The temporary reduction of US tariffs on Chinese imports from 145% to 30% for 90 days has acted as a catalyst for businesses to accelerate shipping, leading to a surge in ocean rates. This situation has raised concerns among shippers and forwarders with long-term contracts as carriers announce general rate increases (GRIs).
Emily Stausboll, a senior shipping analyst at Xeneta, noted that the tariff pause served as a "starting gun" for companies to ship as many goods as possible. She highlighted that carriers are quick to introduce surcharges in response to capacity constraints, leaving shippers in a challenging position. Stausboll also questioned how high rates might go, as carriers rushed to announce GRIs for June 1, potentially pushing all-in rates to $7,000 per 40ft container on the US east coast. While these GRIs may not be sustained, they clearly indicate carrier intentions, which is concerning for those with long-term contracts.
Charles Maralle, CEO of Exfreight, shared insights from IATA’s CNS conference in Miami, stating that many stakeholders were adversely affected during Covid when carriers prioritized the spot market over long-term contracts. This led to a shift towards spot-market operations and a push for more flexible contract terms. However, Maralle noted that carriers often dictate terms, especially for smaller clients, unless they have significant volume like Walmart.
Maritime analyst John McCown suggested in his report that the sharp increase in volumes and rates may be temporary. He anticipates a symmetrical volume increase corresponding to the initial slump caused by the 145% tariffs, with a downward bias in volumes likely due to the 30% tariff. McCown advised that the past offers the best window into the future, indicating that market dynamics post the 90-day period remain uncertain.
In summary, the US tariff pause has triggered a rush in shipping and a corresponding rise in ocean rates. Carriers’ announcements of GRIs reflect their intentions to capitalize on current market conditions, creating uncertainty and challenges for shippers and forwarders with long-term contracts. As the market navigates these changes, flexibility and creative strategies, such as forwarder consortia, may offer some advantage. However, the long-term impact remains uncertain and will depend on future tariff policies and market responses.
