- Freight prices for containers going from China to the U.S. have surged over 100 percent from a year ago as of the beginning of December.
- The world’s two largest economies have been locked in a tit-for-tat tariff fight in the last year, levying duties on each other’s imports.
- The trend of surging freight shipping prices is unlikely to last as China’s November trade data showed slowing growth in exports.
As trade war sparks a ‘bonanza’, the shipping costs from China to the US have more than doubled says an article in CNBC.
Dramatic increase in price
The price of shipping a container from China to the United States has risen dramatically in the last year due to uncertainty surrounding trade tensions between Washington and Beijing.
That’s because Chinese exporters have been rushing to get goods to U.S. ports before new tariffs kick in, but data are suggesting that trend may soon run out of steam.
Tit-for-Tat Tariff
China and the U.S., the world’s two largest economies, have been locked in a tit-for-tat tariff fight over the last year. They levy duties on each other’s imports worth hundreds of billions of dollars in the last few months.
Increasingly strong fears of an all-out trade war have inspired exporters a phenomenon called front-loading – to push forward shipment dates.
In fact, freight prices for containers going from China to the U.S. have surged more than 100 percent from a year ago as of the beginning of December. This is according to data from Freightos, an online freight marketplace.
The Bonanza
“Transpacific ocean freight peak season has been a bonanza, with prices still more than double last year,” said a report on the most recent Freightos data published on the Baltic Exchange’s news website.
That was as freight rates for China to the U.S. West Coast jumped 128 percent while those from China to the U.S. East Coast surged 123 percent compared to the same period a year ago.
In contrast, China to North Europe freight rates were up just 11 percent in the same period due to pre-Christmas cargoes.
Front-loading
Even before an announcement that tariffs will be hiked, many importers were already stocking up as front-loading boosted the Chinese export machinery.
“Many importers from China front-loaded in advance of the 1 January scheduled increase to the 10% trade tariff. That boosted transpacific peak pricing, but there is a limit as to how much front-loading you can, or should, do,” Zvi Schreiber, CEO at Freightos, said in a statement cited by the Baltic Exchange’s site.
Ceasefire on tariff escalations
American tariffs on $200 billion of Chinese imports were set to rise sharply on Jan. 1, but those have since been put on hold following U.S. President Donald Trump and Chinese President Xi Jinping’s recent meeting at the G-20 in Argentina.
There, they agreed to a 90-day ceasefire on tariff escalations while the two sides continued to negotiate a potential agreement.
However, analysts and markets are skeptical about a lasting truce given the back-and-forth between the two economic powerhouses.
Changing trade routes
“The irony is that after … Trump has turned up the rhetoric, the United States has started importing even more from China,” said Soren Skou, CEO of Maersk, the world’s largest container shipper by capacity, according to a November Reuters report.
Maersk’s data indicated China’s shipments to the U.S. had grown 5 to 10 percent in the third quarter compared to the prior year as retailers built up their inventories to avoid any new levies, Skou said, according to Reuters.
Supply chain management departments in a range of industries have been on their toes for months. Exporters and logistics executives have confirmed the shifting of trade routes as factories rush to fulfill orders before a tariff hike.
Chinese data show slowing growth
Despite surprising on the upside for much of the year, Chinese data have shown the country’s economy is now coming under some pressure.
In November, growth in China’s manufacturing sector stalled for the first time in over two years as new export orders shrank, an official survey of large enterprises showed. A private survey confirmed a shrinking of export orders for small and medium companies as well.
Chinese customs data confirmed the slowing of export growth as the value of November shipments out of the country only rose 5.4 percent from a year earlier. The weakest performance since a 3 percent contraction in March, and well short of the 10 percent forecast in a Reuters poll.
The customs data showed that annual growth for exports to all of China’s major partners slowed significantly.
That was even true for exports to the United States, which in November rose 9.8 percent from a year earlier — marking a slowdown from October’s 13.2 percent year-over-year growth.
The Chinese statistics bureau reported slower-than-expected industrial output and retail sales growth for the month of November.
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Source: CNBC
