Trump's tariffs may spike freight costs by 30%; India set to ride the supply chain shake-up

Economic Times

25-04-2025

iStock India's shipping sector navigates a complex landscape shaped by US tariffs, presenting both challenges and opportunities. Experts suggest India can leverage its competitive advantages and favourable tariff exposure to enhance its global trade position by diversifying export strategies and negotiating beneficial market access. India's shipping and logistics sector is bracing for both turbulence and opportunity, as the reciprocal tariffs imposed by the Trump administration in the US have dramatically altered global trade flows, upending supply chains. With freight costs rising and cargo volumes shifting, experts say that Indian companies are facing unprecedented supply chain pressures along with new opportunities. Industry stakeholders unanimously agree that Trump's tariffs have affected interconnected supply chains, leading to changes in freight rates, rerouting cargo, and forcing logistics providers to re-examine traditional routes.
Higher freight, spiked costs
Sateshwar Tuteja, Director of Sales at shipping firm Jeena & Company, explains that global factors like supply and demand, fuel prices, and disruptions mainly affect freight rates, but ongoing high demand on certain routes, like India-US due to trade diversion, can give shipping companies more control over their prices and potentially increase costs for shippers, benefiting logistics‑intermediary margins if managed well.Beyond the silver lining, Tuteja, however, cautions that expanded US duties could dent cargo volumes on affected lanes, adding to already mounting customs scrutiny, longer dwell times, and 10-14% higher compliance costs. Asked about sectoral pressures as witnessed by his company, he says, 'India-US freight rates have risen by 18% year-on-year. Over 40% of Indian apparel exporters have shifted operations to Vietnam and Bangladesh, and major lines are preparing for a 25% capacity reduction on US‑bound routes. Industries reliant on imports are already facing a 12-15% cost increase, offsetting the country's reshoring gains. Trump's sector-wide tariffs on Indian exports will mainly impact telecom, gems and jewellery, auto components, and processed foods, which together are valued at over $21 billion in annual trade.'
Despite looming challenges, Tuteja emphasises that India maintains a competitive advantage, which enables it to navigate the current turbulent period. 'India's relatively moderate tariff exposure compared to other countries like China (imposed with up to a 245% tariff) positions us as a competitive alternative for global manufacturing. A 17% increase in warehousing demand and a 12% surge in foreign manufacturing interest reflect this shift. India could leverage this large tax gap vis-à-vis China by adopting firm and strategic policy measures with efficient export strategies, including market access negotiations, to create scope for trade diversification to the US.'
A mixed bag for India
According to industry experts, US tariffs could trigger a 30% freight hike.
Alan Barboza, Executive Director at Flomic Global Logistics, describes Trump's tariff offensive as 'a mixed bag for global trade—and possibly a windfall for India'. 'If the 90‑day tariff pause extends and Trump's 'up to 245%' levy on Chinese goods holds, Indian exporters could gain a critical edge, especially in low‑cost manufacturing sectors,' he says. Since the tariff announcements, Barboza says, booking queries for breakbulk and loose cargo have jumped 14-17%, particularly from Gujarat and Tamil Nadu. Air cargo demand is also up, led by pharmaceuticals and perishables bound for the US East Coast. 'With carriers set to trim US-bound capacity by 25 %, Indian logistics firms must adapt—consolidate loads, optimise multi-port routing, and invest in compliance excellence to stay globally competitive in a fractured trade landscape.'Meanwhile, rising geopolitical tensions and stuck consignments in China are also stoking fears of a global container crunch. Jitendra Srivastava, CEO of Triton Logistics & Maritime, cautions that trade tensions with China could trigger a 30% freight hike. He adds containers stranded in Chinese ports due to tariffs and uncertainty risk creating global shortages. 'Shipping lines will raise rates to recoup costs as volumes fall. For India's medium and small exporters, this could mean sharply higher logistics bills. If China's export woes persist, we could see freight‑rate swings of 10–30% across regions as early as next month,' cautions Srivastava.
Seizing the upside
According to experts, India's logistics sector faces a turning point, as rising freight rates, shifting shipping capacity, and growing compliance issues exacerbate its challenges. However, experts highlight that India's moderate tariff structure, expanded market access via CEPAs, and growth in warehousing and manufacturing create an opportunity to redefine its global trade role. Industry observers also see an opportunity if the US pause on tariffs extends beyond 90 days. Surendar Singh, Associate Professor of International Business at O.P. Jindal Global University, argues India must act swiftly: 'We have a chance to capitalise on these shifts, but we need concrete measures. The Ministry of Commerce should pinpoint high‑potential products and partner with industry to seize emerging opportunities.' Notably, India is currently in the process of negotiating a bilateral trade agreement with the US. However, Singh flags that meeting US demands related to agricultural products remains challenging for India due to its complex domestic political economy. As a solution, Singh advocates a 'selective approach' to a US trade deal that includes reducing tariffs on certain industrial goods to somewhat please US interests but avoids negotiating sensitive areas like government procurement, IPR, digital trade, and environmental standards.