China-US Trade Surge Expected as Tariffs Slash 91%

Following the implementation of the outcomes from the Geneva trade talks between China and the United States on May 14, industry experts anticipate a significant surge in trade between the two nations over the next 90 days. This is due to the efforts of negotiators from both sides to make further progress in their discussions, as well as the increased urgency among businesses to stockpile inventory. Notably, American importers are expected to initiate a new wave of purchasing.

The joint statement released on May 14 from the Geneva trade talks highlighted substantial progress, including a significant reduction in bilateral tariffs. The U.S. has eliminated 91% of the additional tariffs it had imposed, while China has reciprocated by removing 91% of its retaliatory tariffs. Additionally, the U.S. has suspended the implementation of a 24% "reciprocal tariff" for 90 days, with China doing the same.

Given the clear window of reduced import costs for American importers over the next three months, Philip Sun, an analyst at Goldman Sachs, posed a question: "Imagine this: how eagerly will Chinese exporters and American importers rush to place orders during this 90-day tariff suspension period?"

Sun further elaborated, "We are in a highly uncertain world. Who knows what will happen in 90 days (or even during this period)? Should retailers like Walmart stock up on Christmas goods to the maximum extent possible, perhaps not only to meet the demand for 2025 but also to prepare for 2026?"

Sun's bold prediction was that "China's exports will skyrocket in the next 90 days, with 'front-running' becoming the key word."

This perspective is shared by many market participants. Scott Kennedy, a senior advisor on China business and economics at the Center for Strategic and International Studies, noted that due to the urgency of companies to transport goods across the Pacific during the period of lower tariffs, he expects trade between China and the U.S. to accelerate during the 90-day negotiation period.

Kennedy believes that trade between the two countries will increase, and some companies may see a significant jump in their shipping volumes. These companies may still be uncertain about the situation a few months from now and need to use this breathing room to expand their imports and accelerate trade.

Some industry experts are drawing parallels between the current situation and the end of last year. Compared to the same period in 2023, China's exports to the U.S. surged by 15.6% in December 2024, as many American companies preemptively stocked up in anticipation of tariffs being imposed after Trump's inauguration.

It is worth noting that following the positive news from the China-U.S. tariff negotiations, some American importers were reportedly excitedly placing calls to Chinese suppliers as early as Monday morning local time, urging them to ship goods to secure container slots.

Ryan Petersen, CEO of the international freight forwarding company Flexport, stated, "Since the first day the trade agreement was reached, our sea freight orders from China to the U.S. have increased by 35%. A large number of orders are about to accumulate, and container slots will soon be snapped up."

Some international shipping giants are already preparing for this. Companies like CMA CGM have described the 90-day suspension period and the reduction in tariffs between China and the U.S. as "good news." A spokesperson for Maersk added, "Now, our customers have a clear 90-day window of reduced tariffs, and we are working hard to help them make the most of this opportunity."

Lu Ting, Chief China Economist at Nomura, wrote in a report, "Given that many exporters may have delayed shipments to the U.S. in April, the significant tariff reduction is likely to stimulate a wave of suppressed exports."

Indications suggest that this surge in trans-Pacific shipping has already led to a rapid increase in short-term freight rates. Analysts from Jefferies noted that the cost of shipping a 40-foot equivalent unit across the Pacific between China and the U.S. has risen from around $2,000 in mid-April to approximately $2,500 this week.

Jefferies analysts stated, "The container shipping industry is expected to see a substantial improvement in spot freight rates, driven by two fundamental factors: the recovery of normal cargo volumes and the typical start of the peak season in July. Given the tightening of trans-Pacific capacity, shipping companies are in a strong position to drive up freight rates."