The preliminary trade deal between the U.S. and China is expected to cause a capacity crunch on the Eastbound Trans-Pacific trade. Duties on Chinese goods are being lowered from 145% to 30%, and duties on U.S. imports are being reduced from 125% to 10%. The move is already releasing a backlog of shipments built up over the past month where ocean carriers indicated volumes had dropped by 30%-40%.

Amid the significant uptick in demand, forwarders have issued warnings of higher spot rates, surcharges, as well as vessel space and equipment shortages in the coming weeks. The backlog of goods built up in China due to previous tariffs is expected to flood the market, but according to Flexport’s head of ocean procurement, Nerijus Poskus, vessels are already 85–90% full.

Over 40% of sailings in May were blanked when demand fell sharply so capacity continues to be limited. It could take more than a month to replenish capacity on the route, said Poskus, explaining that the vessels needed on the Trans-Pacific route were not immediately available as they had been deployed to other tradelanes. He expects a space shortage to rapidly develop on the Trans-Pacific.

Even before the deal was announced, carrier executives warned of port congestion when Asian imports rebounded. Maersk CEO Vincent Clerc noted there would be a “catch-up effect”. Furthermore, the anticipated surge of volume could overwhelm U.S. port capacity as infrastructure has not improved since the 2020 cargo surge, carrier executives shared at the recent Georgia Foreign Trade Conference.

Additionally, the situation is complicated by container availability. Empty containers have been repositioned to Southeast Asia or not returned, which could lead to potential equipment shortages.

Source: Journal of Commerce