In shipping, even a single miscalculation can have disastrous consequences for shipping companies. Overconfidence in one’s capabilities and the tendency to overestimate the likelihood of a demand rebound in response to temporary market conditions can lead to results that are far from what was originally projected.
And that’s exactly what’s happening now on the routes between the Far East and the Americas, which have been flooded with new tonnage following the Trump administration’s May 12 announcement of a temporary suspension of U.S.-China tariffs.
This decision by the tycoon has triggered a new rush by importers to ship goods from China, causing a rebound in spot freight rates, which have risen in recent weeks.
However, the problem is that the increase in bookings hasn’t been significant enough to offset the supply-side imbalances caused by the injection of additional capacity along the east-west trade lanes.
The reduction of tariffs on Chinese imports from 115% likely hasn’t had the impact on demand that many analysts expected.
This is confirmed by the Shanghai Containerized Freight Index (SCFI), which recorded a 33% week-on-week decline for services from Shanghai to the U.S. West Coast at the end of last week. On this route, freight rates plummeted to an average of $2,772 per FEU—45% lower than two years ago and just $425 above the level seen in the week ending May 9, shortly before the tariff suspension was announced.
For services between Shanghai and the U.S. East Coast, freight rates fell 21% week-on-week to $5,352 per FEU. Compared to early June, the decline stands at around -23%.
Drewry reports nearly identical results.
After six consecutive weeks of increases, container shipping spot rates dropped 7% compared to the previous week, settling at $3,279 per FEU.
The decline is primarily due to weak U.S. demand for goods, and for Drewry, this signals that the recent surge in U.S. imports following the temporary tariff suspension won’t have the lasting impact analysts initially predicted.
Specifically, rates on the Shanghai–New York route fell 10% to $6,584 per FEU, though they remain 81% higher than six weeks ago. Rates on the Shanghai–Los Angeles route dropped 20% (but are still up 73% compared to May 8).
How could this happen? *Lloyd’s List* suggests that U.S. tariffs on Chinese imports may still be too high. With the 90-day suspension, tariffs dropped from 145% to 30%. However, this reduction is not only temporary but also partial—the 10% U.S. reciprocal tariffs and the pre-April 2 U.S. measures (including tariffs on steel, aluminum, and automobiles) remain in effect.
In reality, tariffs on Chinese imports now stand at 55%, resulting from the combination of the 30% rate set during the first Geneva meeting and the additional 25% imposed during Trump’s first term.
“It’s now clear to everyone that the front-loading rush has slowed down—to the point of stopping,” says Lars Jensen, CEO of Vespucci Maritime, commenting on the SCFI data. “Shippers no longer want to move shipments ahead of the August 14 tariff deadline,” he adds, noting that “the new regulatory uncertainty has shifted the risk perspective for shippers and freight forwarders.”
This refers to the ongoing legal battle over tariffs, including the U.S. Court of Appeals’ decision to side with the Trump administration, temporarily suspending the U.S. Court of International Trade’s ruling that had blocked reciprocal tariffs on much of the world. The legal clash is just beginning and will likely reach the Supreme Court, but the mood within the industry is growing tense.
The current stagnation in trade negotiations, now stuck in limbo, also risks prolonging the uncertainty.
“Spot rates have peaked, but we could see fluctuations between now and August 13, when the 145% tariffs on China are set to resume,” says Xeneta CEO Peter Sand.
“Until then, spot rates should remain above May levels, before the ‘Day of Liberation,’” he adds, predicting a significant drop in demand in the near future. “Shippers have front-loaded imports for all of 2024 and early 2025, so inventories will be high once the current rush ends.”
“With demand weakening and capacity continuing to return to U.S. trade lanes, spot rates will likely fall back to Q1 levels.”
