A Volatile Trump Factor Clouds Outlook For Global Freight
Just as shipping stabilised, 2026 brings fresh uncertainty, with tariff threats and Red Sea disruptions squeezing Indian exporters’ margins before cargo sails.
The Gist
As 2026 begins, the global freight industry faces uncertainty with fluctuating rates influenced by geopolitical factors and supply chain adjustments.
- Freight rates are increasingly viewed as a strategic risk for exporters, particularly in India.
- The ongoing geopolitical tensions, especially in the Red Sea and Ukraine, continue to disrupt shipping routes.
- Exporters are hopeful for improved demand through potential free trade agreements, but volatility remains a concern.
At the start of 2026, the global freight industry finds itself in a familiar but uneasy position of playing the waiting game. After a year of sharp swings driven by geopolitics, trade policy shocks and supply-chain rerouting, exporters and logistics firms are entering the new year with fewer convictions and more contingency plans.
For Indian exporters in particular, freight rates have become less a cost variable and more a strategic risk — one shaped by tariffs, trade agreements and geopolitical decisions made far beyond shipping lanes.
“It’s very difficult to predict freight at this point. On one hand, we are seeing that the situation in the Red Sea is easing out, which has softened freight. But we are also looking at improvement in the global economy to support demand. If that happens, the freight rate may again move up,” Ajay Sahai, director general and CEO of Federation of Indian Export Organisations (FIEO), told The Core.
That tension — between easing disruptions and fragile demand recovery — defines the freight outlook for 2026. Freight rates are caught in the middle as supply conditions are slowly improving, which normally pushes rates down, but demand has not strengthened enough to create a stable, predictable pricing environment. This imbalance leaves markets vulnerable that can trigger outsized movements in freight rates.
While rates have cooled from the peaks of recent years, few in the industry believe volatility is behind them.
One of the most prominent remains the Red Sea and Bab el-Mandeb corridor, a vital link between Asia and Europe that was heavily disrupted by attacks on commercial vessels in 2023–25. Although carriers are cautiously resuming transits, traffic through the Suez Canal and Red Sea remains well below historical levels, and war-risk insurance premiums are still elevated, keeping alternative, longer routes such as around the Cape of Good Hope under consideration.
Another key concern is the ongoing Russia-Ukraine conflict and its impact on Black Sea shipping, which has forced grain, oil and bulk cargoes onto longer and more complex corridors, complicating logistics across Europe and beyond.
The Strait of Hormuz, a narrow but strategic chokepoint through which around a fifth of the world’s crude oil and significant LNG volumes transit, remains a potential flashpoint. In 2025, tensions between Iran, Israel and the US briefly slowed tanker traffic there, raised war-risk premiums and spurred fears that any escalation could sharply elevate energy and freight costs globally, a pattern traders are still watching in 2026.
Taken together, these political and security risks and the rerouting and insurance cost impacts they trigger mean that even as some disruptions ease, freight planners are still pricing in the threat of sudden route closures, longer voyages and sharply higher premiums.
But why does it matter?
Prolonged freight volatility can erase exporter margins, influence where global buyers source goods, and eventually filter through to consumers as higher prices, delayed deliveries or fewer product choices.
From Turbulence To Transition
The freight market enters 2026 after a bruising year. In 2025, exporters navigated diversions around the Red Sea, sudden airspace restrictions, tariff escalations and uneven consumer demand across major economies.
Capacity surged even as trade volumes lagged, creating a mismatch that pushed rates down on some routes while keeping others artificially elevated.
For now, the balance is tilting toward softness.
“From an ocean freight perspective, rates are steadily declining as the Red Sea is expected to reopen, adding capacity. Air freight typically follows the same trend with a lag of about one to one-and-a-half months, so rates could ease in the first quarter,” Ruby Abidi, director of air freight at Cargo Partner, told The Core.
Yet even as rates ease, uncertainty remains entrenched. Global trade flows are increasingly hostage to political decisions, particularly in the US, and unresolved conflicts in Europe and the Middle East.
“I think this turmoil will continue into 2026. Trump is volatile, and there are still uncertainties around peace in the Middle East, as well as between Ukraine and Russia. All of this directly impacts our industry. If these disruptions persist, freight levels are likely to remain high in 2026,” Captain PS Rath, managing director at Econship Marine, told The Core.
That uncertainty is amplified by Trump’s long-standing trade disputes with India over tariffs, market access and the bilateral trade deficit, which have previously disrupted export flows and now weigh on freight demand planning.
Red Sea and Route Realities
Despite the dramatic rerouting of 2025, industry leaders do not expect major structural changes in 2026 — unless conflict flares again.
“I’m not seeing a major change. It’s not that some routes are now blocked or opened up. What happened in 2025 may not happen again unless some kind of battle breaks out in the Middle East or Eastern Europe and airspaces are closed, forcing longer routes,” Rahul Mehta, Chief Mentor of the Clothing Manufacturers Association of India (CMAI), told The Core.
The US Tariff Overhang
The biggest factor that looms large over Indian exporters this year is US trade policy. With Washington signalling a tougher tariff stance, including the possibility of higher import duties on select labour-intensive goods, stricter enforcement of trade remedies such as anti-dumping measures, and a greater willingness to use tariffs as a negotiating tool, exporters said predictability has eroded, complicating pricing, contracts and logistics planning.
“I think 2026 is looking much brighter — except to the US. The US is very uncertain as yet, because now he’s talking about increasing tariffs even more. The current tariff rates are not sustainable. If they continue, our apparel exports are definitely going to be impacted,” Mehta said.
The concern is particularly acute for price-sensitive sectors such as garments and mass-market textiles, where freight costs and tariffs together can erase already thin margins.
Mass-market apparel typically operates on operating margins of 3–5%, while freight and logistics can account for 8–12% of the landed cost; even a small rise in tariffs or shipping rates can wipe out profitability. By contrast, competitors such as Bangladesh and Vietnam often enjoy lower tariffs and cheaper logistics, leaving Indian exporters little room to absorb higher costs.
Trade policy, experts say, has become a direct determinant of freight mode selection because tariffs inflate landed costs and compress margins. Exporters respond by cutting discretionary expenses — and since air freight is significantly more expensive than ocean shipping, trade policy effectively dictates the mode of transport.
Abidi noted that if tariff negotiations fail to deliver relief, exporters — especially smaller ones — may be forced to shift shipments from air to ocean freight to contain costs, even at the expense of speed.
FTAs As The Counterweight
Against this uncertainty, exporters are pinning hopes on free trade agreements to rebalance demand and reduce over-reliance on the US market.
“We are expecting that before the next season, in April, particularly for the fashion industry, where orders are on hold, we will have a bilateral trade agreement in place. Whenever that happens, we will see demand picking up, particularly from India,” Sahai said.
He added that stronger demand would inevitably feed into freight pricing.
“When demand picks up, and supply matches demand, freight rates will move up. Industry may not mind paying a little higher freight in that situation, because right now they are absorbing tariffs.”
Beyond the US, exporters are watching developments with Europe closely.
“We are also looking at having some kind of free trade agreement with the entire EU. Once that happens, to some extent, our dependence on the US will come down. India has already signed some FTAs, which will be leveraged in 2026. We will be signing many more. That will spur diversification and de-risking of exports,” Sahai said.
Mehta echoed that optimism, while tempering expectations.
“With FTAs — particularly with the EU if it comes about, and the UK once it gets implemented — and those already signed with Australia and the UAE, I am looking at a fairly positive year in 2026. Therefore, freight should also look up,” Mehta added.
Still, Mehta cautioned against assuming immediate gains.
“People think that once an FTA is signed, exports will start moving from tomorrow. That’s not going to happen. The procedure itself will take six to seven months before it actually gets executed.”
How FTAs translate into freight pricing will depend heavily on trade balances.
“It will depend on which route you are operating. If Indian cargo to Europe picks up, freight to Europe may go up. Freight to the US may come down. Ships would rather go back with something on board than sail empty, so rates could soften,” Sahai said.
This dynamic — balancing import and export flows — will increasingly shape carrier pricing strategies in 2026.
Lessons From The Tariff Wars
One clear takeaway from recent years, exporters said, is the danger of over-concentration.
“This tariff war has taught us that we cannot rely on a single market. Companies overexposed to the US are now taking a call to move to other geographies,” Sahai.
Some sectors are already ahead. “In marine exports, diversification to China, Europe and Russia has already happened to a large extent. The numbers there are encouraging,” he added.
As freight markets become more politically sensitive, companies are being forced to rethink how they plan.
“Geopolitics and commerce can no longer be treated separately. They have to be looked at closely, complementing each other. The impact today goes beyond politics — it’s felt everywhere,” an industry expert said in condition of anonymity.
He added that companies must be prepared to pivot quickly. “If there is a disruption, your Plan B should already be ready.”
