At first glance, the imposition of sweeping U.S. tariffs – reaching up to 145% on Chinese imports – and China’s retaliatory tariffs of up to 125% on U.S. exports to China would seem poised to significantly disrupt dry bulk commodity trade flows. However, 2024 trade data suggests otherwise. The U.S. sources only 1.6% of its dry bulk commodity imports from China, indicating limited direct exposure. While U.S. exports to China account for a larger share — approximately 16.8% of China’s dry bulk imports in 2024 — China has been actively diversifying its sourcing, reducing reliance on any single partner. As a result, the direct impact of these tariffs on dry bulk trade has been modest. Beyond sentiment, the more consequential effects stem from indirect shifts in trade patterns, particularly in steel, as Chinese exports are increasingly routed through other countries.
In recent years, the rerouting of Chinese exports to the U.S. has gained prominence amid rising trade tensions and tariffs. Vietnam has emerged as a key beneficiary, with U.S. imports from the country surging from just $38 billion in 2015 to over $114 billion in 2023. Many Chinese firms have established manufacturing operations there, effectively relocating final assembly processes to circumvent U.S. tariffs.
Mexico plays an even larger role, with total exports to the U.S. exceeding $475 billion in 2023. Chinese companies are increasingly using Mexico as a nearshoring base, leveraging its proximity and the U.S.-Mexico-Canada Agreement (USMCA) framework.
Malaysia, while smaller in total volume, holds critical importance in electronics and semiconductors. It has also warned Chinese companies against using it as a relabelling hub, signalling awareness of its growing role in re-export pathways.
Increasing protectionist measures from the U.S. and other countries now pose risks not only to direct trade, but also to the rerouting pathways that Chinese exporters have come to rely on. Mexico has initiated anti-dumping investigations into Chinese steel imports to protect its domestic industries – measures that also align more closely with U.S. trade policies and may facilitate improved bilateral trade relations.
Meanwhile, Vietnam – another key re-export hub – has announced temporary anti-dumping tariffs on galvanized steel products from China and South Korea, following a similar move in February when it imposed provisional duties on certain hot-rolled steel products from China. These actions underscore its intent to shield local producers and limit exposure to trade circumvention risks.
Together, these developments suggest that even countries benefitting from rerouted flows are growing more cautious about the influx of Chinese-origin goods, further tightening the space for manoeuvre within global supply chains.
If rerouted steel exports continue to face rising global resistance, it could suppress Chinese steel production and weaken demand for raw materials. This in turn would weaken import demand for iron ore, especially from Brazil and Australia’s Pilbara region—two cornerstone trades in the global Capesize dry bulk market. While growing demand from Southeast Asia and India may provide some offset, the structural shifts in China’s steel export model could weigh more heavily on overall tonnage demand.
To add fuel to the fire, the outlook remains clouded by policy uncertainty. The blanket 10% tariff recently announced by the U.S. is framed as a temporary measure, and it remains unclear whether the broader reciprocal tariffs introduced earlier will be reinstated.
Much will depend on the trajectory of negotiations between the U.S. and its trade partners. As Los Angeles Times columnist Doyle McManus noted, “You can offer your loyalty to Trump. Just don’t expect any in return” – a comment that underscores the asymmetry in expectations that has often characterized U.S. trade relations under Trump-era policies.