A tale of two tariff pauses

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Kristen Hays: 

Hello and welcome to the Platts Commodities Focus podcast by S&P Global Commodity Insights. Today we're digging into the two pauses of triple-digit tariffs between the US and China in 2025 so far and their impact on shipping. 

I'm Kristen Hays, the manager of Americas Freight Markets. With me today are Catherine George and Aroob Sheikh who cover North American and South American container markets. 

So let's first set the scene on these tariff pauses. The first time the US and China stood down on triple-digit tariffs for 90 days in May, China's 125% on US goods and the US's 145% on Chinese goods. Container ships loaded with Chinese imports hit the water in droves, US buyers sought to use the pause to bolster inventories ahead of the second half of 2025, which includes the holiday shopping season critical to retailers. Container rates to the US West and East Coast spiked and ships that would've been bound for South America diverted to those US destinations. 

However, supply drove that surge, not demand, and that rush quickly deflated. By the time the world's two largest economies reached the end of that pause in mid-August, both announced another 90-day pause as trade talks continued. This time, there was no surge. US buyers sufficiently bolstered supply during the first pause and soft demand that has lingered throughout 2025 remains unchanged. 

One thing to remember, containers carry everything from furniture and washing machines to toys, games, clothing, food and drink, and packaged goods. When you walk into Walmart and Target look around, at some point, most of what you see came to the US in a container. Importers pay tariffs, and those costs that importers don't absorb trickle down to higher prices for consumers. The cost to move those goods in containers on ships depends on the strength of demand, availability of ship capacity, and, as we've seen this year, a push to boost inventories when very high tariffs are paused, at least the first time. 

These rates have shown wide swings before. Demand cratered in 2020 when COVID sent people home all over the world and container rates fell sharply. As economies emerged from COVID shutdowns in '21 and 2022, demand for everything from homes and cars to air fryers and couches exploded, leading to freight rates of $10,000 per container and higher, as well as serious backups to top US container ports, such as Los Angeles/Long Beach. Interest rates that began rising in 2022 started cutting back on that demand in 2023, and container rates fell. 

Other world events have prompted higher freight rates, rebel attacks on ships in the Red Sea, congestion at Asian ports, and a brief longshore strike at US ports from Boston to Houston, but then came tariffs. The Trump administration has imposed tariffs on countries worldwide, including the triple-digit taxes on Chinese imports that prompted China to respond. Much US-China trade hit a standstill in April this year with ships turning around to return to China as buyers said, "No way, we don't want to buy it." And that first pause temporarily reduced tariffs to 30% on Chinese goods and 10% on US goods. 

So Catherine and Aroob, let's talk about what you saw in that surge and what you're seeing now. We're going to turn to Catherine George. She's the Associate Editor for North American Container Markets for us here in the Americas. Tell us what you've seen. 

Catherine George: 

Yeah, I will first walk you through what we saw in the first pause. So first, Liberation Day, so when the tariffs were first announced, that 90-day pause that was announced on May 12th, we saw a shift of volume, trade dynamics, everybody front-hauled ahead. Usually the typical peak season is later in the summer, I would say typical peak season's around July, August, and September. 

Kristen Hays: 

And peak season, that's when people are buying a lot of stuff to fill the warehouses ahead of Christmas shopping, right? 

Catherine George: 

Yeah. So you think of all your holiday goods, think of all your Halloween goods that you buy at Spirit Halloween, Target... 

Kristen Hays: 

Back-to-school. 

Catherine George: 

... Costco, back-to-school--backpacks, pencil supplies--and on top of that, all of the Black Friday, so clothing, and then Christmas goods too. So think of all your holiday goods that you buy early in October. So all of those are front-hauled a couple months ahead. 

Kristen Hays: 

Okay. So the peak season this year that happens every year, that happened to coincide with this 90-day pause. 

Catherine George: 

Yes. 

Kristen Hays: 

So what did you see with that? 

Catherine George: 

So we saw a early peak season in this year, and that is completely motivated behind the first pause that happened May 12 90-day extension, everybody front-hauled ahead, carriers put out multiple GRIs, which stacked rates up to... we were seeing early July rates up to the mid-6,000s from North Asia to the US West Coast and then to the mid-7,000s to North Asia to the US East Coast. And yes. 

Kristen Hays: 

What's a GRI? 

Catherine George: 

So GRI is a general rate increase. So that is adjustment that carriers put out a base rate adjustment that carriers announce usually the 1st and 15th of the month to adjust the price in line with operational adjustment, operational cost, on top of that adjustment of market factors too, including rise of demand. You see this rushed ahead front-haul ahead for the tariffs too. So Russia change shifts of drastic change of volume, causing more demand in the market. So carriers really adjust the base rate. So they usually adjust it up to, I would say, around $1,000 per FEU. 

Kristen Hays: 

What's an FEU? 

Catherine George: 

So an FEU, that is the unit that we use, the container size that we look at, so 40-foot unit. So there's two big or, I guess, two major units that we use for containers. First is the 20-foot unit, so the smaller container size, and then the 40-foot unit. 

Kristen Hays: 

And the 40-foot unit, that's the one that we all see on the highway being hauled by a semi-trailer? 

Catherine George: 

Yes, yes, that's correct. 

Kristen Hays: 

And with this GRI, the market doesn't necessarily say, "Okay, we'll pay this much more per container if you impose this cost," right? 

Catherine George: 

It's really up to the shipper to accept the GRI. It's really dependent on what space is available. If there is more competitive offers that carriers have out there below the GRI, they can't accept it, or there's also partial GRIs. Sometimes it doesn't fully accept in the market up to $1,000. Maybe it gets accept below from, let's say, half of the GRI, quarter of the GRI. It's really dependent on the type of or, I guess, who is willing to accept in the market. 

Kristen Hays: 

Okay. And Aroob, let's turn to you. This is Aroob Sheikh, she is our Associate Editor for South American Container Markets. And I mentioned earlier that when we saw the surge of ships heading to North America, that there were ships that would have been headed to South America, whether that be the West Coast where we see Peru, Chile, Ecuador, or East Coast, which is largely Brazil and Argentina. So tell us what you saw during that time. 

Aroob Sheikh: 

Of course, you're absolutely right. What we saw was South America really dealing with a lot of the aftershocks that came with these surge demand that the US and North American markets were feeling. So we saw, like you said earlier in the introduction, a lot of these rates and a lot of this "demand" was pushed due to supply-driven reasons, so that the reshifting capacity mainly driven by some of that rerouting, especially on that transpacific side. And again, these supply-driven increases led to a market that was full of much higher rates that the market was prepared for. And similarly enough, we were getting ready for that back-to-school season, seasonal holidays as well. So a lot of that was already in play at that time, supporting that increases as well. 

A lot of what we were hearing back from the market was a lot of complaints of tight space, and a lot of this tight space was "artificially created and supportive," so you were seeing a lot more competition just to get a booking done as well. And that started translating into rolled cargo as well. So you'll see where June is supposed to be a peak season, you start seeing the emergence of it, but it became a full-on surge, a full-on stronger peak season. And you saw a bit of a different characteristic affect both the West Coast and East Coast. 

For the West Coast, you could almost say that it hit almost hard and fast. So you saw a pretty sharp increase with some of the rerouting that you saw because keep in mind to that Los Angeles/Long Beach port is major on the West Coast, so it's the easiest to reroute down from, say, North Asia to Mexico, North Asia from Peru up there. And we were hearing reports of vessels being emitted as early as mid to late May, and that's really coincides with the first announcement of the 90-day shipment. So carriers were quite prompt to respond to the demand expected in the market. 

Kristen Hays: 

Okay. So we saw a surge to North America, a surge pulling capacity that would've headed to South America to North America. But overall, this didn't really seem to last very long. But one thing to keep in mind is 90 days may seem like a long time, but in terms of shipping, it's not. It takes about two months to bring a ship from China to North America. So when they had this 90-day pause, they grabbed it at the time and really grabbed onto it. But if I remember right, Catherine and/or Aroob, tell us what we were seeing by the time we got to June, the end of June. 

Catherine George: 

I mean, by the end of June for the North America container market, it was pretty flat. That is just purely backed behind the front-haul activity that the market experienced in June 2025, later May 2025 too. So we saw that front-haul rush ahead, and then we saw it dip back down to the mid-1,000s to the West Coast, mid-2,000s to the East Coast, purely made it behind. Nobody was taking the typical peak seasonal GRIs. Inventories were already stocked ahead. Nobody had any urgency to ship ahead or any volume ahead due to already warehouses have been full. 

Kristen Hays: 

Okay. So when we get to August, the first 90-day pause ended in mid-August, we thought we might hear, here's some new tariffs, we might see them back up in the triple digits again. But along comes another pause. They announced, "Okay, we're going to pause for another 90 days while trade talks continue between the US and China." So what did we see this time? Aroob, why don't you go first? 

Aroob Sheikh: 

So it's quite interesting. So if you look at South America, jumping back to your previous question, mid to late June, South America is still playing catch-up essentially because once more, we were struggling previously with getting enough space, rolled cargo bookings getting delayed, having to plan out a few weeks ahead. So you go to late July, rates are still a bit elevated, more so rising in the East Coast and starting their downward descent on the West Coast. 

And you see later July when you see that second tariff announcement being pushed into the market, you're starting to see rates really dip back down. And moving into August, you actually see that pattern continue forth. Before we started seeing some more carrier attempts to raise rates. So to be frank, the second 90-day tariff didn't require as much capacity rerouting or as much vessel rerouting as needed for the first 90 days. 

Kristen Hays: 

Is that pretty much because everybody got their inventory stocked up ahead of the second half of the year, and they didn't really need to do it again, even though they had another pause? 

Aroob Sheikh: 

For the South American market, at least, if you just look at the first 90-day pause, once more, most of that was supply-driven. So now come now to the second day, second instance of this 90-day extension, you're not seeing as much vessel rerouting or supply-driven increases. So right now, they're focusing more so on natural demand really driving current rate fluctuations. 

Kristen Hays: 

We've mentioned Golden Week, what exactly is that? Is that something you normally would see a surge in capacity ahead of? 

Catherine George: 

The North America container market usually sees a small preseasonal rush spike, I would say in September, mid-September before any of the Chinese factories closed down, starting October 1st into Golden Week. But right now, since everybody front-hauled ahead, like we previously mentioned, everybody warehoused everything, inventory's already stocked up ahead. This season has been pretty flat leading into Golden Week. 

Carriers have been trying to implement more blank sailings, more void sailings from June 2025 and to present September 2025. But that really did not budge the market. There wasn't enough capacity taken out to maintain even these rate levels. So we're still seeing a pretty flat Golden Week of what it typically we see that GRI increase into September like we did last year compared to September 2024. But it was very uneventful for this year. 

Kristen Hays: 

Okay. And what exactly is a blank sailing? That involves, say, you've got a container ship that's going to Los Angeles/Long Beach, and then it comes down through the Panama Canal, and it's going to stop somewhere in Texas. Does a blank sailing mean they have fewer stops at port? 

Catherine George: 

So it's when you emit a port of destination. Let's say, it was scheduled to sail at LA/Long Beach, scheduled to sail New York, that port of destination has been omitted in that rotation. 

Kristen Hays: 

Okay. And is that a way for ships to reduce the available capacity so they can save costs or something like that, or maintain schedules? 

Catherine George: 

Yes. So it helps reduce overall volume going into the North America lanes. Also, on top of that too, I know some carriers are trying to swap out smaller vessels also to create a bit more tightness into that lanes. And also some carriers announcing emitting their entire service on that lane, not just emitting a port destination. 

Kristen Hays: 

Okay. And when they switch out for a bigger ship, instead of using a bigger ship, they'll do a smaller ship, say, one that can carry 8,000 containers compared to one that could carry 15,000. That's also a way for them to save money, or try to keep rates where they are so they won't keep falling backward if they're using the bigger ships? Is that a motivation to switch out for smaller ships? 

Catherine George: 

Yes, yes, completely. 

Kristen Hays: 

Okay, okay. Well, you've both been saying in recent weeks you've seen market activity be a little repetitively slight, slow, quiet, et cetera. Do you expect it to stay that way for the rest of the year since we had this big surge and everybody already pumped up their volumes and pumped up their inventories? 

Catherine George: 

Well, there are a couple of things that we are going to run into, I guess, a little bit of change of policy under the current administration in the US, including the USTR port fees, on top of that, the US-China trade negotiation trade deal that will be finalized in November. But overall, market sentiment that I've been hearing is pretty, I would say, hesitant, especially on the USTR port fees. A lot of the carriers are absorbing most of those surcharges or absorbing most of those port fees and not passing it on to the customers. 

And part of it too is to gain more market share. I've been hearing too, as a part of, I guess, a part of carrier strategy on top of that is there's this race to the bottom for rate level, so putting it out more competitive rates now since they tried to put more blank sailings, emit more port destinations services too on these lanes, but nothing really did budge in terms of capacity, they're still overcapacity on the lane. They're now trying to increase their market share, more of like a raise to the bottom, what has been corroborated by my sources. 

Kristen Hays: 

Let me just throw in here, when Catherine says USTR, that's the US Trade Representative. That's the entity in the US that oversees trade. And what they imposed back in, or proposed, first in February, and then they were revised in April, was to impose specific fees on ships that were built in China. Initially, these could be very expensive. A Chinese-built ship could pay up to $1,500,000 just to dock at a single US port. That caused a great deal of outcry across commodities: energy, agriculture, ships that carry bulk freight like grains and cotton, ships that carry containers, ships that carry energy--oil, LNG, natural gas, et cetera. And the USTR, they had several hearings on this, and they actually did listen to a lot of this outcry and revised a bunch of these fees to impose it per net ton as opposed to per ship. 

Also, if you have a Chinese-built ship, you have to pay a fee per voyage, not per docking. So if you come and dock at Seattle and then LA/Long Beach and then Houston and then Tampa and then Charleston and then New York/New Jersey, you'll pay one fee, even though you're docking multiple times, because what a lot of people were afraid of was Chinese-built ships would just avoid the US altogether, they would divert to Canada or Mexico, we'd have a lot more imports coming via truck and train across those borders. And frankly, there were a lot of US importers and exporters at mid-sized to small ports that were really afraid they were just going to be put out of business because the only ships they own are two or three Chinese-built ships. 

And one thing to remember, more than half of global shipbuilding capacity is in China. There are significant amounts also in Japan and South Korea. US shipbuilding capacity is 0.1% globally. So when we refer to USTR fees, a lot of shipowners are looking at how that would affect them if they would have to pass along those costs to their customers. And there were a lot of exemptions that were announced when these were revised back in April. If you have a container ship that carries 4,000 or fewer containers, you're not going to have to pay a fee. So that helps the small to mid-sized exporters, say, working out of the Port Everglades, Port of Mobile and Alabama, something like that. So just to catch everybody up on that little part. 

Catherine George: 

So it looks like some freight forwarders are now switching out for smaller vessels. 

And what I've been hearing too is it's a lot easier to absorb these port fees, it's a lot easier to switch out to other non-Chinese-built ship alternatives due to the softening sentiment in this market. 

Kristen Hays: 

If we were to go back to, say, 2021 and 2022, like I mentioned earlier, when demand was exploding for everything and ships were backed up at Los Angeles/Long Beach, they were diverting to Northern California ports, they were diverting to Houston and in Texas and further on the Gulf Coast, but these were big ships. These were ships that were carrying 15,000, 20,000 containers because everybody in the U.S. wanted to buy everything. They'd been sitting at home during COVID, and they'd been saving their money, and they wanted to spend it. If this were to have been imposed during that time, it would've affected a lot more ships as opposed to what we're seeing this now. And these new port fees are slated to be imposed October 14th. It's possible that that could be delayed. We're waiting to see what happens with that. 

And just, I wanted to also throw out to both of you, throughout the whole tariff war, not just the ones between the US and China, but there were plenty of tariffs put on all other countries in the world, when you talk to sources about the tariffs themselves, how concerned are they about those? Those seem to have a much more direct effect on stuff that comes to the US in containers because they're tariffs on the product. 

Aroob Sheikh: 

So from the South American side, actually, that's definitely been an emerging conversation because as of August 1st, Brazilian goods were definitely hit with a notable tariff, around 50% on a wide range of commodities. So we're seeing a lot of effects on commodities that may be priced a little more competitive to even more higher cost exclusive commodities as well. So we're already hearing feedback of effects on local economies because if you look at the trade deficit between the two countries, Brazil is very reliant on US as a major consumer. They're second to only China. 

Kristen Hays: 

That's right. Because unlike most countries in the world with which the US has a trade deficit, the US has a trade surplus with Brazil. Brazil buys more from the US than the US buys from Brazil. 

Aroob Sheikh: 

Absolutely. And that's definitely been impacting a lot of the trade activity and volumes seen trade in between the two countries as well. 

Kristen Hays: 

Okay. And Catherine, do you hear a lot of folks talking about the tariffs between the US and China or US and other Asian countries? 

Catherine George: 

Well, let's start in April 2025 when Liberation Day was first announced. There was an overall urgency in the market to front-haul everything ahead. Since they were the market or, I guess, China was so beaten down by the tariffs too about the 90-day extension pause, there was that first rush. But then we go into the second pause where this is something they already faced, the urgency already happened. So right now the sentiment is business as usual. I've been hearing business as usual, rolling with it once the US comes out with a policy, a trade policy with China. I really haven't heard of any other urgency in the market behind the tariffs. 

Kristen Hays: 

Well, we could possibly see what we saw in April. If the triple-digit tariffs between the US and China come back, we'll see ships turning around going back to China again, especially now since they've bolstered all their... retailers and buyers have bolstered their inventories already ahead of this with the first 90-day pause. But tell me this, have either of you heard from your sources in these container markets, do they think, well, let's not get too excited about this announcement because it could change next week or it could change next month or the number could go down or the number could go away when it comes to tariffs? 

Aroob Sheikh: 

We've definitely heard an emerging sentiment from the South American side in terms of this, actually. I can think of quite a few conversations where they almost, "I've heard the exact verbatim I heard back from the market." 

Kristen Hays: 

Okay. Although I have heard that we could end up spending a lot more money for coffee because we get a lot of coffee from Brazil. 

Aroob Sheikh: 

For my sake, I hope not. 

Kristen Hays: 

That's true, we do like our good coffee. 

Okay. Well, looks like we've had an exciting year so far with the container markets. It may not be as exciting as the rest of the year goes along. But as I mentioned, these announcements can come along any day, things can change at any moment, and markets seem to be trying to do the best they can to adjust to quick turnarounds and quick changes. 

Well, thanks, ladies, for chatting with us about this today. It's really interesting. And I'd like to thank our listeners for tuning in. We really appreciate that. And this Platts Commodities Focus episode was produced by Jennifer Pedrick.