US-China Ocean Freight Rates Cool As Trump’s Tariff Threat Looms Large

The rates to move cargo containers from China to the U.S. have more than halved since the beginning of the month, as demand for imports subdued following a surge earlier, driven by the easing of tariffs.

Shanghai-to-U.S. West Coast route shipping rates have seemingly found a near-term floor at around $2,500 per 40-foot container, after rising to about $6,000 per month, Jefferies shipping analyst Omar Nokta said, according to a Reuters report.

U.S. inbound shipments from China had risen after Trump cut tariffs on Chinese goods to 30%, excluding his previously imposed tariffs. However, U.S. data has shown that tariff-driven inflation has adversely impacted domestic consumption.

John McCown, a senior fellow at the Center for Maritime Strategy, reportedly said that as the volume decreases, economic activity tends to decrease as well. While a decline in volume, which means lower availability of goods, leads to higher inflation.

Shipping consultancy firm Drewry said that “recent surge in imports to the US, which occurred after the temporary halt of higher U.S. tariffs, will fail to have the lasting impact we had initially expected.”

The firm’s benchmark World Container Index fell 9% this week, the second consecutive weekly decline after five weeks of gains. The firm also noted that spot rates to Los Angeles dropped 20% over the past week.

Retail sentiment on Stocktwits about iShares China Large-Cap ETF (FXI) was in the ‘neutral’ territory on Thursday.

However, things could turn for the better as Trump’s Commerce Secretary announced late Thursday that the U.S. and China have finalized a trade agreement reached last month in Geneva, which includes China’s commitment to supply rare earth elements critical to multiple industries.

Earlier this week, Federal Reserve Chair Jerome Powell told the House Committee on Financial Services that the central bank was “well-positioned to wait” regarding interest rate cuts as tariffs are expected to boost inflation. All eyes will be on May inflation data, expected to be released on Friday.

Trump’s deadline on other trading partners to ratify a deal is expected to expire on July 9.

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