AMONG the Trump tariff memes inundating social media, there’s one where the US president is spinning a game-show wheel. Chance determines where the rate ends up, from 10% to 145%, whether there’s a refund, whether levies are back on or off, or whether the penguins in the Heard and McDonald Islands will pay the price.

That meme sums up today’s cost uncertainty for US importers. Current tariff dynamics make earnings forecasting impossible for giants like Amazon and Walmart and could push some small and medium-sized businesses into bankruptcy.

The largest share of US containerised imports — the 39% of total teu arriving from China — is now under severe stress. Container shipping participants have only seen this situation once before: during the initial Covid lockdowns in China.

Tech reprieve won’t rescue ocean shipping demand

Most containerised goods shipped from China to the US are still tariffed at 145%, a level so high it is forcing US businesses to pause orders when possible.

Smartphones, computers and electronics won a 90-day reprieve on Friday and are now tariffed at 20%. Tech stocks jumped on Monday in response. Trump said during a press conference, “I speak to [Apple chief executive] Tim Cook. I helped Tim Cook recently and that whole business.”

The exempted electronics represent over 20% of US goods imports measured by value, but the reduced levies will have little effect on ocean shipping demand because these cargoes comprise only a sliver of US import volume shipped by sea.

The largest US import category from China by value, smartphones, moves primarily by air, and any phones that do move by sea are insignificant to shipping demand given their small size (it is estimated that 22,000 iPhones could fit in a single twenty-foot container).

Jason Miller, a freight economist and professor at Michigan State University, told Lloyd’s List that the US imported 55,000 tonnes of smartphones by air in 2024, including 45,000 tonnes from China, “and hardly any moved by water”.

Government data compiled by Miller shows that the top cargo categories moving via ocean from China to the US in 2024 (measured by weight) were bikes and bike parts, kitchenware, plastic household items, furniture, lithium ion batteries, exercise equipment, automobile brakes and other parts, textiles and clothing, porcelain fixtures, iron and steel, holiday decorations, fans, appliances and bedding.

Linerlytica wrote on Monday: “Despite moves to de-escalate the tariff war, we estimate that 30-40% of the transpacific container imports are still effectively halted by the tariffs that remain in place, principally affecting carriers with the largest exposure to Chinese exports to the US.”

The carriers with the highest percentage exposure to the China-US trade are Hede, Matson, SeaLead, TS Lines and Cosco, said Linerlytica.

Cancellations in China, frontloading potential in Southeast Asia

“The uncertainty in the market is severe,” said Paul Bingham, director of transportation consulting at S&P Global Market Intelligence, in an interview with Lloyd’s List.

“Some beneficial cargo owners have paused orders as they wait and see how this shakes out. Smaller importers are just cancelling orders because they can’t sell goods at that price [to cover tariffs]. In terms of trade impact, it’s very clear that bookings will nosedive because the orders are not happening.” 

Kit Johnson, director of trade compliance at customs brokerage John S. James Co., pointed to the limitations on cancellations.

“We are hearing of order cancellations from some sectors that are able to,” Johnson told Lloyd’s List. “For instance, they either have sufficient inventory for now or they have an opportunity to source elsewhere.

“However, in the case of certain manufacturing sectors, especially those with just-in-time inventory, this isn’t feasible. Without those imported goods, some businesses simply cannot continue to make their products, so they pay what they must to keep the business going.

“For others, there are contracts in place, and cancelling an order isn’t as easy as picking up the phone or sending an email,” said Johnson.

There could also be some offsetting shipping upside from Southeast Asia, where tariffs have been lowered to 10% for 90 days, creating a huge spread with tariffs on most Chinese goods.

“Ninety days is enough of a window where you could get something in if you think it’s going to last that long,” said Bingham. “There is an incentive to try to frontload and insulate yourself later in the year, if, for example, you already have a supplier in Vietnam.

“But even if you increase that by some tremendous percentage [outside of China] it isn’t going to make up for the 40% from China, so overall, the transpacific will come down.

“There’s also a risk because these time periods are completely at a whim,” Bingham continued. The 90-day reprieve for countries other than China could be extended on a case-by-case basis if there are ongoing negotiations. “Or he [Trump] could change his mind and say it’s not 90 days, it’s 30 days. We really don’t know.”

Eventual effect on US store shelves?

Reduced imports to the US would ultimately lead to shortages in stores if the order pause lasts long enough. “It will depend on the category,” said Bingham.

Importers frontloaded orders in preparation for tariffs, increasing volumes in both 2024 and early this year, which will delay the effect on store shelves. US imports of smartphones and laptops were particularly high in January and February due to frontloading, Miller said.

Jeans retailer Levi Strauss said during its latest quarterly call that it already has inventory to meet US demand through the second quarter.

The Wall Street Journal highlighted one particular example where shortages could become apparent, noting that US consumers are heavily dependent on socks made in China. These are low-margin goods, meaning Chinese exporters can’t afford to pay the tariff, nor can US importers pass along a high price increase.

Concerns with processing and payments

The sudden spike in tariff rates is also raising practical concerns for importers in the near term: Will there be delays at the ports due to manual aspects of processing by Customs & Border Protection? What happens if importers can’t afford to pay CBP the tariff, particularly in cases where a customs broker or freight forwarder is advancing the payment? Will higher tariffs lead to higher collateral requirements for customs surety bonds that will put further strain on importers, negatively impacting shipping demand?

Regarding possible delays at the ports, Johnson said, “The main thing I would be concerned about as far as manual processes would be inspection holds, not just from CBP but also the other agencies with hold authority like FDA [Food & Drug Administration] and NHTSA [National Highway Traffic Safety Administration]. In addition to normal concerns like storage and demurrage charges, a delayed release could mean increased duties if the release occurs after the implementation of a new tariff.”

Regarding unpaid tariff bills, he said, “I think most brokers are examining the risk involved in advancing duties without prior payment. On top of the increased financial exposure with greatly increased duties, the overall market uncertainty at the moment should make any business careful and judicious in their decisions to extend credit.”

Johnson does not see surety bond collateral requirements having an immediate effect on ocean shipping demand. “I don’t know that it will have a huge impact on overall volumes in the short term, as an importer may be able to find another surety willing to write their bond without collateral,” he said. “But sureties will also be more cautious now, so it will become more challenging.”

Long-term effect of Trump tariffs

Additional concerns have been raised about long-term fallout for US trade.

Trading partners’ perception of America will change, and these countries will likely seek to hedge their future exposure by developing more trade outside the US.

According to Bingham, “We might be able to recover some of the perception loss that has occurred, depending on all sorts of factors: what the administration chooses to do, what Congress chooses to do, or even what the courts do.

“But more broadly, there are clearly a number of businesses and policymakers around the world that have been shocked enough that they’re not likely to ever go back to the perception they had before.”