As trade war ramps up, the tanker market may well benefit

Earlier this week, the US Administration announced 25% tariffs on Mexican and Canadian goods (10% on Canadian energy) and 10% on Chinese imports, set to take effect at the beginning of March (delayed by one month from the first announcement). While these tariffs could weaken the global economy if a trade war emerges, the tanker market stands to benefit from shifting crude trade flows.

China, in response, has already announced levies on American goods, signalling early signs of a potential trade war. These will commence on February 10th, leaving plenty of time for talks between the two countries (which Trump has already been flagging).

Tonne-mile demand to increase as new import routes develop
According to Fearnleys Research, trade is likely to become more complex, leading to longer sailing distances. Mexico can easily redirect exports to Asia and Europe, whereas Canada faces greater challenges as pipeline exports to the US account for a significant share of its production. Canada may respond by maximizing pipeline exports, lowering prices, or increasing inventories, all of which could boost tanker demand.

To compensate for reduced imports from Canada and Mexico, the US may source crude from South America or the Middle East, further increasing tonne-mile demand and supporting tanker rates. Combined with the OFAC sanctions on Russian oil, this could strengthen an already bullish tanker market.

Meanwhile, the container segment is expected to be hit hardest due to weaker demand for Chinese imports and broader economic uncertainty.