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Preface:
This week, the international trade landscape shifted dramatically: The Trump administration dramatically increased steel and aluminum tariffs to 50%, US-China trade talks restarted with difficulty, and Trans-Pacific container freight rates surged 72% in a single week! This global tariff war is profoundly impacting everyone, from shipping giants to retail shops, and even ordinary consumers' wallets.
Effective early Wednesday (June 5th), President Trump formally signed an executive order raising tariffs on steel and aluminum imports into the US from 25% to 50%. The White House claimed this aims to "combat low-priced dumping and protect American industries and jobs." Canada's largest union, Unifor, has already called for reciprocal retaliatory tariffs against the US.
Exemptions & Buffer: The UK received a temporary exemption due to a preliminary trade deal, maintaining the 25% rate at least until July 9th.
Industry Shock: The US is the world's largest steel importer, with annual imports accounting for about 25% of its consumption (import value approximately $31.3 billion in 2024). Major suppliers include Canada, Brazil, Mexico, and South Korea. This move will inevitably raise costs for US manufacturers reliant on imported steel and aluminum.
Linked Deal: Trump simultaneously announced support for Japan's Nippon Steel to acquire US Steel for $14 billion.
Amid escalating trade war tensions, the US and China held a roughly 90-minute call on Thursday (June 6th). Both sides agreed to hold a new round of high-level trade talks "soon."
US Team: Treasury Secretary Besant, Commerce Secretary Lutnick, and Trade Representative Greer will represent the US.
Complex Backdrop: Prior to the call, friction intensified over issues like critical mineral (e.g., rare earths) exports, restrictions on Chinese student visas, and US industry warnings regarding Chinese semiconductor use. The fragile consensus of "temporarily lowering retaliatory tariffs" reached during May talks in Geneva faces challenges.
Rare Earths Focus: Trump specifically mentioned after the call that "there should be no more problems regarding the complexity of rare earth products," highlighting the critical nature of this issue.
Driven by the June 1st General Rate Increase (GRI) and Peak Season Surcharges (PSS) implemented by carriers, combined with demand expectations fueled by the US-China suspension of "reciprocal tariffs," spot rates on major routes saw astonishing increases:
Shanghai → US West Coast: Soared 58% in one week, reaching an average of $5,172 per 40-foot container (FEU), a massive 128% year-on-year increase.
Shanghai → US East Coast: Rose 46%, reaching $6,243 per FEU, a 90% year-on-year increase.
Yantian → Los Angeles: Increased from $5,610/FEU to $6,000/FEU.
Ningbo → Los Angeles: Increased from $5,151/FEU to $5,431/FEU.
Market Interpretation: Analysis firm Xeneta noted that the 88% weekly jump in rates shows some shippers are shipping "at all costs" to seize the 90-day tariff suspension window. However, it's anticipated that June may be the peak, with downward pressure emerging later as capacity returns and inventories accumulate.
To alleviate pressure on shippers from high freight rates, Shanghai International Port Group (SIPG) announced a 50% discount on port yard storage fees, valid until August 31st (coinciding with the end of the US-China 90-day tariff suspension period).
Applicable: Standard dry cargo containers (excluding dangerous goods and reefers).
Free Storage Period: All containers (full and empty) enjoy the first 4 days free of charge.
The US trade deficit in April recorded its largest ever monthly narrowing, primarily due to a more than 16% plunge in imports (as businesses stockpiled goods early to avoid anticipated tariffs). However, this creates new problems.
Retail Inventory Crunch: Supply chain data indicates that after the wave of early imports, replenishment orders haven't kept pace, potentially leading to tight inventories at the retail level, with small businesses hit hardest.
Warehousing Cost Paradox: Zachary Rogers, Director of the Supply Chain Management Forum at Colorado State University, points out that while current inventory levels haven't grown significantly, warehousing costs are rising because goods are staying in warehouses longer. The gap between inventory levels and cost indicators in May reached the third-highest level on record (26.8 points), far exceeding the 2024 average (12.1 points), signaling declining supply chain efficiency.
Prof. Rogers analyzed that large corporations dominated the import surge in Q1, squeezing out small business shipping capacity. Now that stockpiling has ended, "middle-mile" supply chain service providers (like wholesalers, logistics firms) reliant on orders from large corporations are suffering. Unlike large corporations stockpiling during the pandemic, overall inventory strategies are now leaner, further exacerbating the squeeze on small and medium-sized supply chain businesses.
"Small businesses in America are now bearing the brunt of the tariffs."
Cost Pass-Through: A New York Fed survey showed over 35% of manufacturers and nearly 40% of service companies raised prices within a week of encountering tariff-related cost increases.
Retailers' Dilemma: Retailers face a tough choice: raise prices and suppress demand, or absorb the costs and erode already thin profit margins (industry average operating margin is around 5%). Walmart, for example, has warned it may not be able to fully absorb costs under current or higher tariffs.
Whiskey Not Spared: Doubled steel/aluminum tariffs impact the canned ready-to-drink beverage industry. Analysts estimate that if the EU imposes a 50% retaliatory tariff on US whiskey, it could reduce the EBIT (Earnings Before Interest and Taxes) of major distiller Brown-Forman by about 10%.
This week's tariff hike and freight rate surge mark a new phase in global trade tensions. Their impact has rapidly spread from macro trade data and the meso-level shipping and supply chain sectors down to the micro-level costs for businesses and consumer prices. Small businesses appear particularly vulnerable in this storm, while ordinary consumers may also need to prepare for a potential "tariff bill." The next 90-day negotiation window is crucial, and the world is watching the next move in this trade standoff closely.
Amid the current unpredictable tariff environment, Shengshi Group is committed to being your solid backbone, standing shoulder-to-shoulder with you.
Shengshi Group Global Logistics – Specializing in US final clearance & transshipment, Amazon FBA logistics, and one-stop third-party warehousing services. Headquartered in Los Angeles. As a US-based customs broker, we possess over 50 years of clearance experience and our own in-house Green Card holder Chinese clearance team. We have the latest news, firsthand information to help you avoid pitfalls and achieve comprehensive cross-border e-commerce business development.
In this challenging tariff environment, choosing us means choosing professionalism, efficiency, and peace of mind. Shengshi Group will go all out, using our professional capabilities to safeguard your cargo, supporting your steady progress in the complex and ever-changing international trade market. Let's overcome difficulties together and open up a broader business horizon!
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