[Source/Observer Network Qi Qian] After the China-US talks achieved results, US enterprises immediately "overloaded" the phone of Chinese suppliers, demanding urgent delivery.
On May 17, NBC and Reuters reminded that a sudden increase in demand in a short period of time might lead to factory overloading and port congestion in the supply chain in the next few months. Many industry insiders are concerned that the China-US freight route may soon experience serious transportation delays, affecting the peak of American consumption during the summer, as the number of cargo ships, containers, and port capacity are all limited.
It is worth mentioning that on July 4 next year, the United States will celebrate its 250th anniversary. However, the fireworks industry complained that due to the US-China tariffs, production and transportation were severely delayed, and there may be no fireworks available for use next year's Independence Day.
American companies are racing against time to place orders.
According to data from container tracking software provider Vizion, this week, the volume of container shipping orders from China to the US surged nearly 300% compared to the previous week, reaching the highest level this year.
President Trump initiated the tariff war in April, and the trade tensions between China and the US continued to escalate. The excessively high tariff levels have caused many US companies to be unable to bear the import costs, forcing them to suspend shipments and cancel orders. Gene Seroka, executive director of the Port of Los Angeles, said on May 6 that that week, the freight volume at the Port of Los Angeles dropped by about 50%, and the price of products soared by about two and a half times compared to last month.
Seroka recently said: Video screenshot showing the Port of Los Angeles freight volume was cut in half.
After holding firm for a month, Trump finally gave in and decided to take a step back. From May 10 to 11, high-level economic talks between China and the US were held in Geneva, Switzerland. Both sides agreed to reduce tariffs within 90 days and lower the tax rate by 115%.
NBC reported that the current tariffs on Chinese imports remain too high, but US companies are still competing to place orders, urging Chinese suppliers to ship goods as soon as possible at relatively low tariffs to transport as many products as possible to the US.
"Over the past month, we have seen a significant decline in trans-Pacific trade, especially from China, with trade volumes dropping by 60% or more," said Jessica Dankert, vice president of supply chain at the Retail Industry Leaders of America. "So now, at least for the 90-day window, we can expect transaction volumes to rebound."
The head of a factory in the US that produces toys and holiday decorations told Reuters that they are booking previously accumulated goods to be shipped to US stores including Walmart. Michael Wied, co-founder of US baby product brand Lalo, said: "We have hundreds of thousands of products waiting to be shipped. These products can now be shipped."
"Everyone in my company and my friends' companies is very busy," said the head of a logistics company in Shenzhen. "They are preparing large quantities of goods and products to be shipped immediately from China to the US."
Rising freight costs, with concerns over insufficient container and cargo ship supply
However, the report pointed out that despite the significant reduction in tariffs, US companies do not expect everything to go smoothly in the coming months.
Brian Gross, who is responsible for supply chain issues at PricewaterhouseCoopers, said that it usually takes about a month to transport goods from China to the US. Now with the surge in demand, but with limited numbers of cargo ships, port berths, and trucks, it may cause transportation time to increase by several months.
"The capacity of this pipeline is limited and can only expand to a certain extent. The number of container ships is also limited, as well as the number of port bookings," Gross explained. "The cargo bubble will begin to flow through the system but will be limited by the size of the pipeline."
A spokesperson for German container shipping operator Hapag-Lloyd said: "Demand is too high, so we can only provide services to customers who have signed long-term contracts with us. We hardly have enough space to meet spontaneous bookings."
At the same time, the imbalance between supply and demand may also lead to an increase in freight rates. In recent days, the freight rates for China-US cargo have already increased.
Trump said on the 12th: Video screenshot showing friendly China-US talks.
An executive of a Chinese company told CNN this week that she saw freight rates rise. Previously, the cost of transporting one container to the US was $4000, now it has risen by about 50%. She also said that this increase in costs is borne by American buyers, which may ultimately be passed on to American consumers.
According to Drewry, a maritime consulting company, the non-contract spot freight rate from Shanghai to Los Angeles surged 16% compared to the previous week on Thursday, reaching $3136 per 40-foot container. It is predicted that the freight rate on June 1 may significantly increase to around $6000 per container.
In addition, since it takes several months for a ship to make a round trip between China and the US, the surge in the number of ships departing from China in the coming days and weeks may lead to a shortage of container ships this summer, when retailers are at their peak for shipping back-to-school and holiday goods.
Ben Tracy, vice president of strategic business development at Vizion, said: "The potential problem is that two months from now, during the peak retail season, we may not have enough containers available for loading in China, not only for containers but also for ships there."
"The US may celebrate Independence Day without fireworks."
The report also mentioned that for some industries, lowering tariffs now is too late.
Reuters reported that the surge in freight demand would overwhelm factories and container ships, causing supply chain problems. Shipping and retail experts both said that 90 days is not enough time for most factories to complete new orders.
Julie Heckman, executive director of the American Pyrotechnics Association, said that due to the inability to bear higher tariffs, US fireworks importers suspended many shipments from China in April. She said that although the current tariff costs are still high, some companies have started to resume shipments. However, for some companies, it may already be too late to receive goods before the US Independence Day holiday, leading to shortages of certain products.
"Everyone is racing against time to take advantage of this 90-day tariff suspension period, but the departure and booking of these voyages take time. This isn't something that can be turned on and off instantly," Heckman said. "Companies are making arrangements, and they will try to secure as many orders as possible, but some of these orders may arrive after Independence Day."
NBC said that the shortage of fireworks may affect the US Independence Day next July 4. At that time, the whole country will celebrate the 250th anniversary, and the fireworks industry originally expected a surge in demand. However, due to the uncertainty of tariffs, many fireworks companies suspended production in China in April.
Heckman said that although some companies have resumed production, they have lost valuable production time now.
Trump's policies are "changing frequently," creating serious uncertainties that affect Sino-US economic and trade exchanges. The report said that US retailers are still concerned about the long-term impact of tariffs on their businesses and are struggling to plan for the next few months.
"Now that we have more certainty about the near future, we are able to plan more, trying to put more critical goods into production and ship them to the US," Dankert said. "But I think, in the long term, what enterprises and industries truly need is a sense of stability and future certainty to make long-term decisions about ordering."
Joe and Bella, a company selling clothing made in China, targets adults who cannot dress themselves due to arthritis, dementia, or being wheelchair-bound. Jimmy Zolo, the company's head, helplessly said that even though 90 days may not be enough to produce the products, he still placed new orders with suppliers. He said: "We can only hope that China and the US can reach a new trade agreement, and tariffs will not continue to rise."
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