Freight’s Fragile Balance: Rates Plummet as Politics and Overcapacity Collide

It’s shaping up to be another turbulent peak season for global logistics—only this time, the instability isn’t coming from bottlenecks or demand surges. Instead, it’s tariffs, geopolitics, and good old-fashioned overcapacity that are pulling ocean and air freight in unpredictable directions.

In Freightos’ latest market update, Judah Levine, Head of Research, outlines a global shipping landscape caught between high-stakes negotiations in Washington and an industry still expanding its fleet long after demand has softened. The result? Transpacific ocean rates are in freefall, air cargo prices are sliding, and a once-hyped recovery appears to be tapering off—again.

Tariff Politics: A Pause With Limits

On Monday, President Trump extended the reciprocal tariff pause for U.S. trading partners until August 1st, giving negotiations more time—but leaving China out of the reprieve. “These changes do not apply to China,” Levine notes, pointing to the existing August 11th deadline for Beijing, which continues to serve as a focal point for U.S. trade policy.

While the extension may stave off immediate disruption for some Southeast Asian exporters, most importers had already frontloaded their shipments in anticipation of earlier tariff hikes. That means any bump in volumes before August is likely to be muted. And for China-bound freight, the clock is still ticking.

West Coast Whiplash: Rates Tumble 60% in Three Weeks

Transpacific container rates to the U.S. West Coast have cratered. Spot prices dropped from $6,000/FEU in mid-June to $2,390/FEU—down 60% in just three weeks and nearly back to levels last seen in early spring. The East Coast isn’t faring much better, with rates sliding 30% since mid-June.

The sharp declines come as shippers rush to beat the August 12th China deadline, while carriers flood the market with capacity. “Transpacific capacity has been increased to a record level, which is now surpassing demand and contributing to the downward pressure on rates,” Levine explains.

In response, carriers are pulling the emergency brake: canceling July GRIs (General Rate Increases), suspending PSSs (Peak Season Surcharges), and beginning to remove capacity to curb the slide. Whether that will be enough to stabilize the market remains to be seen.

Europe Holding—Barely

Rates on Asia–Northern Europe lanes are holding up better, buoyed by modest peak-season demand and lingering congestion at European ports. FBX data shows spot prices climbing to $3,384/FEU, up 14% in the last week and 50% above late May. But even here, optimism is limited. Scheduled capacity growth is suppressing prices, and carriers are reportedly planning blank sailings—a rare move during peak season.

On the Asia–Mediterranean lane, things look more familiar: rates have dropped nearly 20% since mid-June despite strong demand, with overcapacity again the primary culprit.

Air Cargo: Soft Skies Ahead

It’s a similar story in the skies. Global air cargo rates are down 7% year-over-year, with capacity creeping ahead of demand. Much of the softness comes from reduced China–US e-commerce volumes following the suspension of the de minimis exemption for Chinese exports earlier this year. And with Congress now aiming to end de minimis for all imports by 2027, the long-term forecast could remain cloudy.

Airspace disruptions from June’s Israel–Iran conflict have also strained Middle East hubs. Rates from the region jumped 30% to North America in early June, but a recent 11% decline suggests that carriers are finally clearing backlogs.

Freight’s Tightrope: Political Risk Meets Market Physics

As always, the freight market is a balancing act. Even small shifts—an executive order, a tax exemption change, a diverted freighter—can reverberate across lanes and lift or crush rates.

But what’s especially clear this season is that the mechanics of the market—fleet size, lead times, and route preferences—are often more rigid than the politics shaping them. Carriers can cancel sailings, but they can’t erase the ships already delivered. And no amount of AI forecasting can fully account for Washington’s next policy move.

That leaves logistics professionals navigating both complexity and volatility—again—with one eye on the water and the other on Capitol Hill.