Tariffs – It’s Just the Beginning?
While recent deals with the US brought some clarity ahead of the August deadline, 2026 will be the first full year when most countries outside the US face tariffs on exports to the American market. The implications for dry bulk are significant. In 2024, the top 30 dry bulk importers accounted for 88.8% of global shipments, and many of these will now face fresh economic hurdles as they attempt to address trade surpluses with the US. This casts a lingering shadow over their long-term appetite for dry bulk imports.
China and India, which together accounted for nearly half of global dry bulk demand in 2024 (40.7% and 6.6% respectively), remain exposed to high US tariffs. Meanwhile, as Washington seeks additional leverage to press for an end to the Ukraine-Russian war, President Trump had floated secondary sactions for buyers of Russian energy. And in his latest UN speech, Trump announced US is ready to impose tougher sanctions on Russia, conditional upon NATO nations agree to follow suit. Furthermore, their positions as BRICS members underscores the structural divide between US trade policy and the world’s largest emerging economies.
Adding to this backdrop, a new wave of targeted tariffs came into force on 1 October. These sector-specific tariffs are designed to reinforce the “America First” policy by shielding domestic industries, notably pharmaceuticals, with higher import barriers. In most cases, they will apply on top of existing country-based “reciprocal tariffs”, although certain partners including the European Union and Japan have negotiated exemptions to avoid overlapping charges.
Just prior to writing, US-China trade tensions reignited with President Trump threatening an additional 100% tariff (above existing rates) on Chinese imports and impose export controls on all critical US-made software starting 1 November.
Tradeflow Dynamics – Slowing Signal or Temporary Break
Last year, the top 3 dry bulk cargoes, namely iron ore, coal and grains account for approximately 64% of total dry shipments volumes. In the first eight months of 2025, they experienced declines in the region of -0.3%, -5.5% and -4.3%, respectively, led by lower Chinese imports.
China’s annual declines in dry bulk imports coincide with clear signs of domestic demand weakness and a deepening contraction in the real estate and construction sectors. China’s property sector remains under strain, with new home sales from the country’s 100 largest developers falling 17.6% year-on-year in August, according to China Real Estate Information Corp. This marked the sixth consecutive monthly decline, following a 24% slump in July. Despite fresh stimulus rolled out in Beijing and Shanghai, the downturn persists, extending a housing slump that has now dragged on for more than four years. In addition, the first half of 2025 began with elevated inventory levels, which slowed the overall appetite for imports.
USTR Policy - Second-Order Impacts
Since the April announcement, fewer Chinese-linked bulk carriers have undertaken transatlantic voyages, while some charterers remain hesitant to fix time charters amid lingering uncertainty over port fee implementation. Together with continued Red Sea deviations, this has effectively reduced the pool of suitable tonnage, particularly within the subcape segment, providing support to transatlantic rates.
Meanwhile, a Bloomberg report in late September indicated that the leasing arms of at least two major Chinese banks are in talks with regulators to convert shipping leases into mortgages, a move aimed at shielding them from potential USTR-related port fees.
On 10 October, China unexpectedly announced retaliatory measures imposing port charges on a net-ton basis for US-linked vessels. Exemptions currently apply to vessels entering Chinese shipyards for maintenance, China-built ships, and other cases formally approved by the authorities. Given Capesize vessels’ significant exposure to China-bound iron ore cargoes and their inherently larger tonnage, which magnifies the fee burden, this move effectively targets US-linked capacity in the segment with precision. While speculation continues over potential new exemptions, market activity has quietened markedly, perhaps signalling a brief calm before the storm.
Looking ahead, as geopolitical shifts increasingly move the industry away from “tonnage neutrality,” shipowners and operators with diversified financing structures and operational footprints could hold a long-term competitive advantage.
Freight – From Fatigue (1H25) to Firmness (2H25)
Capesize – Bauxite shipments to China continue to be a shower of blessings for C5TC, despite the cancellation of mining licenses by the Guinean government in late May, which both disrupted bauxite mining activity and shipments during June and July. For Capesize stems, in the first eight months of 2025, the Guinea to China flow surged nearly 40%, displacing the previously second-ranked Brazil to China flow as the latter underwhelmed by +1.6%.
Subcapes - In July, two Greek operated vessels were sunk following Houthi attacks. More recently, on 29 September, two seafarers were reported injured after another bulker was struck in the Gulf of Aden. The implication is straight forward, as long the risk in Red Sea crisis remained elevated, bulk carriers will be deterred from transiting the Suez Canal, providing a much-needed crutch to dry prospects when volume growth has been unspectacular year-to-date.
While China’s import appetite, particularly for Indonesian coal, has taken a backseat in 2025, its exports have flourished, rising by around 24% year-on-year over the first three quarters, mainly driven by steel and fertilizer. This has helped improve geared bulker fleet utilization in the Pacific region.
These developments provided upward momentum heading into 3Q25, with spot rates (from C5TC to HS7TC), rebounding from May lows. Market concerns over a prolonged downturn eased and drove a sharp reversal in sentiment as 4Q25 FFA contracts erased all their 1H25 losses to hit fresh highs by end September. Meanwhile, a shortage of suitable tonnage in the North Atlantic, driven by USTR effects and Red Sea diversions, lifted subcape transatlantic rates (P1A_82, S4A_63) last month, thereby widening spreads against their transpacific counterparts (P3A_82, S10_63).
For the first time in decades, China has avoided US soybean purchases at the start of the export season, signaling agriculture’s renewed role as a bargaining chip in trade tensions with Washington. With importers securing sufficient supply through year-end, industry reports suggest US cargoes may not be needed until 1Q26. And with the latest trade spat, it appears that any hope of China buying US soybeans heading into APEC meeting at end-October has likely evaporated.
This implies that USG stems that are usually loaded on Kamsarmaxes heading to the Far East (P2A_82), will now seek new buyers in the Americas/Mediterranean, which would imply a shift onto geared bulkers. Accordingly, we have observed the discount between P2A_82 and S4A_63 widening to -$12,494/day by early October, from a year-high of +$4,080/day at end April.
Known Unknowns
Although the dry freight demonstrated short-term upside through 3Q25, the mid-term outlook remains murky, subject to changing macro variables that could materially shift trade dynamics. Potential flashpoints include sudden escalations in US–BRICS trade relations, a U-turn in China’s grain procurement from the US, and any deeper downturn in China’s economy that offsets policy support. On the other hand, any move towards ending the Ukrainian war could boost Black Sea trade, while a cessation of Red Sea disruptions, could introduce upside risk. Taken together, these factors highlight the degree of uncertainty still embedded in dry bulk markets, especially considering that the 90-day tariff truce between US and China is set to expire in early November.