One Fact Shows the Dramatic Future Ahead After U.S.’ Tariffs on China: Container Ship Bookings Have Fallen by 60%

The trade war’s repercussions extend beyond the stock and currency markets. Its effects are also evident in maritime transport, where more than 80% of the world’s trade is carried. In particular, the Pacific Ocean has become a focal point for the tariff conflict between Washington and Beijing. Following the 145% rate increase imposed by President Donald Trump on Chinese goods, logistic companies report a slowdown in container bookings and maritime traffic from Chinese ports to the US.

Now, the pressing question is: What comes next?

Consequences on maritime traffic. International trade relies heavily on maritime transport, and the oceans serve as a crucial trading arena. The United Nations estimates that more than 80% of global trade is carried by sea. While ships may take longer than airplanes, they offer a significantly more cost-effective transportation option.

When Trump recently announced his extensive tariff list, the effects were most acutely felt in maritime traffic and at ports. By early April, container bookings for the U.S. had fallen by more than 60%. This decline was expected, given that many companies had expedited their operations to prepare for the impending tariffs.

Looking toward the Pacific. The initial blow in the trade war caused significant market turbulence. However, it was quickly mitigated when Trump announced a 90-day pause, establishing a global tariff base of “only” 10%. Tensions remained high in China. Beijing and Washington engaged in a tariff battle that led to an escalation in the levies both countries imposed on each other’s exports. The U.S. imposed tariffs of 145% on Chinese goods, while China retaliated with tariffs of 125%. In some cases, like agricultural products, Chinese tariffs rose to 135%.

The maritime trade between the two countries swiftly felt the impact of these increased costs. The South China Morning Post recently reported canceled scheduled voyages and a decline in container traffic on trans-Pacific routes. According to the outlet, there was also a significant drop in cargo bookings for the upcoming weeks, ranging from 30% to 60% in China and 10% to 20% in the rest of Asia. The reason behind this decline was that U.S. tariffs complicated the feasibility of Chinese exports.

This situation is particularly notable considering that China accounts for around 30% of all imports to the U.S. via container, and 54% of those imports come from Asia. In 2018, that figure was even higher at 67%. Trans-Pacific shipping lines responsible for this trade have now resorted to blank sailings and canceled voyages in response to the changed landscape.

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The current scenario is complicated. German shipping company Hapag-Lloyd recently admitted that it’s seen a cancellation of bookings from China to the U.S. of around 30%. Additionally, CNBC reported a decline in the number of Chinese ships arriving at the ports of Los Angeles and Long Beach. Specifically, it highlighted a 29% drop in container ship traffic originating from China.

“In the [three] weeks since the tariffs took effect, ocean container bookings from China to the United States are down over 60% industry wide,” Flexport CEO Ryan Peterson added on X.

In terms of forecasts, vessel flow for the week of May 4-10 is projected to show a larger year-over-year decline of 44%. This translates to significantly fewer containers being processed. During the week of April 20, those U.S. ports received 22 vessels. A week later, only 12 are expected. In terms of TEUs, this means that 62,668 containers are expected for the week of May 4-10, compared to 120,608 during the week of April 20-26.

Ceased shipments. “I’m hearing directly from large retailers and manufacturers here in the United States that many have ceased all shipments from China,” Gene Seroka, executive director of the Port of Los Angeles, told Axios. “You’re probably going to see two-thirds of normal cargo or less coming through the Port of Los Angeles in the weeks to come,” he added. Seroka also noted an 8-10% decrease in U.S. exports over the past few months and didn’t rule out the possibility that this trend could worsen due to Chinese tariffs.

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Beyond China. While the trade war has negatively impacted container demand from China to the U.S., it hasn’t significantly affected the entire region. Quite the opposite. Hapag-Lloyd is observing more than just cancellations of bookings from China to the U.S. According to Air Cargo News, the volume of bookings from Cambodia, Vietnam, and Thailand has increased considerably.

This trend makes sense. Not long ago, investment bank Goldman Sachs warned that some companies began seeking alternatives outside of China after Trump announced the 90-day tariff pause. They’re looking to neighboring countries, particularly in Southeast Asia.

Activity in Southeast Asia is rising, and Chinese manufacturers have started using their facilities outside China to avoid tariffs.

Further consequences. The slowdown in demand has worsened the decline in freight rates on routes such as Shanghai to Los Angeles. Container rates for Chinese exports have dropped by 28% so far this year, marking their worst start to a fiscal year in two decades.

The trade war is also impacting other areas of the logistics sector, such as warehousing and road transport serving the ports. “Looking at how many truck loads are available versus trucks, we’ve seen a precipitous drop, over 700,000 loads have evaporated nationally in the past week compared to two weeks prior,” Ken Adamo of DAT Freight & Analytics told CNBC.

Images | Athanasios Papazacharias | Sven Piper

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