The United States and China decided to suspend high mutual tariffs until mid-August, leading to expectations that freight rates on the Asia (China) to North America route, the world's largest trade route and a key part of the global supply chain, will rise further. On the 12th, the United States and China chose to delay tariffs exceeding 100% for 90 days. The shipping industry anticipates an increase in so-called 'push export' activities as companies try to ship goods during this period.
Typically, the Asia to North America route takes about 6 to 8 weeks to arrive, depending on the port of call. If a vessel departs from China, it must load goods by the end of June at the latest to reach the U.S. before tariffs are imposed. With a surge in demand from shippers, shipping companies are also increasing ship deployments.
The Shanghai Containerized Freight Index (SCFI), compiled by the Shanghai Stock Exchange, stood at 1586.12 points on the 23rd. Compared to March, when the United States and China were imposing retaliatory tariffs, this represents a 23% increase in just two months. The SCFI quantifies the average freight rates for container cargo departing from the Port of Shanghai.
Recently, the SCFI is lower than at the beginning of the year, but the upward trend is steep. As the tariff war temporarily paused, exporters rushed to transport goods, leading to a backlog. Freight rates for container ships departing from China to U.S. West Coast ports surged from $2,347 per 1 FEU (40-foot container) on the 9th to $3,091 on the 16th, following the tariff suspension announcement, marking a 32% increase in just a week.
U.S. ports are divided into the East Coast and West Coast, with the West Coast being closer to Asia and equipped with large-scale processing capabilities, making it a hub for maritime logistics. Container ships departing from Asian countries such as China, South Korea, and Japan drop goods at ports including the Port of Los Angeles (LA), the Port of Long Beach (LB), the Port of Oakland, and the Port of Seattle. From there, the goods are distributed inland.
While cargo demand is surging, there is a shortage of ships to carry it. Major ports in Asia reportedly are experiencing a buildup of goods. The U.S. Trade Representative (USTR) decided to impose fees on Chinese vessels and shipping companies entering its ports, leading shipping companies to reduce their ships on the Asia to North America route or adjust their ship deployers by route.
Recently, shipping companies are increasing ship deployments on the Asia to North America route. Korea Marine Transport announced that it will start services from China to the North American West Coast on the 18th of next month. This route is being revived after 40 years, with plans to deploy six vessels ranging from 3,000 TEU (20-foot containers) to 10,000 TEU. The shipping alliance to which HMM belongs, 'Premier Alliance,' noted that it plans to resume Asia to North America West Coast services starting on the 5th of next month. This route had been slowly reducing operations following the tariff war.
Shipping rates are also expected to rise. Shipping companies attempt to implement a general rate increase (GRI) by notifying shippers and logistics companies of the rates at the beginning of the month, and it has been reported that the shipping companies currently have the advantage. Last week, HMM sent a message to shippers stating, "Due to the impact of the tariff suspension, we are facing an exacerbated shortage of shipping capacity. Starting this week, increases in logistics costs across all U.S. regions are unavoidable."