Middle East Conflict Drives Up Landed Costs for Importers

Recently, Washington and Tokyo spent an estimated $59 billion buying up Japanese yen after it hit a 40-year low against the dollar. This move was aimed at stopping excessive volatility and disorderly movements in the currency, not to affect trade terms. While a weaker yen can make Japanese goods cheaper for buyers, this impact is less significant than expected.

Most trade is invoiced in dollars, not yen, so currency swings have little effect on U.S. importers' invoices. Exporters often hold prices rather than pass discounts along to customers. The actual costs of tariffs and freight remain unchanged, despite the weaker yen.

The real pressure on landed costs comes from the conflict in the Middle East, affecting both ocean and air transportation. Ocean carriers are passing on fuel surcharges due to higher bunker fuel costs, with marine gas oil up 24% to $785 a metric ton. Carriers like CMA CGM, MSC, and ONE have added emergency surcharges, which will land on everyone's freight bill.

Air freight is also affected as carriers pulled capacity over the region due to jet fuel spikes and Middle East airspace closures. This has already shown up in how brands behave, with merchants asking about fuel surcharges and delayed shipments, rather than the yen or monetary policy.