News / White House moves create yet more stormy water on the transpacific

© Woraphon Banchobdi

The 90-day tariff moratorium on US imports, except those from China, have failed to keep transpacific bookings from falling.

On 5 April, all US imports were hit with a basic 10% tariff, with additions varying by country planned for 9 April.

However, on 8 April, US president Donald Trump announced a 90-day pause on the extra tariffs, keeping to the basic 10%, except for China, whose imports to the US now have a 145% tariff.

Four days later, Mr Trump announced that smartphones and consumer electronics were exempt from the additional tariffs – although yesterday, he threatened to reverse that decision.

Analysts at Linerlytica this week reported that the exemptions had failed to restore transpacific volumes. China’s US-bound container bookings have fallen between 30% and 60%, while those from other Asian countries have contracted 10%-20%.

The upcoming Labour Day holiday, on 1 May, in some Asian countries, including China, are expected to further cut volumes and, just three transpacific services being withdrawn – MSC’s Mustang, Premier Alliance’s PN4 and TS Lines’ AWC – is likely to be inadequate, in terms of capacity management, to restore rates.

Last Friday, the Shanghai Containerised Freight Index showed a 5% drop in Shanghai-US west coast rates, to $2,202 per 40ft, and a 2% dip in Shanghai-US east coast rates, to $3,226 per 40ft. And Linerlytica cautioned that these rates are set to drop below $2,000 in the next two weeks.

“There’ll be further turbulence as carriers adjust rates downwards over the coming days to deal with falling cargo volumes from China,” said the consultancy.

“Although rates from South-east Asia are holding up better, on expectations of a rebound in cargo volumes, it will not be enough to cover the drop in Chinese exports.

“Contract rate negotiations are now on hold until clarity is restored.”

Despite the exemption for consumer electronics, an estimated 30% to 40% of transpacific container imports are still effectively halted by the tariffs that remain in place.

Barclays Bank yesterday released a report suggesting the Trump administration was moving from a rules-based to a deals-based international order.

The report said: “Given the rise of China in economic, technology, and military power, US policymakers have shifted their views from one of ‘strategic engagement’ to ‘strategic competition’.”

China’s spending on research and development is now nearing that of the US: in 2020, the US spent just under $700bn, while China spent about $550bn.

Barclays said: “China’s economic planning and rise in R&D spending has provided an ecosystem to develop traditional manufacturing, as well as next-generation, dual-use (civilian and military) technologies.”