According to recent analysis by Xeneta, even without tariffs US President Donald Trump has other levers to pull in trade wars and bring further confusion to global supply chains.
Emily Stausbøll, Xeneta Senior Shipping Analyst, has looked into the matter and noted that the court decision to deem the sweeping tariffs unlawful is clearly positive news for shippers who have faced extraordinary increases in the cost of importing goods into the US, but this should come with a warning that the story is far from over. Even if the appeal fails, Trump will not throw in the towel and he has other levers to pull to achieve the same outcome as the sweeping tariffs.
We only have to look at the US Government proposal to introduce port fees on China-affiliated ships and the SHIPS for America Act to understand the range of options at Trump’s disposal in the ongoing trade wars.
… said Emily Stausbøll, adding that when Trump does pull these levers, we could enter a new era of confusion in supply chains because the situation will become more complex for shippers to navigate. They could be hit with a raft of surcharges and levies, whether that is port fees or a new tariff regime imposed on a product-by-product basis.
Immediate response from shippers
Businesses will react in different ways depending on their supply chain needs and the goods they are shipping. We have already seen a rush to import goods into the US from China following the lowering of tariffs on 14 May, so the decision by the U.S. Court of International Trade will add further fuel to this demand.
Shippers who utilized bonded warehouses in the US are in the advantageous position of being able to wait for the green light that ‘Liberation Day’ tariffs are no longer in place before immediately releasing those goods.
Impact on ocean container freight rates
The cargo rush following the lowering of US-China tariffs combined with fear and uncertainty in the industry is putting upward pressure on spot rates.
Average spot rates from the Far East to US West Coast have increased 17% since 14 May to stand at USD 3040 per FEU (40ft container). Into the US East Coast, average spot rates increased 11% to stand at USD 4095 per FEU.
Market mid-high spot rates now stand at USD 3200 per FEU into the US West Coast (+22% since 14 May) and USD 4250 per FEU into the US East Coast (+15% since 14 May). The market mid-high are the rates generally being paid by those shippers who reacted quickest to the lowering of tariffs and are willing to pay more to get goods moving.
Ongoing frontloading of imports will see big increases in spot rates on 1 June. Average spot rates will rise at least 18% from the Far East to US West Coast and 14% into the US East Coast. Data is being received from shippers paying far higher rates than this, so the market has the potential to increase even more dramatically in early June, Emily Stausbøll concludes.
