- Shippers Rush to Capitalise on 90-Day Tariff Grace Period.
- Freight Rates Climb as China–U.S. Trade Tensions Ease.
- Trans-Pacific Shipping Demand Rebounds After Tariff Deal.
The recent China–U.S. trade tariff reduction is set to boost freight rates higher as companies are rushing to grab a 90-day window before higher tariffs increase again. An initial tariff boost had already driven down trade considerably, with China’s exports to the U.S. declining by 21% last month while imports dropped nearly 14%, reports Transport Topics.
Sudden Trade Shift Expected to Boost Demand and Rates
The sudden relaxation of trade tensions is now predicted to trigger a bounce in shipping demand and freight prices. The shift comes at the industry’s busiest time, further putting pressure on already tight shipping capacity. “Right now, our customers have gotten 90 days of clarity with reduced tariffs, and we are working hard to help them make the best use of this window,” said a Maersk spokesman. The company noted a noticeable surge in bookings just hours after the deal was announced.
As per Jefferies, freight rates across the trans-Pacific route have already risen from $2,000 per 40-foot equivalent unit (FEU) during mid-April to about $2,500 as of May 13.
Relief for Carriers After Freight Rate Slump
Container shipping companies have been struggling to achieve break-even freight rates, with the global benchmark falling just over $2,076 per FEU last week — a record low since December 2023, according to the Drewry World Container Index.
“The container sector is positioned for a meaningful improvement in spot rates on two fundamental fronts: a resumption of normal volumes and the beginnings of peak season, which typically commences by July,” wrote Jefferies analysts. “Given the tighter capacity on the transpacific, ocean carriers are in the driver’s seat to push freight rates meaningfully higher.”
Trade Truce Greeted by Freight Industry
Freight forwarders, among the first to be hit by trade movements, have welcomed the truce as a step towards more consistent operations. CMA CGM, No. 7 on the TT global freight list, referred to the agreement as “good news.”
Front-Loading and the Shipping Cycle
Chinese exports to the United States usually start the year slowly and build over summer, reaching a peak in September just before the holiday season. But in 2024, this trend was disrupted as businesses pre-front-loaded shipments to get in ahead of proposed tariffs under President Trump.
Jefferies analysts highlighted that shipping companies can now start cutting blank sailings in which planned voyages are left out, in order to drive capacity to the highest. Repositioning of ships from alternative trade lanes could, however, take up to 40 days.
Tariff Rollback Likely to Trigger Export Surge
“As many exporters might have held up their shipments to the U.S. in April, the substantial tariff rollback is likely to spur a wave of pent-up exports,” wrote Lu Ting, Chief China Economist at Nomura Inc.
Shifting Trade Patterns in Asia
The previous imposition of high tariffs encouraged Chinese exporters to divert shipments through Southeast Asia. Chinese exports to Vietnam and Thailand surged in March and April, and then surged higher with subsequent shipments from them to the U.S.
But since Chinese companies can now export at only a 30% tariff compared to the earlier 145%, straight shipments from China into the U.S. could resume, reversing current patterns of trade diversion.
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Source: Transport Topics
