A 'dead cat bounce', as freight goes from rules-based to deals-based trade?

© Indianeye

It’s not artificial intelligence we should be worrying about right now: it’s an artificial freight market.  

The constant proclamations, rules, executive orders, and downright confusion emanating from the White House has altered both air and sea markets. Yes, demand and supply continues to influence rates, but the recent significant ups and downs have essentially been artificially created – from the sudden, huge drop in transpacific freighter capacity to the recent rebound. 

The market no longer reflects the very basics of consumer and industrial demand, and capacity supplied.

From front-loading to blankings, to freighter shifts; all because of policy rather than trade, and the market is, as one wise forwarder has noted, somewhat illusory. 

Alana Raitt, global director airfreight at Navia, wrote: “One policy shift. A 60% surge in freighter capacity. And an illusion of recovery that’s already unravelling.” 

Noting the influx of transpacific freighter capacity after the China-US tariff agreement, she said: “This isn’t a rebound. It’s a short-term reset, driven by political pressure, not market fundamentals.” 

And there is a switch, pointed out by Singapore’s Hinrich Foundation for Sustainable Trade, from rules-based trade, to deal-based trade. 

The WTO explains: “A rules-based trade system provides a structured and predictable framework for international trade, ensuring that all members are treated equally and that trade flows smoothly. This system emphasises principles like non-discrimination, fair competition, and market access, fostering a level playing field for all countries.  

“In contrast, deals-based trade, or bilateral agreements, may involve preferential treatment or concessions between specific countries, potentially creating imbalances in the global trading landscape.” 

As Hinrich Foundation’s head of trade policy, Deborah Elms, noted: “A dramatic u-turn on tariffs, engineered over a furious weekend of negotiations between the US and China, may appear to be a return to the status quo. It is not. Instead, it illustrates the consequences of rapid, unanticipated policy shifts with real economic consequences. This 90-day pause on the highest levels of tariffs imposed in history provides an opportunity to reconsider the trade agenda between the US and China, but the window is too limited and the agenda is long.” 

She points to the “stop-start nature of trade adjustment”, which has led to cancelled orders; uncertainty about delivery speeds and costs; and changing capacity, which will not restore China-US trade to its original level for some time. 

We are all currently guessing how the market will reset – some companies, inevitably, are looking for devious ways around tariffs, but could be in for a financial a shock if discovered. Others have front-loaded, then paused; US SMEs are facing insolvency.

None of this speaks to a ‘normal’ rules-based market. One airline CEO said recently the carrier hadn’t spent the usual couple of months working out its forecasts for the year –calling it a waste of time, given the constant knocks to the system that negate weeks of planning. 

Is the recovery a ‘dead cat bounce’? We will only know when the cat is back on the ground – in 90 days? Or three and a half years…? The crystal ball is murkier than ever, as a new trade system comes into play.