Transmodal's Logistics and Trade Update Advisory May 2026

IN THIS ISSUE

What changed: The Iran conflict and near-total closure of the Strait of Hormuz has done to supply chains in 2026 what COVID port congestion did in 2021. ISM delivery times have lengthened by the most since 2022. The Logistics Managers' Index shows warehousing capacity "tight everywhere," shrinking at the fastest pace since March 2024. Transport costs have hit the highest reading since spring 2018. Maersk CEO Vincent Clerc said publicly the company is absorbing $500 million in additional monthly costs through Q2 — and will pass them on. His framing was unambiguous: "Our belief is that those energy costs are so high that nobody can just shoulder them."

On trade policy, the legal ground under U.S. tariffs continues to shift fast. On May 7, the Court of International Trade ruled that the 10% global Section 122 tariff is unlawful — following the Supreme Court's February ruling that struck down the broader IEEPA tariffs. The government collected an estimated $166 billion in IEEPA duties now being refunded through CBP's CAPE portal. We're seeing importers who haven't yet filed refund claims leaving real money on the table. If you paid IEEPA tariffs and haven't acted, that process is open now — and the clock is running.

The pharma tariff clock is also running. A 100% Section 232 tariff on patented pharmaceuticals and active pharmaceutical ingredients takes effect July 31 for 17 named large companies and September 29 for all others. Generics and biosimilars are exempt — for now. Companies from the EU, Japan, South Korea, and Switzerland face a reduced 15% rate; the UK faces 10%. These Section 232 tariffs were not struck down by the IEEPA ruling — they are on different legal footing and are moving forward. Companies most exposed: those importing branded patented APIs from non-treaty countries with no onshoring plan and no MFN pricing agreement in place. If you're anywhere in the pharma supply chain and haven't audited HTS classifications against Annex I and IV, July will be expensive.

ADDITIONAL READING

▸ Supply-Chain Stress That Peaked in Covid Heads Higher Again

▸ Section 232 Pharmaceutical Tariffs: What Importers Need to Know

▸ Trump Tariff Tracker: Court Strikes Section 122

What changed: The Iran conflict triggered a wave of carrier increases beginning in late February that pushed 2026 contract rates up as much as $1,000 per 40ft almost overnight. Xeneta data confirms Transpacific import rates from the Far East are running roughly 50% above pre-conflict levels on both coasts. The Drewry World Container Index for Shanghai–LA sits at $2,930/40ft, approximately 34% above pre-conflict pricing. The Containerized Freight Index is up 45% year-on-year as of May 8. Carriers are targeting $3,500–$4,400/40ft to North Europe and Mediterranean for mid-May GRIs.

We're seeing carriers deploy disciplined capacity management — blank sailings, service restructuring, and strategic slot controls — to prevent rate gains from eroding. This is not accidental; it's carriers applying exactly the lessons from 2024's overcapacity softness. C.H. Robinson's May update confirms Southeast Asia transshipment hubs — Singapore, Tanjung Pelepas, Port Klang — are absorbing congestion pressure from rerouted Middle East capacity, degrading schedule reliability in ways that don't show up in rate data alone.

Where the process breaks down: importers on annual contracts locked before the conflict are paying below-market rates — but those contracts renew into a market that is 40–50% higher. Shippers without confirmed space on May sailings face a mid-month GRI at the worst possible time. The contrast is stark: importers with multiple carrier relationships and confirmed forward allocations are managing. Those running spot with a single carrier are getting squeezed on both price and transit reliability. Any landed cost model built before March 2026 is materially obsolete and needs recalculating now.

ADDITIONAL READING

▸ Drewery Index Update

What changed: The Iran conflict and Middle East airspace closures triggered a sharp March spike across all air freight corridors. The global BAI surged 32.7% year-on-year through April, widening to 37.2% by month-end. TAC Index confirmed that early May data shows HK–North America spot rates beginning to ease and Asia–Europe rates plateauing — the first directional softening since the conflict began. But the assessment is direct: given ongoing disruption to jet fuel supplies, a sharp reversal is not expected anytime soon.

We're seeing significant lane divergence. Indian Subcontinent–Europe capacity has recovered to about two-thirds of pre-conflict levels — improving but not normal. Trans-Atlantic is the most stable corridor, though longer routings around Middle East airspace are creating a 3–6% effective capacity reduction through extended block times. HK–US East Coast spot rates surged from HK$45.95/kg in late March to HK$57.53/kg by April 30. Some airlines are deploying fuel tankering strategies — carrying extra fuel to avoid expensive or unreliable refueling points — which reduces available cargo payload and tightens effective capacity further.

The contrast is sharp: shippers of time-sensitive goods — pharmaceuticals, perishables, high-value electronics — are absorbing the full cost impact. Those with 3–6 month contracts locked before April are insulated; those buying spot on Asia-origin lanes are paying rates not seen since COVID disruptions. Critically, contract renewals are now showing low single-digit increases, meaning the elevated baseline is being normalized into forward pricing, not corrected. Build your air freight cost model with a meaningful buffer through at least Q3, and lock capacity where you can. Waiting for rates to "normalize" is not a strategy right now.

ADDITIONAL READING

▸ Airfreight Rates Remained Elevated in April Despite Ceasefire — TAC Index Analysis

What's changed: Agentic AI — systems that don't just generate recommendations but act on them autonomously — is moving from pilots into limited production deployments. Logistics operators are testing "self-healing" supply chain agents that renegotiate freight rates, reroute shipments in real time during disruptions, and adjust inventory levels without human intervention. Nearly a quarter of logistics executives plan to launch AI pilots in the next 12 months, making 2026 a pivotal test-and-learn moment. Near-term applications gaining the most traction are route optimization, ETA prediction, carrier selection automation, and customs compliance support.

We're seeing two distinct groups. Companies with clean data pipelines, integrated TMS/ERP systems, and real AI governance programs are documenting 20–30% reductions in routing costs, 25% improvements in on-time carrier performance, and measurable working capital efficiency gains from better demand forecasting. In many cases, however, companies rush to deploy AI onto broken data foundations — inconsistent HTS classifications, fragmented carrier records, siloed customs data — and get outputs only marginally better than the manual processes they replaced. The technology delivers what the data deserves.

On sustainability: 2025 was a setback year for decarbonization commitments. Political headwinds, regulatory delays, and capital pressure pushed corporate sustainability teams toward reporting optimization rather than emissions reduction. However, IMO 2026 CII regulations are now imposing real vessel speed restrictions and adding green surcharges of $150–$400 per container to carrier pricing — creating a structural floor below which spot rates cannot fall without carriers operating at a loss. Sustainability is no longer just a compliance exercise; it's embedded in the freight cost structure and affecting every shipper's pricing, whether they're engaged on ESG or not.

ADDITIONAL READING

▸ Why 2026 Will Decide the Future of AI in Logistics

▸ Future of Global Supply Chain: AI, Nearshoring & Sustainability Takeaways

What changed: Diesel prices surged nearly $1 per gallon in a single week in March, per EIA data — then partially retreated, then surged again. The national on-highway diesel average hit $5.64 during the week ending May 4, just three-tenths of a cent below the 2026 high set in early April. California diesel reached $7.36/gallon. Diesel now represents 30–40% of total carrier operating costs. The U.S. Bank Freight Payment Index found shipper spending surged 12.9% quarter-over-quarter in Q1 2026 — the largest jump since late 2020 — even as shipment volumes were essentially flat. Fuel surcharges drove the entire spending increase.

We're seeing a structural breakdown in how fuel surcharge programs are built: most FSC schedules update weekly based on the prior week's EIA data. When diesel jumps 29 cents in a week — as it did the week ending May 4 — carriers absorb today's fuel cost while being reimbursed at last week's rate. That lag destroyed margins for small carriers and owner-operators during March's spike. Multiple carriers idled equipment or exited the market, which is precisely why domestic spot rates hit all-time highs on the Truckstop.com platform the week ending May 1 — running 32% above the same week last year.

Aviation fuel tells an even sharper story: Jet-A retail averaged $8.57/gallon in May — up $2.09 year-on-year. The EIA projects Brent crude peaking at $115/barrel in Q2 before gradual easing, but maintains a risk premium throughout 2026. Meaningful relief across diesel and jet fuel is not expected before Q4 at the earliest — and only if Strait flows normalize. The companies managing this best have negotiated fuel escalation clauses into carrier contracts, locked air capacity at Q1 pricing, and are shifting volume to intermodal where transit time allows. Those managing fuel reactively are absorbing 20–30% cost overruns against their 2026 logistics budgets.

ADDITIONAL READING

▸ Spot Rates Hit All-Time High as Diesel Cost Surges Again

▸ Rising Fuel Costs and Tight Capacity Drive Q1 2026 Freight Spending