Regardless of political debates about winners and losers or the quality of the agreement, the crucial outcome is the anticipated smoother flow of goods between the world’s two largest economies. The escalating trade war had severely damaged businesses, so the apparent return to diplomacy will bring significant relief, reports Xeneta.
Effect On Freight Rate
Given the average transit time of 22 days on the Transpacific trade route, shippers are expected to capitalize on the 90-day window of reduced tariffs by shipping as much cargo as possible into the U.S. This anticipated surge in shipping activity is likely to exert upward pressure on freight rates in the short term.
In response to declining volumes from China to the U.S., carriers had previously reduced container shipping capacity on this route and redeployed vessels to other trade lanes, such as the Far East to Europe. Reversing this capacity shift will take time, meaning that a rebound in volumes from China to the U.S. could lead to shippers facing slightly higher freight rates in the immediate future.
While the third quarter (Q3) is typically the peak season for ocean container shipping, this peak may occur earlier in 2025 if a rush to import goods from China into the U.S. materializes due to the tariff reduction. However, the resurgence in demand for some low-margin goods may be slower due to the tariffs that remain in place.
Looking at the longer term, it is anticipated that freight rates will likely resume the downward trend observed in the market during the first quarter of 2025, prior to President Trump’s “Liberation Day” announcement regarding the tariff reduction.
Since January 1st, average spot rates from China to the U.S. West Coast and U.S. East Coast have decreased by 56% and 48%, respectively, despite a temporary increase of 18% and 12% on April 1st. While rates have slightly declined since then, they remain higher compared to the end of March.
Long Term Impact
While the easing of tariffs will undoubtedly bring some relief, shippers cannot afford to become complacent. Recent months have underscored the importance of anticipating the unexpected and preparing for continued volatility. The ever-present geopolitical risks to supply chains remain a significant concern.
Moving forward, businesses are likely to accelerate their plans for supply chain diversification. The desire to reduce their vulnerability to geopolitical factors will drive them to establish more agile and responsive supply networks, enabling them to react more swiftly and decisively to future disruptions.
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Source: Xeneta
