Econ Pulse

US - China Tariff Cut Agreement Expected to Drive Up Freight Rates

May 15, 2025, 2:36 pm EDT

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US - China Tariff Cut Agreement Expected to Drive Up Freight Rates

The recent agreement between the US and China to cut trade tariffs is anticipated to lead to a rise in freight rates. This is because businesses from both countries are competing to take advantage of the 90 - day grace period to ship goods across the Pacific. In recent weeks, the rapid escalation of tariffs has caused a significant decline in freight volume. Last month, China's exports to the US decreased by 21%, and imports fell by nearly 14%. Maersk, the container giant, estimated last week that the bilateral trade volume between China and the US in April dropped by 30% to 40%.

 

 

However, after the negotiations between China and the US, the tense situation has eased significantly. Freight companies and analysts say that a rebound in demand and prices is expected in the near future. According to a report released by Jefferies on Tuesday, the freight rate of the transpacific route this week has jumped from $2,000 per 40 - foot standard container in mid - April to about $2,500.

 

The tariff - related changes have had a profound impact on the trade and logistics between the two countries. The previous tariff hikes had a negative impact on the volume of goods traded, and now the tariff cuts are expected to reverse this trend. The increase in freight rates is a direct result of the expected increase in trade volume. As businesses rush to move their goods during the grace period, the demand for shipping services is rising, which in turn is driving up the prices. This situation will likely continue in the short term until the market stabilizes after the grace period.

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