Sporadic global trade flows are sputtering back to life after U.S. and Chinese government officials today announced a 90-day pause in a trade war that has triggered a rush of imports and swift changes in the regular flow of containers.
American supply chain and retail trade groups cheered the move, calling it “a welcome development.”
Under the agreement, the U.S. will reduce its April reciprocal tariffs on China from 125% to 10% starting Wednesday. However, previous tariff levels already in place will remain, leaving the new baseline on all Chinese exports to the U.S. at a 30% minimum tariff, according to analysis by Freightos. Likewise, another previous tariff level that will remain unchanged is the U.S.’s suspension of the “de minimis” eligibility for Chinese goods, a policy which is expected to shake recent patterns in global e-commerce.
In exchange, China will reduce its own reciprocal tariffs on the U.S. from 125% to 10% for all U.S. exports. And while the 90-day trade war ceasefire holds, both nations have agreed to continue discussions and negotiations on trade relations and toward a new, permanent agreement.
But while the upfront trade tolls are now lower, the see-saw nature of the negotiations will continue to hamstring retailers and manufacturers who are accustomed to seeing their international shipments cross the oceans in smooth, predictable schedules.
Importers and exporters now have a 90-day clock ticking echoing over their long-term planning decisions, according to Judah Levine, head of research at Freightos. And that could trigger another round of imports rushed into the country before that timer expires. “Tariffs at the 20% level didn’t stop shippers from frontloading in March and April – U.S. ocean import volumes were up 11% YoY in that stretch— so the current ‘reduced’ 30% level should see a restart of shippers pulling forward demand to beat a possible August tariff hike,” Levine said in a post.
“Blank sailings and repositioning of smaller vessels have kept transpacific rates stable despite falling demand during the April pause. And a demand rebound – which could strain equipment availability and port operations in the near term from a surge of volumes and from vessels and containers now out of position – should start pushing rates back up soon,” Levine said.
Despite that continued uncertainty, the move is a welcome development for the global supply chain community, according to Mark S. Baxa, President & CEO of the Council of Supply Chain Management Professionals (CSCMP). “The mutual reduction in tariffs between the U.S. and China provides much-needed short-term relief and reopens critical lanes of trade. While the 90-day window is temporary, it signals positive momentum toward more sustainable trade practices. CSCMP members should use this opportunity to assess their sourcing strategies and prepare for what’s next,” Baxa said.
Retail trade group the American Apparel & Footwear Association likewise applauded the move, but warned that the temporary nature of the deal would continue to roil markets until the two countries strike a long-term deal that allows U.S. companies to predictably make long term trade, investment, and sourcing decisions.
“The 90-day pause is welcome and may temporarily help unstick the effective trade embargo that has been in place with respect to U.S./China trade since April 9,” AAFA President and CEO Steve Lamar said in a release. “Sadly, the residual 30 percent tariff, stacked on top of the existing Section 301 and ‘most favored nation’ (MFN) tariffs, will still make for an expensive back to school and holiday season for most Americans. If freight rates spike due to the tariff-induced shipping disruptions — which will take months to unwind — we could see costs and prices creep up even further,” Lamar said.
