by Lloyd's List
25 April 2025 (Lloyd's List) - US PRESIDENT Donald Trump surprised the markets yet again this week, stating that 145% tariffs on China “will come down substantially”. US treasury secretary Scott Bessent admitted that current tariff levels “are equivalent to an embargo” and are “not sustainable”.
This latest course change is no panacea for transpacific demand. On the contrary, it could curtail volumes even further in the near term. An expectation for lower future tariffs gives US importers even more incentive to pause orders in China and wait for costs to fall.
Bessent was widely quoted as saying the tariff reduction would come “in the very near future”, but he also said that the US would not reduce China tariffs unilaterally.
China isn’t budging. A spokesperson for China’s foreign ministry said on Thursday that there are no talks between China and the US. A spokesperson for China’s commerce ministry said the first step is for the US “to fully remove all unilateral tariffs against China”.
The Wall Street Journal reported that the US is considering a reduction in Chinese tariffs to 50-65%.
But that reduced level is still too high for US importers, particularly those bringing in low-margin Chinese goods. The best hope for container shipping demand is that US economic fallout from the China tariffs is so severe that Trump capitulates and lowers the levies, not to 50-65% but to manageable levels.
The US president has repeatedly backtracked as a result of economic pressure, most recently with the 90-day pause on tariffs for US imports of Chinese smartphones, laptops and other electronic products.
Simon Heaney, senior manager of container research at Drewry, said during a webinar on Thursday, “We have to ask ourselves: Are there any conditions — whether it’s a looming economic recession or negative public opinion — that might make the US administration reverse course? As of today, I think that question remains undecided.”
Economic fallout will take time to develop
US economic fallout from China tariffs is now a certainty, but it will transpire in slow motion.
Flexport chief executive Ryan Peterson said on Wednesday that US orders from China are down over 60% industrywide since the tariffs took effect. Bessent also said that orders are down over 60%.
The first ships that departed China after the tariff deadline did not begin arriving at US west coast ports until this week; those to US east coast ports are still in transit.
The US imports around 40% of total containerised goods from China (measured in teu), and because of voyage times, the impact of order cancellations won’t be fully felt at US ports until May.
There would then be another lag before the tariff impact is seen at US retail stores.
Axios reported that chief executives of Walmart, Target and Home Depot warned Trump on Monday that if the trade war was prolonged, “shelves will be empty” and prices will rise.
However, that scenario would take time to develop. As of now, inventories are in place due to frontloading and consumers are still buying.
Adam Miller, chief executive of US trucking giant Knight-Swift, said during a conference call on Thursday, “Some of our customers are pressing forward with little change, needing product as they see strength in their underlying sales. Some have already cut back or are in the process of cutting back, mostly centred around China. Still others are in wait-and-see mode, drawing down inventory to support sales in the near term.
“At this point, our customers are expressing more concern about the cost impacts of tariffs and less concern regarding demand from their customers,” said Miller.
Services cancelled, more sailings blanked
The near-term response of container lines has been to reduce transpacific capacity via both service cancellations and blank sailings.
The Premier Alliance opted to not go forward with its PN4 service from China to the Pacific Northwest, which was planned to begin in May. It also decided not to proceed with its PS5 service from China to Southern California in May.
TS Lines’ AWC2 service from China to Southern California will be suspended at the end of this month. Zim has ceased its ZX2 service from Central China to Los Angeles.
Blank sailings were up sharply this month, according to Drewry. Next week, 18% of Asia-US west coast sailings and 41% of Asia-US east coast sailing will be blanked, said Philip Damas, head of Drewry Supply Chain Advisors. “I think that 41% is a record or close to a record,” he added.
According to John Kingori of eeSea, a company that tracks ocean carrier schedules, “We are seeing reduced capacities, especially on Ocean Alliance services.”
Kingori told Lloyd’s List, “MSC’s standalone services have not been spared either, but Gemini seems to be holding up and keeping its capacity relatively steady as opposed to its competitors.”
The Ocean Alliance’s PSW11 service (China-Long Beach) “has blanked four out of six vessels previously deployed, while a fifth one is marketed ‘TBN’,” he said. “Unless the current situation changes, we expect the ‘TBN’ to be changed to a blank soon. If the tariff war continues, this service might be suspended.”
The Ocean Alliance’s PSW2 service (China-Long Beach) “appears to be consolidating cargo on other vessels and services. Half of the PSW2 is already blanked or ‘TBN’.”
The PSW1 service (China-Los Angeles) “has seven blanks out of eight available slots,” said Kingori, adding, “There is a high chance this service might be suspended as well if the trade war does not end. This is the same case with another Ocean Alliance service, predominantly operated by Evergreen Marine — the PSW5 — which has six blanks out of seven available slots.
“It’s not all bad,” he said, pointing out that several Ocean Alliance services “remain relatively stable. Our analysts believe carriers might be consolidating the available cargo on the PSW6, PSW7, PSW9 and PSW10.”
Kingori also pointed to a change in operating behaviour by carriers in the transpacific.
“We have seen vessels steaming slowly back to Asia and increasing their transit time from the usual two weeks to almost four weeks,” he said. “This was the case for COSCO Shipping Denali (IMO: 9757876), which sailed between Long Beach and Cai Mep/Vung Tau, and a similar case was observed with the OOCL Bauhinia (IMO: 9949716).”
