The Impending Shift in Global Trade: Understanding Tariff Deadline Consequences

Time Is Running Out on Tariff Negotiations

The fast-approaching China–US tariff de-escalation agreement, which is set to expire on 14 August, raises concerns for US importers depending on several trading partners. This urgency is further complicated as reciprocal tariff pauses, initially designed to facilitate trade negotiations, are scheduled to lapse as early as 9 July.

As of now, only the United Kingdom has successfully reached a preliminary agreement with the United States. However, talks with significant players like the European Union, South Korea, and Japan have hit a wall, largely due to the US’s ongoing insistence on maintaining its 25 percent tariff on autos.

Adding to the complexity, uncertainties loom over the July and August deadlines. There’s no clear indication yet whether goods need to be loaded at the origin by these dates or if they must actually arrive in the US by then. The latter scenario would considerably tighten the timeline for lower-tariff goods, particularly with ocean freight from the Far East, which would necessitate movement within just a few weeks to comply.

The Surge in Ocean Freight Demand

Following the 12 May China–US tariff pause, there’s been a noticeable recovery in ocean freight demand across the transpacific route, bouncing back from a dramatic volume drop that followed the implementation of 145 percent tariffs on Chinese imports in early April.

In response to this renewed demand, carriers have initiated mid-month general rate increases (GRIs) ranging from $1,000 to $3,000 per FEU, with additional hikes anticipated for 1 and 15 June. The goal here is to elevate rates potentially to $8,000/FEU, reminiscent of the height of the 2024 summer peak on the Asia–US West Coast route.

According to Freightos, daily rates for transpacific shipments as of early this week already surged by about $1,000/FEU to the East Coast, now sitting at $4,400/FEU, while rates to the West Coast have risen by $400/FEU to $2,800/FEU.

Carriers are scrambling to revive previously canceled services and blanked sailings from April’s downturn. However, with numerous vessels diverted to other routes during the lull, there are currently equipment shortages in China right as demand spikes.

Factors such as congestion and weather-related disruptions at key Chinese container ports are also driving up container prices. With tariff deadlines looming, shippers may start favoring West Coast ports as they prioritize shorter transit times to meet deadlines.

Despite the uptick, analysts caution that with a 30 percent minimum tariff still in place on Chinese goods, the current surge in rates and demand may not lead to a significant spike before August. This level of activity heralds a potentially early start to peak shipping season, though it may also conclude sooner than in previous years.

Shifts in the Airfreight Market

With the elimination of de minimis eligibility for Chinese goods, airfreight volumes, especially within the chartered freighter sector, have seen notable declines. Consequently, much of the freighter capacity has exited the transpacific market.

Nonetheless, spot rates have remained high. The Freightos Air Index indicated China–US rates held steady at $5.50/kg last week, which is consistent with early April numbers.

Additionally, Freightos suggests that this previously utilized transpacific freighter capacity might now be redirected to different markets, which could soon alter rate dynamics beyond the US borders.

Meanwhile, the Asia–Europe ocean freight market is yet to experience the typical seasonal uplift, even amidst ongoing Red Sea diversions. This is a stark contrast to previous years when shippers began peak season bookings months ahead to account for the longer transit times.

Carriers are projecting June GRIs aimed at raising rates to approximately $3,200/FEU to northern Europe and $4,500/FEU to the Mediterranean—an increase of about $1,000/FEU. However, these figures remain significantly lower than the $6,000–$7,000/FEU levels recorded in June 2024.

Συμπέρασμα

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