News / New US tariffs on key transpacific cargo will crush hopes of rate recovery

Photo: © Paulus Rusyanto

US president Donald Trump’s imposition of tariffs of up to 50% on cabinet and upholstered furniture imports could derail hopes of a recovery in transpacific freight rates.

He announced yesterday a 10% tariff would be imposed on imported softwood and other timber used to make building materials, as well as a 25% tariff on kitchen cabinets, vanities and upholstered wooden furniture.

Those levies will be effective 14 October, but on 1 January the tariffs on cabinets will rise to 50%, and on upholstered furniture to 30%. The president said the tariffs aimed to revive US furniture manufacturing and improve national security.

Linerlytica said the tariffs, coming amid uncertainty over massive US levies on Chinese imports, would hurt already weakening cargo volumes that have seen Shanghai-US west coast rates slipping below $1,500 per 40ft container. Gains from general rate increases this month have been wiped out.

Linerlytica said: “Operating margins have already dropped below breakeven on several key routes after the recent rate slide, but carriers have continued to prioritise market share over profitability as the disconnect between charter and freight rates widened to a record high.

“The new US import tariffs will have a significant impact on container volumes as furniture accounts for some 10% of transpacific volumes.”

Meanwhile, disrupted shipping schedules arising from Super Typhoon Ragasa in south China, and Typhoon Bualoi in Vietnam, failed to lift long-haul container freight rates last week.

With freight rates now in the red and facing hefty US port fees, Chinese long-haul entrant Hede Shipping is withdrawing one of its transpacific services, HDS2, which connected Huanghua and Shanghai with Los Angeles.

However, HDS2, which used two 1,800 teu ships, accounted for less than 1% of the roughly 2.6m teu of Far East-USWC capacity, and its exit would not ease supply pressures, added Linerlytica.

See also today’s report on the impact of the tariffs on US consumers