Riding the Wave: Seizing Container Shipping Profits in the Trade Truce Window

Philip CarterFriday, May 16, 2025 4:07 pm ET
2min read

The US-China trade truce, effective May 14, 2025, has unleashed a tidal wave of demand for container shipping, driven by a 277% spike in trans-Pacific bookings and a scramble to capitalize on reduced tariffs. For investors, this creates a narrow but lucrative window to profit from rising rates and capacity constraints—provided they act swiftly and hedge against looming risks tied to the 90-day deadline.

The Opportunity: Trade Truce Fuels a Shipping Boom

The 90-day tariff reduction—from 125% to 10%—has erased the fear of a "trade blockade," triggering an immediate surge in trans-Pacific cargo volumes. Companies like Hapag-Lloyd (HLAGG) and Maersk (MAERSK-B.CO) are benefiting directly from this demand surge:

  1. Rising Freight Rates:
  2. Spot rates for Asia-to-US West Coast routes have jumped 30% since the truce’s announcement, with rates hitting $4,200/FEU in early June.

  4. Capacity utilization for major carriers now exceeds 90%, forcing operators to deploy older ships and chartered vessels.

  5. Inventory Replenishment Rush:

  6. Retailers and manufacturers are front-loading orders to lock in lower tariffs, with Basic Fun Inc. (a toy supplier) reporting 30% higher orders from China.

  7. Logistics firms like STG Consultants are inundated with inquiries to reroute shipments back to China from Vietnam and Indonesia.

  8. Port Congestion & Premium Pricing:

  9. Ports like Long Beach and Shanghai are experiencing bottlenecks, allowing carriers to charge premium rates for expedited services.

The Risk: Post-Truce Uncertainty and Overhang

While the truce’s short-term boost is undeniable, the clock is ticking. Three key risks loom by August 11, 2025:

  1. Tariff Reversion to 34%:
  2. If no deal is reached, tariffs could jump back to 34%, slashing demand as companies reassess supply chains.

  4. Inventory Overhang:

  5. A 277% booking spike in May could lead to a glut of goods in US warehouses by late summer, depressing freight demand abruptly.

  6. Non-Tariff Barriers Persist:

  7. China’s rare earth export controls and US port fees remain unresolved, limiting long-term stability.

The Strategy: Tactical Allocation with a Stop-Loss

To capitalize on this window while mitigating risks, investors should:

  1. Buy Shipping Equities Now:
  2. Hapag-Lloyd (HLAGG): Europe’s largest container line, with exposure to Asia-Europe and trans-Pacific routes.

  3. CMA CGM (CMAC): Benefits from high charter rates and a strong presence in Asia.

  4. Pair with Freight-Forwarding Firms:

  5. Expeditors (EXPD): Provides logistics solutions for companies managing post-truce supply chain shifts.

  6. Set a Strict Stop-Loss:

  7. Allocate 5% of a portfolio to shipping stocks, with a stop-loss triggered if rates drop 20% by August 15—signaling tariff reversion or demand collapse.

  8. Monitor Key Metrics:

  9. Track the Baltic Container Index and weekly booking data to gauge momentum.

Conclusion: Time Is of the Essence

The trade truce has created a once-in-a-cycle opportunity for container shipping stocks, but it’s fleeting. Investors who act now can ride the surge in rates and volumes—but must be prepared to exit quickly if August’s deadline ends in disappointment. With the clock ticking, this is a high-reward, short-term bet best suited for aggressive traders willing to balance urgency with discipline.

Act fast, but set your escape route. The next 90 days will decide the payoff.