2027 to be the Year of ‘Growing Consequences’ Related to Tariffs

For the fifth straight month and for the seventh in the last nine months, inbound volume had a meaningful decline.

Inbound In-depth

January had the 10 largest U.S. ports showing a 5.3% year over year decrease. This comes after December’s 6.0% decrease and November’s 5.7% decrease. The three-month trailing figures came in at a 5.7% decrease in January, below December’s 6.6% decrease as well as November’s 6.8% decrease. The decline was particularly strong at West Coast ports, which were down 12.0%. The total was buoyed by a 2.6% increase at East/Gulf Coast ports, but with the voyage time differences, next month those ports should see the effect of a weak Chinese New Year market that drove the West Coast figures.  

Despite the Supreme Court decision, the downward trends in inbound volume will continue. Another striking trend is the widening gap between volume trends in North America and the rest of the world. This can be seen in the graph below based on trailing three-month year over year changes during 2025 through December, the last month of available worldwide data. Based on that metric, North America went from a 5.5 percentage point overperformer at the beginning of 2025 to an 11.5 percentage point underperformer in December, an extraordinary swing of 17.0 percentage points. The swing was even more pronounced at 24.3 percentage points when measuring based on the individual months. Volume growth in all other regions remains robust and world trade is moving on. For instance, while North America inbound volume in December was down 5.5%, global volume grew 4.7%. The differences compared to U.S. volume growth are even wider. Next year will be the year of growing consequences related to tariffs put in place in 2025 as well as expected actions to at least duplicate the IEEPA impact. The one-two punches of the drag on economic growth from less inbound volume to the U.S. and the inflationary impact of the continuing loads and the consumption tax they represent will be meaningful.     

Returning to U.S. volume trends, inbound loads this January compared to January 2019 were 11.9% higher which is equivalent to a seven-year CAGR of 1.6%. That growth rate measure was below both the 2.6% in December and the 3.2% in November. The underlying trend clearly points downward.

The medium-term comparisons to the same month in 2019 are important metrics that have the effect of jumping over and therefore netting out the roller coaster impact of the pandemic and getting at the underlying growth rate. The latest actual growth rate of 1.6% compared to 2019 is well below the 3.8% 10-year CAGR that total inbound loads grew in the decade from 2010 to 2020.

Outbound In-depth

Total outbound volume from the U.S. in January increased 2.0%. In comparison, December was down 2.8% and November was down 4.3%. October’s increase of 16.2% was an anomaly resulting from last year’s short-lived ILA strike that had shippers diverting outbound shipments from East/Gulf Coast ports as the contract deadline approached without resolution. That came after a 0.5% increase in September and a 0.5% decrease in August. That back and forth followed a 2.0% increase in July and a 1.7% decrease in June. While outbound volume has shown that type of erratic pattern on a month-to-month basis for over a year, the broader trend has been flat, evident by the 0.1% increase in trailing 12-month volume.

Global Perspective

When U.S. container volume data is compared to global data and data in other major areas, there is a noticeable and widening gap as the downtrends in U.S. lanes are being significantly mitigated by increased volume in other areas. The actual underscores that significant shifts have already occurred related to trading volume as the rest of the world moves on and ahead without the U.S.       

Worldwide container volume grew 4.7% year over year in December, some 10.7 percentage points or 1070 basis points better than the 6.0% inbound volume decline to the U.S. that same month. Another tangible indication of strength in other global markets is the growth of imports in other major regions. Container imports to Africa (up 20.3%), South/Central America (up 11.2%) and Mideast/India (up 8.3%) were all robust. December outbound volume from the U.S., the direction that is most directly associated with jobs, was down 2.8% and was lower than and underperformed all major regions. For example, in that same month Mideast/India outbound volume was up 10.0% and South/Central America outbound volume was up 6.1%. As the data shows, world container supply chains have already begun to adapt and reconfigure trading patterns faster than I would have thought while U.S. volume languishes and declines. The volume gains those regions have represent more growth and less inflation than the U.S. should have had.       

Economic impact

The full year 2024 saw a 15.2% increase in total inbound loads to the U.S. compared to 2023. With December data now in, that brings total inbound volume for 2025 coming in at 0.3% below 2024. That is a 15.5 percentage point growth swing between those years. We will see a noteworthy overall decline in 2026 resulting in the worst trendline related to actual container volume that has ever been experienced in the U.S. For a tangible metric that has consistently for decades grown above U.S. GDP, most often at two, three or even more multiples of GDP, the unusual nature of an actual decline in inbound container volume into the U.S. cannot be overemphasized.

The downward turn in 2025 was due solely to tariffs and unfortunately there is nothing at present that suggests it will be short-lived. The Supreme Court ruling that the IEEPA tariffs were unconstitutional has already been responded to with a temporary additional tariff and indications that it will be fully replaced with other tariffs. All things point to significant tariffs remaining in place through the balance of the current administration.

These container volume reports not only telegraph future economic activity driven by the law of large numbers, but they will be a particularly useful tool into 2026 as they provide data to assess the impact of tariffs on both economic activity and growth as well as inflation.

To put into better context the commercial activity that is impacted from container volume declines, the total value of goods in containers moving in and out of all U.S. ports including the two dozen container ports outside of the Top 10 ports in January was $177.3 billion. That is the equivalent of $2.128 trillion in annualized economic activity.

Whether it involves increases or decreases, material changes in what is a meaningful portion of the U.S. economy will have pronounced positive and negative effects across the economy. For example, a 15% reduction in overall container volume from this point on based on tariffs is possible. Such a decrease would translate directly into a $319 billion reduction in annual commerce for the U.S. What will fill the void is a different issue, but in any case, it will occur later and involve challenges in how to precisely measure it as well as what to attribute it to. But the initial impact both in economic activity and inflation now looks to be significant. It will flow through and ripple throughout the economy, adversely affecting everything that commerce touches and invariably resulting in job losses.

Pricing

December’s CTS global pricing index is now out and was at 77. That was up 1.3% from November’s revised level of 76 and up 2.7% from the original level of 75. Compared to its overall 2024 and 2025 averages, that latest monthly index is 20.0% and 2.4% lower, respectively. The overall 2025 average CTS global pricing index is down 18.0% compared to its overall 2024 average.

The December index brought the actual 4Q25 average to 75.3, or 6.2% below the actual 3Q25 average of 80.3 and 6.7% below the actual 2Q25 average of 80.7. From its recent monthly peak level of 118 in July 2024, except for a temporary spike in June, the global pricing index has been declining since then. That July 2024 peak itself resulted from an uptrend since the November 2023 level of 69 and is largely a result of the Red Sea situation.

Note that the CTS global pricing index uses actual 2008 rates as the base set to 100 and they are not inflation adjusted. That level of 69 was the lowest monthly reading over the last five years and approximates where the index was consistently prior to the pandemic. That overall non-inflation adjusted pricing today is less than it was decades ago is another indication that speaks volumes about the cost efficiency of container shipping. The CTS global pricing index level and trend is the most credible measure of sector pricing and the most relevant pricing index to use in any projection of industry results.

The latest readings on the SCFI index, the most closely followed spot index measure, augment overall pricing insight into the container sector. Pricing in most container lanes involving the U.S. shows trends similar to those in broader measures as the lanes are invariably linked in what is really a single pricing matrix. While there are credibility issues with the various spot pricing indices based on how they are determined and who provides input, they do provide information on the direction and trend of pricing.

The SCFI began trending down last December and, except for a summer bump due to frontloading, has generally been in a downtrend except for some recent upward movement the past few months. The latest SCFI reading of 1333 on February 27 is 5.8% below the 4Q25 level of 1415 and 10.0% below the 3Q25 level of 1481.

Shifting port traffic

The 66 months after the beginning of the pandemic effect on container volume began in August 2020 can be thought of as a new era in container shipping.

We are now moving into another volatile period that will be overpowered by tariffs pushing volume down. July and August were temporary respites, and declines will return in a more pronounced way based upon the tariffs now in place. January’s overall inbound volume was 1.5% above that 66-month average. East/Gulf Coast ports were 1.1% above their 66-month average while West Coast ports were 1.8% above their 66-month average.   

The West Coast ports have outperformed the East/Gulf Coast ports in 20 of the last 30 months. Those 10 months that were the exceptions, including the six most recent months, were a return to the period before the preceding 24 months that saw a streak of 26 straight months where the East/Gulf Coast ports out-performed West Coast ports.

January showed a 14.6 percentage point coastal gap favoring East/Gulf Coast ports based on an 12.0% decrease at West Coast ports compared to the 2.6% increase at East/Gulf Coast ports. That is the widest advantage of East/Gulf Coast ports since 16.5% in July 2023. The January gap was well above the 6.6 percentage point December advantage and the 9.9 percentage point November advantage of East/Gulf Coast ports. The last six months have been a pronounced flip from the 7.2 and 1.8 percentage point coastal gaps favoring West Coast ports in July and June.       

The chart below on actual overall inbound volume depicts a muted story. The spike in total inbound volume in July and August from frontloading is also readily evident here. The chart shows this with total inbound TEU volume by coastal range, with West Coast further split into Los Angeles and other ports.

The trailing three-month figures give a clearer picture of trends and the recent westward shift that has now abated. In January they showed the East/Gulf Coast ports with an advantage of 10.4 percentage points compared to 8.9 percentage points in December and 8.4 percentage points in November. That extends on a trend that is a sharp downturn with January very different than the 25.8 percentage point record West Coast advantage for the three months ending November 2023. Only nine of the last 30 periods had East/Gulf Coast ports outperforming on this metric. The West Coast advantages go back to September 2023 and East/Gulf Coast ports had the advantage during the prior 29 months.

Even with some rebound in volume to the West Coast, the underlying shift eastward and away from the West Coast since 2016 and the resulting trendline is evident. My analysis is that there will continue to be an eastward shift in the range of 35 basis points per year. This will be driven primarily by the superior cost economics of moving containers by water compared to land as well as relative U.S. population distribution and growth.

Ports with the strongest January performance were Savannah (up 12.2%), Norfolk (up 5.3%) and Oakland (up 5.1%). The weakest performance came in at Seattle/Tacoma (down 16.0%), Long Beach (down 13.1%) and Los Angeles (down 12.9%).

Export boxes over-performed import boxes from mid-2022 to late 2023, but since then have shown erratic up and down moves that circle in to general flatness over the last year. Total outbound volume was up 2.0% in January. The latest month was an improvement compared to the 2.8% decline in December and the 4.3% decline in November. Twenty-three of the last 42 months have shown increases following 14 straight months of decreases. The trailing 12-month figure in January for total outbound volume showed an increase of 0.1% compared to a decrease of 0.4% in December and a decrease of 0.3% in November. Except for the October spike, that metric has been negative the last eight months in contrast to positive readings in the preceding 27 months.   

With January outbound volume up 2.0% and inbound volume down 5.3%, there was a 730-basis point directional gap in favor of outbound compared to gaps of 320 basis points in December and 140 basis points in November, joining two of the prior four months of gaps in favor on outbound volume growth. These nine months with outbound generally performing better were a reversal of earlier periods and they followed 19 straight months where the gap consistently favored inbound volume growth. January was in sharp contrast with the average 600 basis point gap by which inbound growth has exceeded outbound growth over the last 66 months.

With exports, only 25 of the last 71 months have shown year over year gains, with a 1.4% average monthly decline over the period. While total inbound loads this January were 11.9% above what they were seven years ago during January 2019 for a 1.6% CAGR, total outbound loads were 9.9% less that resulted in a negative 1.5% CAGR. That 310-basis point difference in directional growth rates over a seven-year period is a noteworthy divergence in the overall performance of exports compared to imports over the same period. The January metric was below the 340-basis point difference in December and the 420-basis point difference in November.              

Ports with the strongest export volume performance in January were Savannah (up 13.6%), Charleston (up 6.0%) and New York (up 5.9%). Ports with the weakest export performance were Los Angeles (down 7.9%), Oakland (down 3.7%) and Norfolk (down 2.0%).