by Lloyd's List

12 May 2025 (Lloyd's List) - ANOTHER week, another plot twist. Extreme whipsaws in trade policy continue, with big consequences for shipping demand.

The US has agreed to pause all reciprocal tariffs on China for 90 days, temporarily slashing tariffs on Chinese goods from 145% to 30% from Wednesday. In response, China lowered its tariffs on US exports from 125% to 10%.

US President Donald Trump has repeatedly backtracked on tariffs when the fallout proves too steep, first with Mexico and Canada tariffs, then with non-China reciprocal tariffs, then with reciprocal tariffs on Chinese electronics, and now with reciprocal tariffs all Chinese goods.

The consequences of keeping the 145% tariffs would have been drastic. US imports are plunging this month. Retail stores would have faced stock-out issues starting this summer if the high tariff rate had been maintained. Concerns over politically important holiday goods were escalating.

Consequently, a de-escalation was widely expected. But the big surprise was that Trump retreated all the way back to pre-Liberation Day levels.

The announcement “significantly exceeded expectations”, wrote Deutsche Bank chief China economist Yi Xiong. “Few expected the tariff war to de-escalate quickly, and even those expecting de-escalation did not think tariffs could be brought down to the same level as other countries.”

Strong upside for container shipping

The joint announcement by the US and China is very good news for container shipping.

Shares of liner operators Zim and Matson both surged 17% in early trading on Monday. Shares of Maersk and Hapag-Lloyd were up 12% and 13%, respectively. Containership lessor stocks also rose, with US-listed tonnage providers up by mid-single digits.

The pause in US tariffs coincides with traditional peak season and follows a month when cargo volumes were heavily constrained. US importers will likely bring in as much cargo as they can, as soon as they can. That could cause supply chain complications that could increase rates even further.

“This has meaningfully positive consequences for the container shipping industry,” said Jefferies shipping analyst Omar Nokta.

“With ocean carriers having stabilised freight rates since mid-March at just above break-even by reshuffling vessel capacity away from the transpacific, and with peak season volumes due as July approaches, the potential for a big push upwards in freight rates is becoming realistic.”

Vespucci Maritime founder Lars Jensen said in an online post: “We should expect an immediate surge of cargo from China to the US for two reasons.”

The first reason: “There is already a large amount of cargo ready to go as US importers have been adopting a ‘wait and see’ strategy.”

The second: “The 90-day pause expires in the middle of the usual peak season for holiday-related goods going to the US. We should therefore expect a possible pull-forward of cargo creating a shorter, sharper peak season from basically right now.”

A slump in US imports for this month is already locked in due to transit times. Cargo loaded in China takes around three to five weeks to travel by sea to US ports.

Most analysts did not expect a full pause on China’s reciprocal tariffs, and the scale of Trump’s reversal should help US imports in June, particularly in the second half of the month.

“Carriers will reinstate a lot of the blanked sailings announced in recent weeks,” Jensen said. “The question is how quickly this can be done. That depends, in part, on where the vessels are physically.”

Maersk chief executive Vincent Clerc said on a conference call with analysts on Thursday: “You can blank a ship with about 10 days’ notice, and you can reactive it with less that that. So, if you had a big surprise [with US-China trade] you would see a catch-up effect on volumes from the following week and you would have capacity ready to cater to it.”

LPG and dry bulk shares also rise

Liquefied petroleum gas shipping was another sentiment winner from the US-China announcement. The Chinese tariff on US propane exports will fall from 125% to 10%.

Shares of Dorian LPG and BW LPG both rose around 5% in early trading on Monday.

Shipping sentiment upside goes beyond LPG. The unexpected relief for the Chinese economy, and the world economy in general, means that dry bulk demand should face less pressure. As of Monday morning, shares of dry bulk carriers owners Seanergy, Golden Ocean, Star Bulk and Genco were up 8%, 6%, 5% and 5%, respectively.

Tanker shares were also up, by low single digits.

Tariffs reduced but still high

The US stock market reacted on Monday as if the trade war is over, even though it could very well be in the early innings.

The White House announced it had reached a “trade deal” with China over the weekend, but there was no deal; it was just an agreement to “establish a mechanism to continue discussions”, combined with a retreat on tariffs to pre-Liberation Day levels.

The US has signed just one trade agreement so far, with the UK, and it is a non-legally binding framework.

The 90-day pause on non-China reciprocal tariffs ends in less than two months. Meanwhile, given longstanding tensions with China, and Trump’s abrupt decision-making style, the China reprieve may not result in a final deal.

Businesses involved in global trade still face a high level of level of uncertainty, and uncertainty is bad for growth. And while US tariffs have been lowered dramatically from the worst-case scenario envisioned last month, they’re still considerably higher than they were previously.

George Saravelos, head of foreign exchange research at Deutsche Bank, wrote on Monday: “We now have both a likely cap and a floor on America’s tariff rates. The UK has one of the least imbalanced relationships with the US and now has a tariff rate of 10%. China has one of the most imbalanced relationships and now has a tariff rate of 30%.”

According to Clarksons Securities shipping analyst Frode Mørkedal, the downside risks to the Chinese economy, the US economy and the global economy have been reduced.

“Overall, the shift points to a less disruptive trade environment heading into 2H25,” said Mørkedal. “We estimate that this could reduce the drag on global GDP growth from 0.5% to 0.2%. Put differently, the International Monetary Fund’s recent 0.5% downgrade to its global growth forecast, to 2.8%, may now be partially reversed.”