After U.S. tariffs on Chinese goods had climbed to 145% – and even higher on certain types of imports – the United States announced on May 12 that they’d be temporarily lowered for 90 days. While further trade negotiations with China take place, C.H. Robinson’s experts say the ripple effects have already begun.
Mike Short, President for Global Forwarding, said C.H. Robinson expects a burst of pent-up cargo starting in two or three weeks.
“Customers that had cargo stored at origin are ready to ship,” Short said. “Others are cutting purchase orders this week and asking suppliers to produce as quickly as possible to get their goods out in the 90-day window.”
“What customers are doing now depends in part whether they were in a position to frontload ahead of the higher tariffs in April. Some of our 7,500 retail customers had enough capital to stock up on inventory, factories with capacity at the time and storage once the inventory got here. Retailers and retail suppliers also have a greater reliance on low-priced consumer goods from China. Still, many of our small-to-medium retail customers took a wait-and-see approach. For our automotive customers, it was a mixed bag. A small windshield wiper motor made sense to frontload. Seats for a specific model of SUV didn’t.”
“But first, the ocean carriers have to reposition their vessels. About 20-30% of capacity was removed on the Asia-to-U.S. West Coast trade lanes and 30-40% on the Asia-to-U.S. East Coast lanes in May. Some carriers have had vessels anchored in Shanghai waiting for the floodgates to re-open, but others shifted ships to other regions and it’ll take two to four weeks to bring them back. With this new demand, all the major carriers have announced spot rate increases starting today and additional increases are set to be implemented June 1.”
“Considering a transit time of roughly two to three weeks on the water, we expect this flow of additional freight to start hitting U.S. West Coast ports at about the end of June. It could shape up to be an earlier ocean peak season this year.”
As for how trucking might be affected, VP for North American Surface Transportation Ronnie Davis said port activity can be an indicator of ripple effects downstream, but this situation is unique due to the frontloading earlier this year.
“Front-loading is a sign of preparation, not demand. That freight is now moving through the supply chain – sitting in warehouses and getting delivered as demand calls for it,” he said. “Freight volumes also naturally go up this time of year because of produce season and what we call beverage season, when retailers are stocking up on water, soda and beer for the summer. For trucking, that may mask any change in freight coming in from overseas.”
“We’ll have a clearer picture by July, when two factors converge: We’ll know how many trade deals the U.S. has made with other countries before higher reciprocal tariffs are slated to kick in again, and we’ll know how much freight demand there is after produce season and beverage season peak. Sometime this summer, we’ll know whether this 90-day lowering of tariffs between the United States and China holds and how much holiday inventory might have been pulled forward in the meantime.”
Read more Freight Market Insights from C.H. Robinson.
