** Latest tariff threat could cause spike in transpacific container rates. **
Author: Larry Han

Drewry estimates the latest tariff threat could affect 4 million TEUs of cargo from China to the U.S.


  Drewry said its analysis indicates as many as 4 million TEUs of China-to-U.S. goods might be affected by the tariffs that President Trump has threatened to impose on Sept. 1. That compares to Drewry’s estimate of 640,000 TEU affected by the first round of tariffs imposed on $50 billion worth of goods last year and 6 million TEU affected by the tariffs on $200 billion of goods that first went into effect at a 10% level in September 2018 and then were raised to 25% in May.

   The original threat that the tariffs on the $200 billion of goods would be raised to 25% on Jan. 1 caused many retailers and manufacturers to “pull forward” shipments late last year, resulting in spike in container freight rates and busier-than-normal end of the year for many shipping lines and U.S. ports.

   Drewry noted that “the difference this time around is that cargo owners have less time to prepare and with transit times between China and the U.S. 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.

   “In the long term,” Drewry said, “we retain the view 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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