Freight operators have reported a surge in container bookings between China and the United States since the temporary 90-day ceasefire on tariffs went into effect over the weekend. This has led to congestion at Chinese ports, which may take several weeks to clear. However, industry experts predict that this surge will not result in a drastic increase in freight rates and remains within manageable levels.
According to a report by Reuters on May 16, importers in the United States, ranging from athletic shoes and sofas to construction materials and automotive parts, are eager to expedite shipments to avoid potential tariff increases after the 90-day ceasefire, fearing a global transport crisis amid the pandemic.
Shenzhen Yantian Port handles over a quarter of China’s exports to the U.S., and following the U.S.-China ceasefire, port operators have been busy coordinating berths and adjusting schedules.
A spokesperson for German container shipping operator Hapag-Lloyd informed Reuters that due to the high demand, they can only serve customers with long-term contracts, with limited space available to accommodate other bookings.
Vizion, a container tracking software provider, revealed that the seven-day average booking volume surged by 277% to 21,530 standard 20-foot containers as of Wednesday, compared to 5,709 containers in the week ending May 5.
Lalo, a company selling baby furniture online and through retailers like Target and Amazon.com, has instructed Chinese factories to process orders. Co-founder Michael Weider noted, “We have hundreds of thousands of products waiting to be shipped. These products can now hit the water.”
In the coming weeks, the surge in shipping is expected to result in a significant influx of goods arriving at U.S. West Coast ports.
Experts, including the executive director of the Port of Los Angeles, the busiest U.S. port and a major gateway for Chinese maritime trade, do not anticipate a repeat of the cargo tsunami seen during the pandemic. Instead, they foresee a substantial yet manageable wave.
Data from maritime consultancy Drewry shows that non-contract spot freight rates from Shanghai to Los Angeles jumped by 16% to $3,136 per 40-foot container as of Thursday, May 15, less than half of the rate in April 2024. However, if ship owners insist on raising rates, container freight rates by June 1 could significantly increase to around $6,000 per container.
During the early stages of the pandemic, surging freight demand overwhelmed factories and container ships, causing disruptions in the supply chain. Currently, shipping and retail experts indicate that the 90-day ceasefire is not sufficient for most factories to complete new orders.
Moreover, due to tariffs, ship owners have been cutting back on China-U.S. routes and sailings, leading to reduced available cargo space on vessels. Drewry noted that ocean carriers are now reinstating previously “blanked” services.
Many U.S. companies had stockpiled inventory ahead of President Trump’s tariff measures. However, uncertainties loom as the future tariff rates post the 90-day ceasefire remain unknown.
The Trump administration confirmed to Reuters that if no agreement is reached between the U.S. and China by the deadline, U.S. tariffs on Chinese goods will revert to 54%.
Jessica Dankert, Vice President of Supply Chain at the Retail Industry Leaders Association, which includes members like Home Depot, GAP, and Dollar General, mentioned that many retailers are prioritizing which products to order and ship.
Commenting on the impact of tariffs on China, Jamie Salter, CEO of Authentic Brands Group, stated, “Ultimately, tariffs are still as high as 30%.”
Some major suppliers to Detroit’s three big automakers are reportedly airfreighting parts from China and building up inventories to meet customer demands. May is traditionally the month when U.S. retailers place orders for year-end holiday seasons, with Halloween, Thanksgiving, and Christmas products typically arriving at U.S. ports between August and October.
“I don’t know how many retailers are going to say, ‘Hey, 30% tariffs for our biggest time of the year, that’s acceptable,'” said Gene Seroka, Executive Director of the Port of Los Angeles.
Other suppliers are resisting increasing inventory due to space and funding constraints.
Mike Abt, Co-President of Chicago-based family business Abt Electronics that sells refrigerators, microwaves, computers, and TVs, mentioned that the company is holding steady, absorbing the inventory stocked before the tariffs took effect.
“Everyone wants consistency, and that’s the tough part about all of this. It’s like a gamble; you really don’t know what the right answer is,” Abt said.
Hapag-Lloyd stated in a release, “We initially planned to use smaller vessels to transport from China to the coast (of the U.S.), but if the demand is strong, we may change tactics.”
Vincent Clerc, CEO of integrative container logistics company Maersk, mentioned on Thursday that they had reduced capacity on China-U.S. routes by 20% within two weeks and shifted it to other routes.
According to Clerc, Maersk can quickly reverse this policy if customers demand.
President Trump has reiterated that tariffs are necessary for trade balance, to promote U.S. manufacturing, curb illegal immigration and human trafficking, and reduce the federal budget.