Jensen says Trump tariffs will worsen supply chain uncertainty

The decision by the Trump administration to impose tariffs is creating uncertainty within the supply chain, increasing the price of imported goods that could worsen inflation and discouraging US consumers from buying, says Lars Jensen, CEO at Vespucci Maritime based in Copenhagen.

Flawed Understanding of Economics?

In an interview with AJOT at the Trans-Pacific Maritime (TPM) conference at Long Beach, California on March 2nd, Jensen said the problem posed by the Trump tariff policies is: “It appears to me that a lot of the decisions that are being made are being made based on flawed understanding of economics or based on information that is quite simply not correct. That means an unpredictability at a different level than we are used to. We are used to unpredictability. We don't know whether we will get a recession or not. We don't know whether the consumers will buy slightly more, or slightly less. We are used to that uncertainty, but uncertainty down to policy decisions that are unpredictable because they're not necessarily rational in the usual sense…That is new. But it also means shippers do not have much to do right now. The ones who can front load are already front loading. But apart from that, it's impossible to adjust the supply chain right now because no one has the slightest clue what the tariff landscape will look like tomorrow, let alone two days or three days from now.”

If the Trump administration’s goal is to use the tariffs to bring manufacturing back to the United States that is unlikely to work: “I would rather turn around and say, what is the ultimate aim here? It appears the ultimate political aim is to move manufacturing back to the US … And in that case, this is not going to work. Importers will just look for what's the next cheapest option to do this. So, if the whole driver of the policy is the tariff will move manufacturing back to the US, it's going to be a philosophy that has not worked for decades. It's never worked.”

The result of the Trump tariff policies will be higher prices for U.S. imports and higher prices for U.S. exports: “No matter how you slice and dice, it means increased costs. Right. And that cost will land in only one place which is in the US for either importers or exporters. But on the importing side, it'll just mean higher prices for goods for US consumers. On the exporters' side, it will mean that US exporters are just less competitive than they used to be. It's so simple as that.”

Panama Canal Policy Folly

An example showing that the Trump administration's trade policy is not factually based is the criticisms of the Panama Canal, Jensen says. He cites the allegation that China controls the Panama Canal. While a Hong Kong company, Hutchinson does operate two terminals there, the Trump administration's criticism failed to point out that a U.S. company Stevedoring Services of America (SSA)has the biggest operation in the Canal: “Let's take the Panama Canal as a starting point. I mean, the whole US approach to the Panama Canal was essentially completely fact-free. None of the rationale there was holding up to reality. Does Hutchinson have two terminals? Yes. Does that mean they have any kind of control over the canal? No…There are, as far as I recall, five terminals, the largest terminal is SSA Marine, which is a US-based company. So, the whole argument is that China is controlling the Canal because they have two terminals, while conveniently forgetting that the largest one is US-owned and controlled. I see a complete disconnect between the U.S. administration policy and the reality on the ground.”

Proposed Assessment on Chinese Ships

Jensen said he agrees with Peter Friedmann, executive director of Agriculture Transportation Coalition (AGTC) who represents U.S. farm exporters, who has criticized the Trump administration’s decision to propose imposing a penalty on Chinese ships transporting imports and exports to the United States as another misguided trade policy.

On March 2nd, Friedmann reported that: “Biden left a parting ‘gift’ for US commerce, 4 days before Trump took office. Instead of deep-sixing it, Trump has let USTR advance it. It is particularly dangerous for US agriculture exporters. AgTC is the agriculture participant in a joint effort of leading importer, manufacturers, and retailer organizations, now underway to kill this proposal.”

Friedmann referred to an AGTC briefer who stated: “The US Trade Representative's (USTR) office is proposing charging up to $1.5 million for Chinese-built vessels entering US ports as part of its investigation into China's growing domination of the global shipbuilding, maritime and logistics sectors, and its effort to promote US shipbuilding. USTR opened the investigation in April 2024 at the request of the United Steelworkers and four other unions, under Section 301 of the Trade Act of 1974, as a way to rebuild the US shipbuilding industry. The results of the probe were released days before Donald Trump’s inauguration …On February 21, USTR formally proposed significant measures designed to reduce the presence of Chinese-built and operated ships and increase the role of US shipbuilding and US-flag commercial shipping. A public hearing is scheduled for March 24.”

Jensen added: “If they understood the supply chain on the container side, they would most certainly not have written it the way it is. There are many elements, but let me just take out one of them that I find to be really, odd … One of them is if you have a vessel on order in a Chinese shipyard, then you need to pay penalties for all your other ships that arrive in the US. So, let's say I'm operating a hundred container ships that have nothing to do with China whatsoever. And I have one ship on order in China. Now all my other ships, when they call a US port, need to pay $500,000 per port.”

US Ports Could Suffer Business Losses

Jensen says the net result of this misguided policy is that US ports could lose business as importers seek alternate ports to circumvent tariffs and penalties: “Right now the only advice I could give US ports is …. don't rock the [boat], don't do anything because it's unpredictable where this is going to land … If it's only a matter of tariffs, well the goods are still going to be flowing in. There might be the origin port changes, but it's still going to come in on the same ships. If the proposal from the US Trade Representative comes in, then the ports are looking at big trouble. If I am an ocean carrier and usually, I come into the US East Coast and call 2, 3, or 4 ports, I might not if I have to pay a million dollars per port call. I am not going to call on four ports. I'm just going to call on one port and dump all my cargo there. That's going to make life for those other ports difficult. And the next thing I'm going to do, I'm going to dump a lot more cargo in Canadian and Mexican ports. I might also choose to route cargo via Freeport or Jamaica or some of the other transshipment hubs in the Caribbean.”

Ultimately, this would lead to many US ports losing calls while other ports are jammed creating massive port congestion reminiscent of the post-COVID surge. Equally, rail and road links from Canada will not be able to handle the freight shift and in turn, will create more congestion. With the current tension between the US, Mexico, and Canada over the direction of the USMCA pact there is little guarantee that these entry points will remain unaffected by the administration’s trade policies. And ultimately this flawed understanding of international trade economics could undermine the overall health of the US economy.