FEATURE | Container shippers win China-US tariff reprieve, await volume rebound

The container shipping industry on Monday welcomed an agreement between the United States and China to temporarily slash punishing tariffs, saying it expected to be buoyed by a resulting recovery in bookings from China to the US

The United States will cut extra tariffs it imposed on Chinese imports in April to 30 per cent from 145 per cent and Chinese duties on US imports will fall to 10 per cent from 125 per cent for the next 90 days, the two sides said on Monday.

Trade between the world's two largest economies plummeted in the midst of the standoff, prompting container shipping companies like MSC and Cosco to suspend regular routes or cancel individual voyages. Others considered switching to smaller ships.

It is not yet clear if the reprieve will spark a big rebound in shipments to the United States. Some Chinese factories were preparing for a bounce.

"It's welcome news that these guys are talking and that the numbers have been pulled down from those sky-high levels," said Gene Seroka, executive director of the Port of Los Angeles - the busiest US seaport and the number one gateway for ocean imports from China. He was referring to the tariff rates.

"There's still much more work in front of us," Seroka said, adding that 30 per cent tariffs on goods for the world's leading export nation remain significantly higher than before President Donald Trump took office.

A rebound in shipping demand could send off-contract spot rates for vessel space higher.

Importers of critical goods including hospital supplies like syringes, IV apparatus or ventilators could rush in products if supplies are running low, Seroka said.

Still, other importers may take a wait-and-see approach to 30 per cent tariffs that would drive up prices for shoppers, he said.

Retailers like Walmart, Target and Home Depot account for about half of global container shipping volume.

The month of May is when US retailers usually place orders for year-end holidays. Those goods for Halloween, Thanksgiving and Christmas typically land at US ports between August and October.

"I don't know that many retailers are going to say, 'Hey, for our biggest time of the year, 30 per cent is OK'," Seroka said.

Turning the ship?

Last month, London's Drewry Shipping Consultants said 2025 worldwide container port volume could fall one per cent due to Trump's trade policies, rather than growing 2.3 per cent as previously expected.

"Assuming no hiccups along the way (in China-US trade talks), we can safely expect to raise our growth projections for the container market shortly," Simon Heaney, Drewry's Senior Manager of Container Research, said on LinkedIn.

To that end, German container shipping firm Hapag-Lloyd said it expects bookings from China to the US to increase.

Hapag-Lloyd continued sailing during the collapse of Chinese cargo shipments to the US, albeit with plans to downsize ships. That move could put the carrier at an advantage over rivals that culled sailings, should customers rush in goods during the 90-day reprieve.

"Originally, we had planned to use smaller ships for transports from China to (the US coasts) but may reverse that if demand is strong," Hapag-Lloyd said in a statement.

Maersk CEO Vincent Clerc said on Thursday that in two weeks the Danish firm had removed 20 per cent of capacity on the China-to-United States route and transferred it to other routes.

Maersk could switch that back as quickly if customers ask for it, Clerc said.

The Dow Jones Transportation Average, a barometer for the US sector, gained seven per cent on Monday. Elsewhere, shares of Hapag-Lloyd and Maersk posted gains of roughly 13 and 11 per cent, respectively, while stock of China's Cosco rose two per cent.

Tariffs at the 20 per cent level did not stop shippers from front-loading in March and April, so the current 30 per cent level should encourage shippers to pull forward demand to beat a possible August tariff hike, said Judah Levine, head of research at freight booking and payments platform Freightos.

Average transit time on the Transpacific trade is 22 days, so customers will take the 90-day window of opportunity to ship as many goods as possible into the United States, said Peter Sand, chief analyst at pricing platform Xeneta. "This will put upward pressure on freight rates."

(Reporting by Rachel More in Berlin and Lisa Baertlein in Los Angeles; Additional reporting by Jacob Gronholt-Pedersen in Copenhagen; Editing by Matthias Williams, Bill Berkrot and Matthew Lewis)