Specifically, according to a statement issued by the White House, the tariffs cover about $18 billion of Chinese products, including Chinese-made steel and aluminum, semiconductors, electric vehicles, lithium batteries and components, critical minerals, photovoltaic cells, port cranes and personal protective equipment, and other goods. Among them, from this year, the import of Chinese electric vehicles will be subject to a four-fold tariff, from 25% to 100%, and the import tax on Chinese solar cells will also be doubled, from 25% to 50%. In addition, tariffs on U.S. imports of Chinese semiconductors will jump from 25% to 50% starting in 2025.
Peter Sand, chief analyst at Xeneta, said, "The Biden administration's new tariffs on China could be another example of history repeating itself. If so, global businesses will have to prepare for increasing supply chain costs, which will still end up being paid for by U.S. consumers. ”
"Back in 2018, we saw the Trump administration impose a series of tariffs on Chinese imports. As a result, this constant blow has led to an increase in container freight rates from China to the West Coast by more than 160%. As the situation calmed down, freight rates began to fall again at the end of 2018, but never returned to the same level, meaning that the market established a new normal by accepting higher costs. ”
Peter Sand noted that given the U.S. actions, companies may seek alternative supply chain options to enter the U.S.
In the first quarter of 2024, demand for container shipments from China to Mexico increased by 34% year-over-year, fueling the suspicion that some shippers are using it as a "back door into the U.S."
"There has been incredible growth in demand in the shipping container market from China to Mexico, and the latest U.S. tariffs are likely to allow this rapid growth to continue," said Peter Sand. ”
"Based on purely theoretical calculations, at the current growth rate, by 2031, the number of containers exported from China to Mexico will exceed that of the United States. In addition, we are seeing U.S. shippers looking to import goods from countries such as Vietnam – a situation that has gotten worse since tariffs were imposed in 2018. ”
"However, these supply chains are not yet mature compared to the already well-established China-West US transpacific route. This means more complexity, more volatility and increased costs. ”
At the same time, the U.S. announcement of tariffs comes at a time when the container shipping market is being affected by major black swan events, including the Red Sea crisis.
On May 14, the spot freight rate from China to the West Coast was $3,837/FEU, up 162% year-over-year. Spot freight rates from China to the eastern U.S. increased by more than 100% year-on-year.
"The last thing the maritime industry needs right now is more red tape and complexity in the supply chain. ”
Peter Sand believes that much will now depend on China's response.
According to foreign media reports, U.S. Treasury Secretary Janet Yellen said, "Hopefully, we won't see a major response from China — but that possibility is always there." In fact, no matter how much she hopes to gain China's "understanding," China will take resolute measures to defend its rights and interests.
"There is no doubt that this is a move by the United States to suppress and contain China's development, and we are once again seeing the impact of geopolitics on global supply chains," he said. $18 billion, which is not a huge number for US-China trade, but if China chooses to respond in the same way as it did in 2018, it will mean more pain for shippers and ocean service providers. ”
