Pause and consequences: Container freight rates wait for new wave of demand

Container freight rates on the trans-Pacific trade are holding steady thanks to capacity adjustments, as the market awaits a recovery in demand following the US-China tariff pause.

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Container vessel (Photo: Unsplash / Phaata)

With the US and China having just reached a 90-day tariff truce, it remains unclear how much demand will recover on the eastbound trans-Pacific trade, or how it will impact ocean container freight rates.

The truce, which took effect on Wednesday, calls for the US to reduce its reciprocal tariffs from 125% to 10%. When added to the 20% tariff increase aimed at stopping fentanyl from China, the new base tariff on all imports from China will be 30%. This includes tariffs that were in place before President Donald Trump’s first term.

In turn, China will also reduce its retaliatory tariffs on US exports from 125% to 10%, while bilateral negotiations continue.

According to Judah Levine, head of research at Freightos, the minimum 30% tariff on all Chinese goods is actually higher than the highest tariffs ever imposed during Trump’s first term – which were applied to a limited range of goods. However, seaborne import data from the National Retail Federation (NRF) shows that even with the 20% tariff in place in March, US importers are actively “buying up” to avoid the risk of higher tariffs. “Volumes in March and April were 11% higher than in 2024 and featured one of the strongest Aprils on record, though some of that growth was from countries other than China, like Vietnam and Thailand.”

“The 145% tariffs drove a drop of 35% or more in China-U.S. ocean volumes since early April,” Levine said. “So we’re likely to see a significant demand rebound in the near term as shippers replenish inventories that may have started to run down in the past month, and as many Chinese manufacturers have high levels of finished goods already ready to ship.”

Levine predicts that there will be more “early buying” before the tariff suspension ends in August, as importers look to avoid the risk of higher tariffs. This could mark an earlier start to the year-end peak shipping season – and an earlier end to the season.

However, the strength of the peak season remains a question mark. The 30% tariff may have spooked some importers, while the “early buying” may have partially satisfied peak demand – resulting in lower overall volumes than last year.

Despite the sharp decline in China-US volumes since April, trans-Pacific container rates have remained stable at around $2,300 per FEU to the West Coast and $3,400 per FEU to the East Coast, according to the Freightos Baltic Index. This is because carriers have cut capacity by about 22% through “blank sailing” and service suspensions, and deployed smaller vessels to balance supply and demand.

“Carriers shifted some of that excess trans-pacific capacity and equipment to other lanes during the April-May pause, and the reduction in sailings over the last few weeks also means fewer empty containers than usual will be making their way back from the U.S. to China in the near term,” Levine said.

If demand recovers quickly, shippers may face a temporary shortage of vessels and containers, as capacity and equipment are still being diverted back.

“The quick restart could also mean a big bump in the number of vessels and container volumes arriving at U.S. ports in a few weeks. Taken together, shippers could face difficulty securing space and some congestion and delays in the next few weeks at both origins and U.S. destinations. Even if this is the start of peak season though, it’s likely that this congestion will subside after the initial backlog and imbalances are cleared.”

Levine said this could push up short-term freight rates in the near term, although even with the Red Sea route still closed, current rates are still more than 30% lower than last year due to fleet expansion and increased competition from new shipping alliances.

As a result, peak season rates this year are unlikely to reach the 2024 peaks, which exceeded $8,000 per FEU to the West Coast and more than $9,800 per FEU to the East Coast.

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