Chinese garment exporters are gearing up to resume shipments to the United States later this month. This relocation marks an encouraging step towards improving relations with trade partners despite the ongoing tariff disputes. American retailers are in the midst of one of the worst inventory shortages ever recorded. At the same time, demand for goods from China is beginning to increase again, although it’s still below pre-tariff levels.
Judah Levine, chief of research at global freight marketplace Freightos, played up the fact that shipping movements are on a path to bouncing back. After a long drought, businesses are scrambling to restock their depleted supply. “Companies are running out of inventory and Trump has toned down his China talk,” said Jonathan Chitayat, reflecting the need for American importers to restock in light of recent market pressures.
Liu, a toy producer from Dongguan, China, agreed that her U.S. customers are all anxious to restock. However, she cautioned that if her products arrive in the U.S. without a reduction in tariff rates, “American consumers will bear the entire burden of the additional tariff costs.” Definitively, U.S. tariffs now affect more than four-fifths of the products that cross from China to the U.S. border. This makes for a dangerous situation for American exporters.
With this backdrop, U.S. shipping activity tanked in stunning fashion starting in April. Flexport announced that sailings from China to the U.S. plummeted by 60%. The sharp market downturn came in the wake of U.S. President Donald Trump’s implementation of steep tariffs on April 10. It was these tariffs that peaked at a truly astounding 145% on imports from China. In retaliation, China hit products manufactured in the United States with severe tariffs of 125%. This unexpected move provoked a significant drop in trade between the two countries.
With shipping activity ramping back up, freight forwarders should expect price increases, explained Dominic Desmarais, chief solutions officer at Liya Solutions. From that date on, he warned, costs might increase suddenly, sometimes $500 or more per container. This uplift will be predominantly driven by a rebound in demand. According to Freightos estimates, shipping a 40-foot container from Shanghai to the port of Los Angeles in early May would cost between $2,640 and $3,781.
Although tariffs have made that work more difficult, Liu remains optimistic that conditions will improve and the biopharmaceutical trade will continue to flourish. “We are obviously all looking forward to a relaxation of the (tariff) situation this month. I believe it will happen,” she remarked. Yet skepticism still clouds expectations for tangible outcomes from the current, high-level trade talk.
Desmarais commented on past experiences, recalling that “in 2018 when Trump put 25% tariffs on 80% of the commodities out of China, it took two years for the U.S. and China to reach a deal.” Against this historical context, it’s important to consider what is happening during today’s negotiations and what they could accomplish.
Levine’s other observation was on how deeply connected the U.S. and Chinese economies have become. He warned that both countries are realizing the pain of tariffs. “One way or the other, these economies are intertwined and both sides are starting to feel pain,” he stressed.
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