THE FIRST quarter might as well be ancient history for businesses such as container shipping and US retail.

The market landscape has changed dramatically since then, not once but twice — with the US President Donald Trump’s so-called reciprocal tariffs, then the temporary pullback in those tariffs.

Israeli container shipping line Zim said on Monday it earned $296m in net income in 1Q25, compared with $92m in 1Q24. Earnings of $2.45 per share were far above the consensus forecast for $1.87 per share.

Zim’s average freight rate came in at $3,552 per feu, down 6% sequentially versus the fourth quarter of last year.

More importantly to investors, Zim executives gave their views on the current landscape, and how Trump’s tariffs are impacting container shipping rates and demand.

Very high spot exposure for transpacific business

Trump’s decision to roll back incremental tariffs on China from 145% to 30% led to a sharp rebound on Wall Street, but the coast is definitely not yet clear.

In an interview with Lloyd’s List, Zim chief financial officer Xavier Destriau said that after the initial 145% tariff announcement, “we experienced a drop in export cargo out of China to the tune of 50%”.

Following last week’s decision to bring those tariffs down, “booking requests have been extremely strong”, Destriau said. “We may even not be in a position to honour all of the requests that we are getting when we look at what is happening right now. I think our vessels will be sailing full very soon.”

Zim is in a particularly good position to take advantage of rate upside, because it has higher spot rate exposure on the transpacific than other liner companies.

The company’s transpacific business was 35% contract, 65% spot in 2024. For contracts starting this year on May 1, its spot exposure is even higher, at 70%.

Three months ago, Zim was targeting a 50-50 mix. But shipper uncertainty due to Trump’s tariffs tipped the balance toward spot. “We had a minimum [contract] rate we were not willing to compromise on, and some of our customers were more in ‘wait and see’ mode,” said Destriau on the conference call with analysts.

“Clearly, a surge in spot rates will benefit us as long as it lasts,” he told Lloyd’s List. The caveat, he said, was that “rates can go up meaningfully for a short period of time, but maybe this will not last for long”.

Tariff deadlines loom in the months ahead

The big dates to watch, he said, were July 9, the end of the pause for non-China reciprocal tariffs, and August 14, the end of the pause for reciprocal tariffs on China.

“Those key dates are still ahead of us, and the outcome will have a significant potential effect on the financial performance of the company in the second half. It is still very much of an unknown.”

Around 65%-70% of Zim’s transpacific business is China-US, with the remainder out of other Asian countries. Since the initial pause in non-China reciprocal tariffs, that non-China Asian business has increased as shippers have frontloaded.

“That did offset, to some extent, the cargo drop out of China, but as we get closer to July 9, we will probably see a drop in exports from Southeast Asian countries,” said Destriau.

Zim maintained its full-year guidance for adjusted before earnings before interest and taxes of $350m-$950m. Given 1Q25 adjusted ebit of $463m, that implies an aggregate result in the final three quarters of -$113m to $487m.

Despite all the exuberance over the US-China trade war détente, Zim’s outlook remains conservative. It still believes results in the second half will be worse than in the first, and that average rates in the final three quarters will be below average rates in 1Q25.

“The volume situation, for us, is the greatest variable,” explained Destriau. “Volume is the key unknown in terms of guidance.”

As Zim chief executive Eli Glickman said during the conference call, the US-China tariff reprieve was “positive,” however, “it remains too early to determine whether the surge in demand we have seen in the last few days represents a return to normalised US-China volumes”.