MW U.S.-China tariff pause will avoid 'empty shelves,' but here's the catch
By Joy Wiltermuth
Cargo shipping between China and the U.S. could see a double front-loading period this year as companies rush to exploit a temporary 90-day pause in trade hostilities
Cargo shipping between China and the U.S. could see another huge burst of activity as companies rush to exploit a temporary 90-day pause in trade hostilities between the two nations.
Front-loading of goods, similar to the sharp increases in shipping activity in the first quarter, was anticipated to restart now that the Trump administration has agreed to lower its tariff rate to 30% on goods from China, and Beijing's rate on American imports was slashed to 10%.
A scaling back of those tensions, while not ending the trade dispute, sparked a surge in the U.S. stock market on Monday and a slump in safe-haven assets like gold (GC00). The S&P 500 index SPX rose 3.3%, while the blue-chip Dow DJIA surged 2.8% and the Nasdaq Composite COMP was up 4.4%, on track to exit a bear market, according to FactSet.
"What it signals is that U.S. recession risk is further reduced," said Tracy Chen, a portfolio manager at Brandywine Global Investment Management. "The other thing is, it is not a détente between the U.S. and China, but risk management in order not to have an embargo."
Read: What a plunge in shipping traffic from China says about tariffs, stocks and the economy
After surging in March, the number of cargo ships (black line) headed to the U.S. from China plunged to about 41 vessels around April 26, and has since picked up to about 51 vessels, according to Bloomberg data from Monday.
Tit-for-tat measures following President Donald Trump's "reciprocal" tariffs of April 2 saw levies on Chinese goods surge to 145%, while China slapped 125% tariffs on U.S. products, threatening effectively a trade embargo between the trade partners.
Yet as Chen pointed out, shipping volumes already appeared to be climbing after China exempted some goods from its U.S. tariff rate in late April, while the U.S. gave a reprieve to smartphones and other consumer electronics from China.
"People don't know whether tariffs will go higher after this 90-day pause, so they will rush to take advantage of any reprieve to front load," Chen said of double front-loading of inventory this year.
Treasury Secretary Scott Bessent said at a press conference in Geneva on Monday that neither side wants a decoupling of their relationship, while later suggesting 30% was "a floor" on China tariffs.
See: How Bessent explained the 115-point reduction in U.S.-China tariffs that has triggered market euphoria
U.S. ports watch
The pause on higher tariffs could mean California's ports see a burst of fresh activity, but also potentially an earlier-than-usual peak shipping season this year.
"When you get a sharp drop in bookings and volume like we've had for the last month and a half, we'd expect a great majority of that pent-up demand coming flooding back into the market," said Mike Jacob, president of the Pacific Merchant Shipping Association, a not-for-profit trade group based out of Oakland, Calif.
How quickly new goods will hit the U.S. will hinge on the availability of ships and containers, as well as their current locations, warehouse space and appetite for inventory under this tariff regime.
Ships typically deployed to California may have been rerouted to Europe, other parts of Asia or to Latin America, Jacob said, adding that the sourcing equipment like shipping containers could also face glitches.
"We know people are going to be rushing back, but we don't know the scope, scale or timing," Jacob said. "We just know it will be disruptive."
Any rebound in Chinese imports "would reduce the risks of a supply-chain disruption, particularly in the run up to back-to-school and holiday sales later this year," Grace Zwemmer, an associate economist at Oxford Economics, wrote in a Monday client note. But she sees the pause on higher tariffs, which is set to expire Aug. 10, as adding to more favorable odds of a permanent de-escalation being reached this year.
"There will be trade between the two countries," Chen at Brandywine said, but she isn't counting on negotiations to go smoothly.
-Joy Wiltermuth
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May 12, 2025 16:18 ET (20:18 GMT)
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