The escalating trade war between the United States and China is sending shockwaves through global shipping markets, with container bookings plummeting and trade forecasts darkening. As steep US tariffs on Chinese goods bite, container bookings on China-US routes have dropped by 30% to 60% since the measures took effect, while bookings from other parts of Asia have also fallen by 10% to 20%, reflecting a broader demand slump. This seismic shift is prompting a reevaluation of trade flows, with South East Asia emerging as both a temporary beneficiary and a region at risk of longer-term fallout.
Trade Forecasts Downgraded Amid Uncertainty
The World Trade Organization (WTO) has slashed its 2025 global trade growth forecast to a mere 0.2%, down from an earlier estimate of 2.7%, citing the intensifying US-China trade tensions as a primary driver. The organization has warned that merchandise trade between the two economic giants could decline by as much as 80% if current trends persist. In a worst-case scenario, where the most severe tariffs are reinstated after the current 90-day pause announced on April 8, global trade could contract by up to 1.5%, a figure that underscores the fragility of the current economic landscape. 
The immediate impact of these tariffs is evident in the sharp rise of blank sailings—canceled or skipped sailings by shipping lines to manage overcapacity or respond to weak demand—particularly on China-US routes. This strategy, while a short-term fix for shipping companies, signals deeper structural challenges in balancing supply and demand in an increasingly volatile market.
South East Asia’s Temporary Respite
Amid the gloom, South East Asia’s ocean freight rates have shown relative resilience, buoyed by a temporary surge in demand during the 90-day tariff reprieve. Exporters in the region have reportedly ramped up production to frontload shipments to the United States ahead of the anticipated reimposition of tariffs. This frontloading has provided a fleeting boost to local port throughput, particularly in intra-Asia trade volumes and gateway shipments.
However, analysts caution that this surge is unlikely to offset the dramatic decline in Chinese containerized exports. According to Maybank Investment Bank Research (Maybank IB), last week’s World Container Index recorded a 3% week-on-week decline, highlighting the limited impact of South East Asia’s temporary demand spike. “While near-term may offer a fleeting volume uplift, persistent uncertainty and elevated costs are shaping a more challenging outlook for the sector” said a spokesperson for Maybank IB.
The research house also predicts that container volumes could retreat once the tariff grace period lapses, as the wave of frontloading passes. Without clearer policy signals or further trade relief from the US or China, order volumes may decline sharply, leaving regional ports and logistics players vulnerable to a slowdown.
Freight Rates and Future Risks
Looking ahead, container freight rates in South East Asia may remain on an upward trend through the second quarter of 2025, though softer compared to the previous year. This trend is driven by ex-China frontloading activities that have shifted the traditional peak shipping season—typically beginning in May—earlier in the year. Yet, downside risks loom large for the second half of 2025, with potential demand softening due to frontloading exhaustion and a possible further slowdown in US-China trade flows. Both factors could exert significant downward pressure on freight rates across the region.
Another wildcard in the equation is the ongoing disruption in the Red Sea, which has forced many shipping lines to reroute vessels around the Cape of Good Hope, adding time and cost to journeys. If the Suez Canal reopens and vessel capacity is freed up, freight rates could face additional pressure, further complicating the outlook for South East Asian ports and shipping companies.
Impact on Malaysian Logistics and Ports
In Malaysia, the deteriorating global trade outlook has led Maybank IB to downgrade the shipping and logistics sector to “neutral” from “positive.” While domestic consumption demand offers some cushioning, the broader challenges of global trade uncertainty weigh heavily on companies under coverage. The research house maintains “hold” ratings on major players such as Westports Holdings Bhd and Swift Haulage Bhd, reflecting a cautious stance.
Malaysian-listed logistics firms like Swift Haulage, Tasco Bhd, and FM Global Logistics Holdings Bhd have minimal direct exposure to the US market, which offers some insulation from the worst of the trade war fallout. However, even these companies face challenges. Channel checks by Maybank IB indicate increased inquiries from foreign exporters looking to divert trade through South East Asia, but the upside on volume remains limited by erratic order flows, poor shipment visibility, and infrastructure strain.
Port delays are already building at key Malaysian hubs such as Westports and the Port of Tanjung Pelepas (PTP). These delays have been exacerbated by alliance reshuffling at PTP in February, which has further strained capacity and operational efficiency. If trade diversion continues without corresponding infrastructure investment, these bottlenecks could worsen, undermining the region’s ability to capitalize on temporary trade shifts.
Trade Diversion: Opportunity or Mirage?
The concept of trade diversion—where exporters redirect goods through alternative regions to avoid tariffs—has been touted as a potential lifeline for South East Asia. Countries like Malaysia, Thailand, and Vietnam have seen increased interest from exporters seeking to bypass US-China trade barriers. Yet, the reality is more complex. While inquiries are up, the actual increase in volume is constrained by logistical and structural challenges, from port congestion to inconsistent order patterns.
Moreover, the benefits of trade diversion may be short-lived if the underlying tensions between the US and China remain unresolved. A prolonged trade war could lead to broader demand weakness, affecting not just China-US routes but also intra-Asia trade, which has been a critical growth driver for South East Asian economies. The risk of a global trade contraction, as flagged by the WTO, looms large over the region’s economic prospects.
Navigating an Uncertain Future
As South East Asia grapples with the ripple effects of US-China trade tensions, the region finds itself at a crossroads. The temporary boost from frontloading and trade diversion offers a glimmer of hope for ports and logistics players, but the longer-term outlook remains clouded by uncertainty. Key questions persist: Will the 90-day tariff reprieve be extended, or will harsher measures return? Can regional infrastructure keep pace with shifting trade patterns? And how will global demand hold up under the weight of escalating costs and geopolitical friction?
For now, shipping lines, port operators, and exporters in South East Asia are bracing for a bumpy ride. The coming months will test the resilience of the region’s trade ecosystem, with the potential for both unexpected opportunities and significant setbacks. As the global trade landscape continues to shift, the stakes for South East Asia have rarely been higher.
