West Coast Gridlock to Global Retrenchment: Supply Chains Brace for a Tariff-Driven Reset

Wakool Transport
5 hours ago
11 min read

Executive Summary

West Coast Tariffs Spark Crisis Warnings: A group of West Coast port leaders and lawmakers is raising red flags, warning that the latest U.S. tariffs are causing supply chain disruptions comparable to the COVID-19 crisis. Small businesses are already feeling the pressure. The Ports of Los Angeles and Long Beach project that, if the tariffs continue, import volumes could drop by 30–35% within weeks—posing serious risks of product shortages and sweeping job losses in logistics, retail, agriculture, and manufacturing. In response, major U.S. retailers and importers have accelerated shipments to build up inventory and temporarily absorb the added costs. Meanwhile, online retailers Shein and Temu have implemented ~30% price increases to offset the new tariffs.
China Export Slump Strains Ocean Freight Market: The ongoing U.S.–China trade war has triggered a steep decline in Chinese exports, prompting ocean carriers to cancel over half of Trans-Pacific sailings in an effort to align with falling demand. These capacity cuts—similar to those seen during the early COVID-19 period—have temporarily stabilized Asia–U.S. container spot rates at around $2,800 to $3,800 per FEU, following a 50%+ drop since January. However, analysts warn this price plateau may be short-lived. If tariffs and high costs continue to suppress U.S. consumer demand into Q2, freight rates could face renewed downward pressure, despite carrier efforts to manage supply.
North American Freight and Labor: Diverging Trends Amid Trade Shifts
April brought a mixed picture for North America’s freight and labor landscape. U.S. trucking employment saw minimal growth, adding just +1,400 jobs—less than 0.1%, leaving total employment still ~3.9% below 2022 levels. Meanwhile, the warehousing sector added nearly +10,000 jobs, driven by a rush to stockpile goods ahead of new tariffs, inflating inventory levels across the country.

Cross-border trade with Canada and Mexico remains strong, with 2024 totals reaching $762B and $840B, respectively, as nearshoring continues to gain momentum. Yet, looming U.S. trade measures—including a proposed 25% tariff on certain imports—are creating fresh uncertainty, threatening the cost viability of select international sourcing strategies.
Logistics Industry Adjusts for Efficiency Amid Market Headwinds
As trade volatility and softening demand challenge the sector, logistics providers are shifting toward leaner, more adaptive operations. DHL posted a Q1 profit increase despite declining volumes by cutting air cargo capacity and concentrating on its most cost-efficient carrier partnerships. Its ongoing “Fit for Growth” program aims to slash over $1.1 billion in costs by 2024, including terminating outsourced air services such as its venture with Polar Air Cargo and select airline leases to eliminate excess capacity.

This strategy reflects a broader industry trend toward operational streamlining and margin protection. Companies with flexible, resilient supply chains—via rerouting to alternative gateways, nearshoring manufacturing, or leveraging strong financial positions to absorb short-term disruptions—are better equipped to navigate ongoing market uncertainty and adapt to future shifts in global trade dynamics.

Tariffs Ignite Backlash on the West Coast

West Coast ports have become the flashpoint of the growing trade conflict. In an uncommon show of unity, officials from California, Oregon, and Washington criticized the Trump administration’s latest tariff actions as “reckless,” warning of serious economic fallout. With Los Angeles and Long Beach accounting for nearly 40% of U.S. imports, any disruption there is a warning sign for the national economy. That warning is now flashing red: the Port of Los Angelesexpects inbound cargo to fall by ~35% in the next two weeks if the tariff dispute persists. Long Beach is bracing for a >30% decline in May, with 34 vessel sailings already canceled through early summer—a sharp reversal from Q1’s surge of early inventory shipments.

Port and labor leaders are increasingly concerned about broader ripple effects. Reduced import activity means fewer hours for dockworkers, truckers, and warehouse staff—declines that may not be immediate but are steadily accumulating. Some liken the situation to a slow-motion repeat of early 2020: bonded warehouses are reaching capacity as goods sit idle, with importers hesitant to pay elevated duties. Exporters are also impacted. Farmers in California’s Central Valley and the Pacific Northwest face the risk of losing overseas markets if disruptions persist. According to Mario Cordero, Port of Long Beach Executive Director, consumers should expect reduced variety and higher pricesin the near term, while millions of trade-related jobs may be threatened longer-term.

To mitigate the impact, U.S. retailers and importers front-loaded inventory in March and April, temporarily shielding consumers from price hikes. Some big-box chains have stated they will absorb initial tariff costs to avoid passing them on too quickly. In e-commerce, Shein and Temu—which had leveraged the de minimis $800 exemption—have started raising prices following an executive order that ended that loophole. Both firms announced price adjustments by April 25, and shoppers are already seeing higher tags on previously ultra-low-cost goods.

Meanwhile, Amazon is taking a different approach. Its leadership has reaffirmed a focus on price competitiveness, even if that means absorbing margin pressure or renegotiating vendor terms. In fact, early Q1 2025 data shows U.S.-based third-party Amazon sellers lowered average prices across several categories, likely to maintain visibility and sales rank. In contrast, some China-based sellers—now facing tariffs up to 145%—have begun raising prices where they hold brand equity. This divergence suggests domestic sellers are absorbing more of the cost, while international sellers are testing consumer tolerance. The end result is still unfolding, but across the board, retailers are using dynamic pricing, early stockpiling, and flexible sourcing to soften the tariff shock—for now.

Tariff War Impact – Key Indicators (May 2025)

Indicator/Stakeholder	Impact/Response	Source
LA/LB Port Imports (forecast)	↓ 30–35% in coming weeks (due to tariffs)	LA/LB port officials
Canceled Sailings (Trans-Pac)	34+ void sailings Apr–May (56% blanking rate)	Drewry analysis
Importer Inventories (USA)	Surge – warehousing jobs +9,800 in April	BLS jobs report
Shein/Temu Prices (USA)	↑ ~30% (tariff costs now in price)	Company statements
Amazon U.S. Seller Prices	Mixed: Many U.S. sellers lowered prices Q1; China sellers holding or ↑ prices	Jungle Scout Index
Consumer Impact	Higher retail prices likely; fewer choices	Port of Long Beach outlook
Job Impact (Trade-Related)	Millions of jobs at risk if tariffs persist	West Coast officials

China’s Export Slump Strains Ocean Freight

The trans-Pacific container trade is facing significant pressure from slowing demand and escalating U.S.–China tariff tensions. After a strong start to 2025—driven by front-loaded shipments ahead of expected tariff hikes—freight volumes from Asia to North America have declined sharply since April. Chinese export data confirmed a substantial drop, now clearly reflected in U.S. port activity. In response, ocean carriers canceled 56% of scheduled Far East–U.S. sailings on the spot market by late April—an exceptionally high blank sailing rate, rarely seen outside of crisis periods. These capacity cuts aimed to stabilize rates and avoid a pricing collapse.

While that move has prevented a full-scale pricing breakdown, spot rates remain soft. As of mid-April, container rates averaged $2,790/FEU to the West Coast and $3,830/FEU to the East Coast, flatlining after a 50% drop from January highs. (Rates had surpassed $5,000/FEU a year earlier.) A brief spike occurred in early April—+16% to the West Coast and +10% to the East Coast—as shippers rushed to beat the April 9 tariff deadline, but this surge quickly faded once the tariffs took effect and Chinese retaliatory measures were introduced.

Elsewhere, Asia–Europe trade is also losing steam. Spot rates to North Europe dropped ~8% in early May to $2,130/FEU, the lowest level since 2023. Some Chinese exporters have attempted to shift volumes to Europe to avoid U.S. duties, but European infrastructure and demand can’t absorb that overflow, according to Xeneta’s chief analyst Peter Sand. The result: downward pressure across multiple trade lanes, eroding the tight capacity gains seen during the pandemic.

Importantly, today’s rate plateau may not last. Although blank sailings and idle vessels have provided temporary support, forward indicators signal renewed volatility. Should U.S. consumer demand weaken further under the strain of inflation and tariffs, outbound container volumes from Asia could slide again. “The current flat spot market is probably a brief interlude,” Sand cautioned, hinting at a likely continuation of the downward rate trajectory. Unless there’s a shift in trade policy or a demand resurgence, carriers may have little leverage to maintain pricing, despite disciplined capacity management.

From a U.S. importer’s standpoint, lower freight rates offer some relief, partially offsetting added tariff costs. However, the unpredictability of today’s trade environment is pushing logistics teams to reoptimize routes and sourcing strategies. Some importers are shifting bookings away from China-based carriers or rerouting through alternative ports, especially as the U.S. considers new port fees on China-built ships. With China implementing export controls on key materials and the U.S. responding with broader tariffs, global logistics has entered a phase defined by rapid recalibration and extreme agility.

In 2025, flexibility is paramount. Shippers must be ready to reroute, reprice, and replan—sometimes within days. As supply chains stretch and bend under policy and price pressures, resilience is no longer optional—it’s a baseline requirement for survival.

North American Trade: Resilience and Uncertainty

Cross-border trade within North America remains a relative stronghold amid global disruptions. Anchored by the USMCA and proximity-driven supply chains, U.S. trade with Canada and Mexico hit record levels in 2024—$762 billion and $840 billion, respectively. These figures reflect the durability of a regionally integrated economy. Businesses have invested heavily in this system, citing faster lead times and increased agility. As Polaris Transportation’s David Cox put it, the three nations are “entangled, in a good way.”

Nearshoring continues to gain momentum, with companies shifting production from Asia to Mexico and Canada to reduce transit times and mitigate geopolitical risks. Mexico, for instance, exports ~90% of its 180,000 annual tractor output to the U.S. and Canada. U.S. importers are also leaning more on regional sourcing, leading to elevated demand for freight from industrial hubs like Nuevo Laredo—even as Asia–U.S. volumes cool.

Yet, new U.S. tariff measures are casting a shadow. While close partners aren’t exempt, products with significant Chinese content or certain categories may still be taxed. A proposed flat 25% tariff on all imports threatens the viability of many low-margin cross-border shipments. Jason Miller of Michigan State University warns this could shrink the range of goods moving across borders, especially in automotive and electronics.

To adapt, North American shippers are doubling down on trade-compliant strategies. Many are prioritizing USMCA-qualified goods, utilizing bonded warehouses, or modifying sourcing to increase North American content. Some even import bulk materials into Mexico or Canada for final assembly before re-exporting to the U.S., turning regional integration into a tariff mitigation strategy. Specialized cross-border logistics providers are playing a key role, helping businesses navigate the operational and regulatory complexity.

On the domestic front, the U.S. trucking market remains subdued. While March saw a 7,000-job boost, April was flat—trucking employment is still down 3.2% YoY. Freight volumes remain weak, with the U.S. Bank Freight Payment Index logging its 11th consecutive quarterly drop. In contrast, warehousing is booming: April employment hit a record 1.853 million, fueled by importers stockpiling goods.

This raises a crucial question: Will warehoused inventory eventually spark a freight rebound? Some analysts suggest a delayed shipping wave may follow if consumer demand holds, creating a reverse “bullwhip” effect. But if the economy falters or tariffs suppress spending, these inventories could stagnate, weakening transport demand further.

For now, freight rates are showing tentative signs of bottoming out. Contract rates are down slightly (1–3% YoY), while spot rates have nudged up, driven by market exits and capacity cuts. The FreightWaves Supply/Demand Index hints at stabilization—but any true recovery hinges on tariff clarity and broader economic resilience in the months ahead.

Air Cargo & Logistics: Efficiency Over Expansion

As ocean carriers blank sailings, the air cargo sector is also adjusting to a new normal of lower freight volumes. DHL Express exemplifies this shift. In Q1 2025, despite a 7% decline in parcel volumes, the company grew its operating profit by 4.8% to $754 million through efficiency gains and yield management. Rather than chasing volume, DHL prioritized higher-value shipments, improved aircraft utilization, and benefited from lower fuel costs—resulting in a leaner, more profitable operation.

A key driver is DHL’s “Fit for Growth” program, launched in March, aiming to cut over $1.1 billion in annual costs. The company is streamlining its air network by eliminating excess capacity. It exited long-time partnerships, including its joint venture with Polar Air Cargo, and stopped leasing from several charter carriers such as SmartLynx Airlines and AirExplore. This consolidation allows DHL to focus on maximizing its owned fleet and key strategic partners.

While international shipment volumes fell 7.1% in Q1, DHL still managed a 7% reduction in aviation costs and modest savings at hub operations. The delivery of new Boeing 777 freighters this year supports a fleet modernization effort, improving fuel efficiency and reducing maintenance. Its Asian arm, Air Hong Kong, is also completing a renewal plan.

This strategic realignment mirrors similar moves across the sector. FedEx, UPS, and others have launched programs like “Drive” and “Efficiency Reimagined” to control costs. The logistics industry has clearly pivoted from pandemic-era capacity expansion to 2025’s focus on margin protection and asset optimization.

While this approach creates short-term impacts—job reductions and fewer carrier options—it also ensures long-term stability. For shippers, the result is fewer excess options and the return of tighter capacity in some lanes. DHL notes limited exposure to the U.S.–China tariff conflict, enabling it to concentrate on resilient corridors like intra-Europe and intra-Asia while scaling back where volumes have dropped.

Going forward, the balance will be critical: staying nimble for unexpected surges while avoiding overcapacity. Whether in ocean, road, or air, 2025’s logistics leaders will be those who build flexibility into operations and adapt faster than the market.

Outlook: Navigating a Shifting Landscape

zAs we advance through 2025, the global logistics industry stands at a pivotal crossroads. Intensifying U.S.-first trade policies and tariff regimes—particularly targeting China, Mexico, and Canada—are disrupting long-established trade routes. Shippers and retailers alike are recalibrating sourcing, inventory, and freight strategies to manage heightened costs and complexity.

Trade Policy Uncertainty Remains a Key Risk. With tariffs still in force, industry stakeholders are closely monitoring Washington and Beijing for signs of resolution or escalation. Any policy shift will have immediate implications for shipping volumes, rate stability, and peak season planning. U.S. retailers face mounting pressure to determine whether to absorb these additional costs or pass them along to consumers, a test of demand elasticity.

China’s Export Sector Faces Headwinds. With U.S. orders slowing, Chinese manufacturers may require further policy support. In the interim, carriers are responding to softened eastbound volumes with blank sailings and agile capacity adjustments. If seasonal demand—particularly around back-to-school—underperforms, further spot rate declines are likely.

North American Trade Offers Relative Stability. Despite political friction, cross-border supply chains within the USMCA region remain resilient. Mexico and Canada continue to attract nearshoring investment from U.S. firms seeking geographic and regulatory stability. However, rising cross-border volumes may strain infrastructure and create imbalances in regional trucking capacity.

Operational Flexibility is Now a Competitive Advantage. Logistics providers are doubling down on digital tools and AI-driven solutions to optimize routing, manage inventories, and improve last-mile efficiency. Warehousing job growth signals a strategic pivot toward inventory pre-positioning, and the focus is now shifting toward fulfillment readiness.

The Bottom Line: The remainder of 2025 is unlikely to bring explosive growth, but the industry is learning to thrive in a high-cost, low-visibility environment. Companies that stay agile, diversify supply chains, and invest in adaptive technologies will be best positioned to navigate this evolving landscape. The global supply chain is not collapsing—it’s rebalancing. And with every new disruption, logistics players continue to find innovative ways to keep cargo moving.

Wakool Transport: Practical Solutions Amid Tariff Disruption

As U.S.–China trade tensions disrupt freight flows and trigger cost surges, Wakool Transport helps businesses adapt with flexible, compliant logistics strategies:

Tariff-Resilient Routing & Warehousing
• Shift inventory to U.S. warehouses to reduce real-time import exposure.
• Leverage our smart replenishment system to avoid peak season clearance delays.
Multi-Modal Transport Diversification
• Our Self-owned fleet team drayage for cost-effective, resilient delivery.
• Reroute via alternative ports or cross-border hubs to sidestep policy bottlenecks.
Customs Compliance & Cost Control
• Ensure HTSUS code accuracy to avoid penalties and delays.
• Navigate de minimis changes and FTZ rules with expert clearance support.
Digital Supply Chain Visibility
• Real-time tracking + smart inventory solutions = faster decisions, less disruption.