The aftermath of the U.S. tariff war raises shipping costs in the UK, putting pressure on retailers and potentially igniting a new round of inflationary storm

The Zhitong Finance APP noted that due to the ripple effects of the U.S. trade war, the cost of transporting goods from China to the UK has surged, which may drive up consumer prices and complicate the Bank of England's plans to gradually lower interest rates.

Data from shipping analytics company Xeneta shows that over the past three months, the price of shipping a 40-foot container from China has increased by about 60%, reaching $3,305. Another weekly indicator released by maritime consultancy Drewry also showed similar increases.

U.S. companies are eager to import products before the latest round of tariffs imposed by President Trump takes effect, and the resulting demand has pushed up freight rates. This has absorbed shipping capacity and increased transportation costs on other trade routes to the European continent and the UK.

This increase may only be a temporary side effect of the shift in U.S. trade policy, and shipping costs are still well below post-pandemic levels. However, economists say that given the already very thin profit margins for UK retailers, it is likely that the increased costs will be passed on, which could at least temporarily push up consumer prices in the UK.

Andrew Opie, Director of Food and Sustainability at the British Retail Consortium, stated: "The rising freight prices continue to put pressure on the retail supply chain. In a low-margin, highly competitive market, shipping has added to the already considerable costs."

The cost of transporting goods from Asia to Europe is rising

As the Bank of England seeks to continue gradually lowering interest rates amid signs of an economic slowdown, this shift injects another uncertainty into the inflation outlook.

However, the inflation rate remains well above the Bank of England's target of 2%. Jonathan Stenberg, an economist at Coface for the UK and Ireland, estimates that transportation costs could push the Consumer Price Index (CPI) up by 0.3 percentage points in the third quarter, raising it to 3.6%.

In the long term, if Chinese companies lower prices to expand exports to the UK in order to compensate for a slowdown in sales to the U.S., the tariffs imposed by Trump could have a deflationary effect. But for now, rising costs are putting another squeeze on UK businesses, which are already laying off workers and raising prices to offset increases in wage taxes and the minimum wage.

Recent data from the Office for National Statistics shows that in June, nearly 40% of businesses with at least 10 employees expressed concerns about their supply chains for the coming year, up 5 percentage points from March.

Stenberg stated: "The UK is a fairly open economy. We saw a more extreme version of this from 2021 to 2022, when we clearly saw it affecting import prices and the prices of several goods. So we are quite sensitive to this."

As many companies rely on longer-term shipping contracts, recent freight rates may continue to have an impact in the coming months. Peter Sand, Chief Analyst at Xeneta, noted that labor shortages and maintenance work at Nordic ports are also affecting shipping costs The demand for shipping to the UK is also very high, with China's exports to the UK increasing by 11% year-on-year in April. Sanders stated that his company "expects most of these inefficiency issues to persist throughout the year." "All of these (situations) add up."