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            december 08, 2019

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US threat to impose tariffs on China imports likely to push up rates


US President Donald Trump's threat to impose a 10 per cent tariff effective from September 1 on the remaining US$300 billion of imports from China that have not already been hit by tariffs has prompted Drewry to predict a "a brief spike in transpacific freight rates, specifically to the US west coast as the quickest route to market in the first half of August".
The president's remarks that he might raise those tariffs to 25 per cent "could see that process continue beyond September 1, but we do not expect freight rates to replicate the same steep incline as last year," stated the London-based consultants in the most recent edition of their Container Insight Weekly.
According to Drewry, up to four million TEU of China-to-US goods might be affected by the September 1 tariffs. That compares to Drewry's estimate of 640,000 TEU affected by the first round of tariffs imposed on $50 billion worth of goods in 2018 and six million TEU affected by the tariffs on $200 billion of goods that first went into effect at a 10 per cent level in September 2018 and then were increased to 25 per cent in May.
The original threat that the tariffs on the $200 billion of goods would be raised to 25 per cent at the start of this year led to many retailers and manufacturers pulling forwards shipments late last year, triggering a jump in container freight rates and busier-than-usual end of the year for many shipping lines and US ports.
"The difference this time around," said Drewry, "is that cargo owners have less time to prepare and with transit times between China and the US west coast taking approximately 14 days, there is only a small window during the first two weeks of August for shippers to arrange front-loading to beat the new deadline.
Over the long-term, Drewry asserted that "rising protectionism is a negative development for container growth, potentially mitigated by trade substitution and greater production fragmentation away from China but there could be some short-term upside."

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