THE pandemic created an emergency for container shipping in the spring of 2020, forcing US importers to abruptly cancel orders from Asia. Five years later, US president Donald Trump has manufactured an emergency for container shipping by instituting enormous tariffs, precipitating a new wave of order cancellations.

Trump created more uncertainty on Wednesday, hiking tariffs on Chinese goods to 125% but announcing a 90-day reprieve on tariffs of over 10% to other countries. His decision came amid a steep drop in import orders following “Liberation Day” tariffs.

“If you look at the North American market, we’ve seen a 20% decline week over week,” said Sanne Manders, president of Flexport, in an interview with Lloyd’s List on Wednesday conducted prior to Trump’s market-altering announcement.

“We are expecting the next weeks to be way worse. I think we have to assume that cargo volumes are going to come down very significantly. When we call importers and ask them about their future plans, the words ‘pausing’ and ‘cancelling’ are part of every conversation.”

The National Retail Federation warned early Wednesday that US imports will “drop sharply” due to Trump’s tariffs.

“At this point, retailers are expecting to pull back and rely on inventories, at least long enough to see what happens next,” said NRF vice president of supply chain and customs policy Jonathan Gold.

Global Port Tracker, a joint venture of NRF and Hackett Associates, estimated that US imports will fall by at least 20% in 2H25 versus 2H24.

“We expect to see imports begin to decline in May and drop dramatically during the remainder of the year,” said Hackett Associates founder Ben Hackett. Global Port Tracker now predicts that June imports will be the lowest since February 2023.

However, the Global Port Tracker outlook was released before Trump blinked on non-China tariffs. The US decision to minimise tariffs to other countries could change the forecast yet again by inducing higher imports from non-China sources over the next three months.

No ‘Art of the Deal’ for China

“When we were looking at the different scenarios, we were all hoping this would be an ‘Art of the Deal’ type of situation, where you ask for something unreasonable and end up with something reasonable,” said Manders. “I think that still might be the case for many countries, but it’s not going to be the case for China. I think that’s pretty clear now.”

Stocks soared on Wednesday following Trump’s about-face on reciprocal tariffs for countries other than China, but the stock market may be underestimating how pivotal the China-US trade is.

Of total US imports in 2024 measured in teu, 39% arrived from China, according to data from Descartes. Preexisting tariffs, together with new ones, put levies on some Chinese goods as high as 150%. China has increased its retaliatory tariff on US imports to 84%.

“US importers get a disproportionate share of their electronics out of China,” said Manders. “Some will keep importing because their margins can sustain [new tariff levels] but a lot will not be imported anymore.”

Chinese goods that are no longer viable to sell in the US can be warehoused and shipped to other buyers. “Ultimately, the US is only 14.8% of China’s trade. They will definitely start selling the products in other places. China is pretty well diversified in terms of its trading partners,” said Manders.

Tariff spread could shift trade flows

Trump’s reversal is extremely good news for US businesses importing from countries like Vietnam and Taiwan that would have otherwise faced crushing tariff bills.

The announcement also creates a wide spread between tariff rates of exporting nations for a period of time that should allow orders to be accelerated.

According to Manders, “The consumer will keep on buying stuff and that stuff will be more expensive. But if there is only a 10% tariff on the commercial invoice value, that’s only a few percent in price increases. The commercial invoice value is roughly 35% of the normal retail price. So, for countries with a 10% tariff, it could require price increases of around 3% to offset that.”

In the case of China, where the tariff is at 125% or more, the required price increase to maintain margins would be over 40%.

China’s competitors “would have an advantage, and there will be a lot of sourcing shifts to countries that have better tariff rates than China”, predicted Manders.

China tariffs could shutter some US businesses

There was a huge sigh of relief on Wall Street on Wednesday, but the news for many US importers is actually worse, given even higher tariff rates for China announced by Trump.

“I wouldn’t be surprised if we see quite a bit of abandoned cargo in the ports two, three weeks from now,” said Manders. “My prediction is that a lot of SMBs [small and medium-sized businesses] will go bankrupt over this.”

The required price increase to compensate for China tariffs “is the kind of increase that consumers are not going to accept”.

This situation also creates a risk for customs brokers and freight forwarders that pay tariffs on behalf of importers. “Either you sign up and pay through ACH [Automated Clearinghouse] or your freight forwarder or customs broker pays for you and you pay them back. A customs broker or freight forwarder could go bankrupt if they’ve paid customs duties and its customers go bankrupt and don’t pay.”

Flexport is a freight forwarder and customs broker. Asked about strategies to mitigate this risk, Manders responded that possible options include requiring customers to go through ACH directly or telling them they need to pay on delivery, with no credit terms.

CBP overload?

Another issue that is not resolved by Trump’s capitulation on Wednesday involves Customs & Border Protection. CBP has not ramped up personnel but the workload created by new tariffs is higher.

“The documentation is prepared, the tariff rates are applied and that is submitted to the government system. But that’s not fully automated,” said Manders.

“There is quite a bit of manual review here, and the new tariffs definitely add line items. Before you used to have one line item and you can have up to five line items. If there is steel or aluminium, for example, section 99 codes are applied, and those can’t be validated automatically.

“There’s a lot of manual work for CBP to release the goods, and I do think there is the possibility of overwhelming the CBP system.”