US ocean carrier Matson has issued a downbeat forecast for 2025 as US tariffs on Chinese imports are expected to impact its trans-Pacific container services. While imports out of Vietnam have taken up some slack capacity, Matson said the nearly one-third drop in China-origin freight will be hard to replace.

Matson Chief Executive Matt Cox, reporting the company’s first-quarter earnings Monday, said the carrier saw a 30% drop in container volumes out of China immediately after President Donald Trump’s reciprocal tariffs on Beijing went into effect April 9. Due to shipper uncertainty about the direction of the tariffs, Cox said it’s unclear whether volumes will recover within the current quarter or full year.

“Given the pronounced market decline in demand in the trans-Pacific in April, coupled with limited visibility to our container demand, we expect container volume and average freight rates in the second quarter to be lower year over year,” he said. “At the moment, it’s difficult to know if these lower volume levels are transitory or will persist for a longer time in 2025.”

Cox made the comments after Matson reported first-quarter earnings of $2.18 per share, which was double the year-earlier results thanks to strong trans-Pacific freight rates in the first quarter. However, Matson’s customers do not appear to have frontloaded much cargo, with first-quarter container volumes from China being essentially flat compared with 2024.

Matson’s Jones Act services to Hawaii and Alaska saw container volume growth of 3.2% and 4.8%, respectively, in the first quarter.

The carrier added a feeder service from Vietnam’s Ho Chi Minh City during the first quarter on both its CLX and MAX services from China to the US, marking a second service expansion after it added Vietnam’s northern port of Haiphong two years earlier.

With the new port call, Vietnam now accounts for 20% of Matson’s trans-Pacific business, Cox said. Shippers are indicating they plan to move more freight out of Vietnam, he added, along with other Asian exporters that Matson serves through transshipment.

However, Cox said it’s not clear how quickly and easily shippers will be able to further pivot their product sourcing to Southeast Asia. Moreover, shippers will remain cautious about sourcing from other Asian suppliers because they could get hit with tariffs, too.

“Vietnam has grown rather significantly, but Vietnam has some of the same issues as many fast-growing Asian economies,” Cox said. “They’ve got shortages of power, they have shortages of labor, and they were pretty busy before this significant tariff change to begin with. So, it’s not obvious to what extent the country itself can scale over such a short period of time.”

No plans to trim capacity

Cox said Matson has no plans to cut capacity or reduce service frequency because its customers need to restock every one to two months, regardless of tariffs. But until shippers and suppliers figure out how to share the cost burden of Trump’s tariffs, Cox said trans-Pacific volumes will likely stay muted.

“It’s our view that in four to eight weeks is when a lot of inventory runs out, and cargo’s going to need to move,” he said. “There’s a lot of activity going on right now between manufacturers, importers and retailers about how to cover these tariffs. Our customers are loath to have empty shelves to the extent that they can help it. And we think that a significant amount of cargo will be moving at the last minute.”

One trade issue that Cox expects won’t be negotiated away will be the de minimis exemption for low-value goods shipped directly from China via air freight. However, Cox said the end of the de minimis exemption will mean a pivot to ocean freight as China’s e-commerce retailers look to stage their goods for shipment within the US.

Regarding the announcement from Chinese online marketplace Temu that it has stopped shipping directly from China to the US, Cox said it looks like a move by the company to “convert itself into more of an Amazon-like model” that will allow Matson to take advantage of a modal shift from air to ocean.

“So, I think we do see more of that air cargo now converting into ocean, and that may be a long-term opportunity for us as e-commerce continues to grow,” he said.