US demand for China-made goods ebbs on tariff worries; ocean shipping rates drop
By Lisa Baertlein
LOS ANGELES(Reuters) -Rates for shipping cargo containers from China to the U.S. have dropped by more than half since earlier this month, as imports rebounded less than expected after the slump that followed President Donald Trump slapping 145% tariffs on China.
Trump quickly reversed course by lowering the rate to 30%. That cost increase on goods from the nation's No. 1 ocean trading partner remains significant, especially at a time when U.S. economic data is signaling weakness.
Rates on the closely watched Shanghai-to-U.S. West Coast route appear to have found a near-term floor at around $2,500 per 40-foot container, after peaking early this month at around $6,000, Jefferies shipping analyst Omar Nokta said in a note on Thursday.
Shipping rates had surged to their recent peaks after Trump cut tariffs on China to 30% from 145%. That led U.S. importers to rush in new orders on goods they had halted because of the astronomical levy.
The retreat in shipping rates "is a sign that the recent surge in imports to the U.S. ... will fail to have the lasting impact we had initially expected," maritime consultancy Drewry said on Thursday.
Drewry's World Container Index fell 9% for the second consecutive week following five weeks of gains.
U.S. consumers have yet to feel the full effects of tariffs because many importers stockpiled goods ahead of the new duties - delaying price hikes.
Now, time is running out. Walmart, the world's largest retailer and top ocean importer, warned it would start raising prices in late May and June.
Federal Reserve Chair Jerome Powell on Wednesday said he expects tariffs to start stoking inflation this summer.
Tariffs have already risen on some goods, but there is a coming July 9 deadline for higher levies on a broad set of countries. No one is certain whether Trump will back down to a 10% baseline tariff that analysts are using as a minimum, or whether he will impose something more aggressive.
Some maritime experts say Trump has painted the U.S. into a corner with his trade war.
Import shipments to the U.S. virtually ceased in April, due to Trump's short-lived 145% tariffs on China. That volume is rebounding. But the bounce may be less than expected as tariffs begin to weigh on consumer spending and economic growth.
"The more volume goes down, the less economic activity goes up. The less volume goes down, the more inflation goes up," said John McCown, senior fellow at the Center for Maritime Strategy.
"There is actually no comfortable place to land."
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