 last Thursday.
That’s 75% below the pandemic peak of $10,377 in September 2021. It’s also the lowest rate since May 2024.
Analysts at Jefferies expect “a moderation throughout 2025” for freight rates. However, they caution that “the geopolitical landscape has of course become more complex which could lead to wild swings for freight rates in either direction.”
Another concerning development is the U.S. Trade Representative’s February 21 proposal for hefty fees on Chinese-built vessels entering U.S. ports. This union-supported plan aims to boost U.S. shipbuilding.
Under this proposal, vessels owned by Chinese maritime transport operators, including state-owned COSCO, would pay a port entrance fee of up to $1 million per vessel. For other operators using Chinese-built ships, the fee could reach $1.5 million.
While this change might benefit Taiwanese and South Korean liner operators, experts warn it will heavily impact container carriers. Container shipping expert Lars Jensen noted on LinkedIn that “the economic burden on U.S. exporters and importers will be huge.”
Meanwhile, Canada’s oil industry is also feeling the effects of Trump’s tariff threats. The oilfield drilling and services sector is showing signs of slowing down.
Employment in the Canadian drilling sector dropped sharply between 2014 and 2020 due to low oil prices and reduced production during the COVID-19 pandemic. Although activity has improved since then, Trump’s threat to impose a 10% tariff on Canadian crude imports could reverse this trend.
Precision Drilling, Canada’s largest drilling rig operator, reported a steeper-than-expected slowdown in its Canadian well servicing segment in the fourth quarter of 2024. CEO Kevin Neveu said during a conference call last month, “It seems that some of the tariff uncertainty slowed down customer decision-making.”
A TD Cowen report from February predicted Canadian oil producers will “err on the side of conservatism” due to tariff uncertainty. The bank reduced its 2025 Canadian rig count forecast by about 5%, from 185 to 175 active rigs.
Mark Scholz, president of the Canadian Association of Energy Contractors (CAOEC), said in an interview, “I know that certainly the anxiety level is rising. Any sort of investment reduction will have an immediate and very, very quick effect on our industry.”
He noted that while the slowdown so far has been small, involving “just a handful” of rigs, it stems from uncertainty about the timing, duration, and market impacts of tariffs.
There are additional concerns among producers about possible retaliatory tariffs by Canada. These would raise prices for inputs and drilling rig equipment imported from the U.S., according to Gurpreet Lail, president of industry group Enserva.
Sand, which is heavily used in hydraulic fracturing (fracking), is among the items the Canadian government has identified for potential counter-tariffs.
“If tariffs do take effect, it will mean job losses in a sector”
If tariffs do take effect, Lail warned it will likely mean job losses in a sector that still hasn’t recovered to its 2014 levels. Last year, total employment in Canada’s drilling sector was approximately half what it was a decade ago.
CAOEC’s November 2024 forecast had projected that 2025 would see the sector’s highest level of employment in ten years, but that outlook is now uncertain.
“We thought we had finally seen a light coming at the end of the tunnel here, and people were getting back to work,” Lail said. “But this is not good news.”
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