US Logistics Update [May 18, 2025]-English

The U.S. and China have agreed to reduce reciprocal tariffs on each other by a significant margin (115 percentage points) for 90 days after a game of chicken. As a result, companies are resuming orders they had put on hold and stocking up on inventory, Bloomberg reports. The industry is expected to surge imports from China during the grace period, rather than risk a 30% higher tariff, with the possibility of tariffs rising again after 90 days. With the tariff war with China entering a 90-day truce, the odds of the U.S., which accounts for about 25% of the global economy, falling into a recession are also lower. Ratings agency Moody's lowered the probability of a recession to 45% from 60%, while Goldman Sachs cut its forecast to 35% from 45%. However, many experts believe that slowing growth and inflation will be difficult to avoid. Leading U.S. retailer Walmart said on May 15 that the tariffs are “still too high” and that U.S. consumers will likely see price increases at Walmart later this month or next. This comes as President Trump has been pressuring many retailers to reverse the hikes, saying they shouldn't be blamed on tariffs, which is a major concern for consumers.

The U.S. Consumer Price Index (CPI) rose 2.3% year-over-year in April, the slowest increase in four years since February 2021 (1.7%), the federal Labor Department announced on May 13. The 0.2% increase was up from March, which was the first month-over-month decline (0.1%) since the pandemic (see graph below). Excluding volatile energy and food, core CPI rose 2.8% year-over-year and 0.2% month-over-month. Egg prices, one of the main drivers of inflation, were down 12.7% month-over-month but up 49.3% year-over-year.

April's CPI is an indicator after the 10% base tariff and 25% tariffs on steel, aluminum, and foreign-

made automobiles took effect on April 5, raising expectations that the tariffs will have little impact

on prices and that the U.S. economy will remain on a solid growth path.

Trans Pacific East Bound (TPEB) trends
The temporary ceasefire in the U.S.-China tariff war, combined with existing backlogs and peak back-to-school demand, strongly suggests that demand for TPEB routes will increase significantly in Q2 and Q3. Container tracking company Vizion reported this week that cargo bookings from China hit a year-to-date high, up nearly 300% from the previous week. Carrier freight rates have also surged in recent days, with spot prices to US West Coast ports rising to $2,567 per FEU from $1,600 per FEU at the end of March, and prices to Eastern ports rising to $3,567 per FEU from $2,600 per FEU over the same period. Hapag-Lloyd, MSC, CMA CGM, ONE and ZIM announced an increase in rates to Western ports to $6,000 per FEU, effective June 1. Carriers anticipate supply shortages and will quickly restore supply through route adjustments, with Ocean Alliance and ZIM resuming suspended services (CPS/AAC2/HBB/PCN3, ZX3) from week 22. Other carriers are expected to restore supply quickly. Industry experts estimate that it takes about a month to transport goods from China to the U.S., but limited capacity at terminals, trucking, etc. could cause pandemic-like bottlenecks.

De Minimis Tariffs on Chinese/Hong Kong Goods Reduced to 54% (5/14)
President Trump has reduced the tariff rate on de minimis imports of $800 or less from China from 120% to 54%.
- Previous: 120% base duty or $100 per item (increased to $200 on June 1)
- Now: 54% base duty or $100 per item (with plans to increase to $200 on June 1 canceled)

Although about 50% of airfreight demand from China to the US is for low-cost e-commerce cargo

such as TEMU and SHEIN, many experts believe that the de minimis tariff reduction on Chinese

exports to the US is unlikely to spark a surge in airfreight demand on Pacific routes. However, given

that a large number of freighters have been removed from the US-China route and shifted to other

routes, the potential for supply shortages and higher freight rates is high.