News / Trade war ‘armistice’ unlikely to lead to volume surge, says forwarder

The US and China agreeing a 90-day pause in escalating tension with a lowering of reciprocal tariffs by 115%, has triggered expectations of a strong regain in activity on one of the world’s major commercial lanes.

However, given reports that a huge volume of goods was front-loaded to the US to beat the deadline forPresident Trump’s hefty hike in import duties last month, a major forwarder has questioned whether the market is set for a surge in ocean and air freight traffic.

“We do not expect a major rebound of exports out of China to the US in the coming weeks, because the level of inventories in the US does not require an urgent replenishment,” Henri Le Gouis, Geodis’ EVP, Global Freight Forwarding, told The Loadstar.

 “A surge could happen at the end of the year, if shippers get more visibility on the tariff structure and the unpredictability stops, as this has a negative impact on demand.”

He added: “The end of the year could look very different, if the need for the replenishment of inventories becomes urgent.

“At Geodis, our role to adjust the supply chains of our customers to accommodate this high level of volatility. Unfortunately, the seemingly constant change in tariffs is generating a lot of extra work for our teams in charge of customs brokerage.”

He confirmed that the first quarter had “shown strong activity from China to the US”, evidence of front-loading as fears grew of Trump’s so-called ‘re-balancing of trade’ measures, resulting in “inventory levels in the US 15% higher than at the same time last year”.

He added that some customers had slowed down new orders, but “we haven’t observed any major differences across industry verticals or types of commodities. The impact appears fairly uniform,” he said.

One of Geodis’ major rivals recently estimated that bookings for ocean freight out of China to the US were probably down around 25% to 30%, but this was almost equalled by an uptick in business in other Asian markets and tradelanes. However, Mr Le Gouis was less assertive that such a trend was developing.

“While we’ve noticed a growing interest in countries of South-east Asia as alternative sourcing options to China, and also India, so far this has not materialised into large volumes. Volumes from China to other global destinations have remained stable so far.”

As for container traffic being re-directed from the US to other markets in light of the hefty tariffs US had put on its imports from China, now suspended until at least mid-August, Mr Le Gouis noted: “We have not seen any substantial reallocation of container traffic from transpacific routes to Europe. The decline in exports to the US has mostly been balanced by blanked sailings on current services rather than a rerouting of flows.”

Turning to the e-commerce trade for low-value packages, the recent changes to the de minimus rule for US imports has raised the prospect of a possible ‘flood’ of Chinese goods heading for other markets. However, Geodis hasn’t seen a sharp increase to Europe or elsewhere, he said. “For this type of cargo, tariffs can have a notable impact, but much will depend on the final EU regulatory framework.”