Fuel, Tariffs and Hormuz: Why Shipping Through Los Angeles Costs Triple

Container freight costs on the transpacific corridor have climbed to levels not seen since the Red Sea diversions of 2024, and the Port of Los Angeles is at the centre of the pressure. Drewry's World Container Index put the spot rate from Shanghai to Los Angeles at 6,272 dollars per 40ft container on 16 July 2026, a 3 percent weekly decline from the 6,482 dollars recorded on 9 July. The composite index eased 2 percent to 4,547 dollars per 40ft container after touching 4,639 dollars the previous week, its strongest reading since September 2024. Both figures remain close to three times the levels seen in late February, just before the Iran war and the Strait of Hormuz crisis began reshaping global freight economics.

The volume side of the story is just as striking. The Port of Los Angeles moved 1,002,734 TEUs (Twenty-foot Equivalent Unit) in June 2026, the busiest June in its 118 year history and only the third month ever in which the port has crossed the one million container mark. Loaded imports reached 530,558 TEUs, up 13 percent year on year and 18 percent above the five year average, making it the third highest import month ever recorded at the terminal complex. Loaded exports were flat at 126,365 TEUs, while empty containers returning to Asia rose 17 percent to 345,811 TEUs, a signal that carriers expect demand to hold. Across the first half of 2026 the port handled 5,122,603 TEUs, 3 percent ahead of the same period last year, and closed its fiscal year at 10.4 million TEUs.

Two forces are pushing rates and volumes at the same time.

The first is tariff policy.

In February 2026 the Supreme Court ruled that the President could not impose tariffs under emergency economic powers, which wiped out the duties in place since 2025. The administration replaced them within days with a flat 10 percent import surcharge under Section 122 of the Trade Act of 1974, effective 24 February. That law allows a maximum of 150 days, so the surcharge expires automatically on 24 July 2026 and only Congress can extend it. No extension bill is moving.

The consequence is a hard deadline followed by a blank page. To fill it, the US Trade Representative opened two Section 301 investigations in March, one on forced labour enforcement across more than 60 trading partners and one on excess manufacturing capacity in 16 economies. The proposed replacement duties run from 10 to 12.5 percent, and unlike Section 122 they carry no rate cap and no expiry date. Implementation is expected in early August, but the final rates and the treatment of cargo already at sea are still unknown.

For importers the practical effect is simple. Goods landed before 24 July pay a known 10 percent, goods landed after that date pay whatever comes next. That uncertainty is what pushed retailers to advance shipments through the spring and early summer, filling ships, lifting spot rates and driving the record volumes now visible at the Port of Los Angeles.

The second force is fuel. The effective closure of the Strait of Hormuz since late February has removed a large share of normal crude flows from the market, and very low sulphur fuel oil prices at the main bunkering hubs have risen sharply against mid February levels. Sea-Intelligence estimated that the conflict added roughly 5.5 billion dollars in bunker costs to the container sector between late February and early June. A renewed closure in mid July pushed crude prices about 10 percent higher and bunker prices about 5 percent higher within days. Carriers including Maersk, MSC, CMA CGM and Hapag-Lloyd have responded with emergency fuel surcharges in the range of 200 to 500 dollars per container, on top of general rate increases and peak season surcharges.

Port of Los Angeles executive director Gene Seroka noted that fuel now accounts for more than 30 percent of a vessel's voyage cost, and warned that bunker adjustment factors typically follow a three month averaging formula, meaning surcharges will keep rising even if crude prices fall back. The same pressure is visible on land, with Southern California gasoline prices up 18 to 20 percent year on year and diesel more than 25 percent higher, a direct hit to the trucking community that moves roughly two thirds of the port's cargo.

The market has started to cool at the margin. Drewry reported nine blank sailings scheduled on the transpacific route (a blank sailing is a scheduled departure that a carrier cancels) for the week following 16 July, against only three the week before, and general rate increases of 2,000 to 3,000 dollars per 40ft container announced for 15 July largely failed to stick. Front loading ahead of the tariff deadline is easing, and Drewry expects rates to hold roughly steady in the near term rather than continue climbing. The Port of Los Angeles is forecasting July throughput above 900,000 container units, still strong but below the June peak.

For importers, the arithmetic is uncomfortable. Ocean freight, fuel surcharges and duties are all moving in the same direction at the same time. Retailers with thin margins in apparel, consumer electronics and household goods carry the largest exposure, because transport represents a bigger share of landed cost than it does for higher value categories. Companies that shipped early are now holding inventory financed at current freight rates, while those that waited face whatever tariff structure emerges after 24 July.

The situation remains active and unusually hard to forecast. The key variables over the coming weeks are the final scope and rate of the Section 301 measures, whether any grace period applies to cargo already in transit, and how quickly Hormuz traffic recovers. Vessel transits through the strait were running at around 34 per day in mid July, against roughly 150 per day before the conflict. Even in a rapid de-escalation scenario, fuel analysts expect bunker supply chains to take months to normalise, which keeps a floor under transpacific freight costs well into the second half of 2026.