Trade, supply chain damage will remain

President Donald Trump declared the trade war with China “done” on Wednesday, while his Commerce Secretary Howard Lutnick said tariffs on Chinese goods will be locked in at the current 55% rate without additional increases. Even if the resolution to the battle with the biggest U.S. foe in Trump’s trade war is real, the damage to the supply chain, and U.S. consumer and economy, will remain, say logistics and retail industry executives.

The latest headlines in the trade war come amid a slowdown in orders as the early 2025 period of tariff frontloading ended and firms across the economy prepared for a potential slowdown in the U.S., a fear the CEO of the nation’s largest bank, JPMorgan, warned about again on in comments at an industry conference, with Jamie Dimon saying “I think there’s a chance real numbers will deteriorate soon,”  at a Morgan Stanley event on Tuesday, before the Trump’s administration’s most recent comments.

Alan Baer, CEO of logistics firm OL USA, said the existing 55% tariff on Chinese goods will put hundreds, if not thousands, of companies and ultimately jobs at risk. “Very few firms have the pricing power to absorb the tariffs or raise prices to offset the impact,” Baer said. “Ultimately, the consumer pays,” he added.

White House officials explained to CNBC the 55% tariff mentioned in President Trump’s social media post is the stacking of the Chinese tariffs. This is the minimum rate being paid by US shippers. US importers tell CNBC the rate is still way too high to resume full orders.

“A 55% tariff from China will substantially cause instability for consumer goods companies that are bringing goods in from China,” said Bruce Kaminstein, a member of NY Angels and founder and former CEO of cleaning products company Casabella. “President Trump recently said he doesn’t want to make t-shirts? Why is he doing this then? Does he want to make spatulas? I don’t think so,” he added.

The latest national inflation data released on Wednesday showed a smaller than expected increase in prices, though it is expected to remain volatile with tariffs policy uncertainty remaining.

Kaminstein said with most companies working on a 40-60% percent gross margin, this will cause either substantial price increases or substantial cutting of expenses to survive, adding stress to the cash flow of these companies.

“A reported 55% tariff on our largest supplier of American apparel and footwear, stacked on top of already high MFN and Section 301 rates is not a win for America,” said Steve Lamar, CEO of the American Apparel and Footwear Association. “We’re closely watching for more details, but the reality is this: nearly all clothes and shoes sold in the U.S. are now subject to elevated tariff rates. These costs will hit American families hard, especially as they get ready for back-to-school shopping and the holiday season. New trade deals that bring lower tariffs can’t come soon enough.”

The Chinese government has not confirmed the Trump statements beyond saying on Tuesday it had agreed to the “Geneva consensus” trade terms worked out earlier this year with the U.S. Trump said in a social media post on Wednesday about the deal that it is “subject to final approval” between himself and Chinese President Xi Jinping.

The tariff uncertainty is also weighing on EU exports bound for the U.S. On Wednesday, Lutnick said an EU trade deal would likely come last, partially due to the need to deal with a bloc of countries rather than a single government.

Consumer demand, recession fears continue during tariff pauses

The current situation leaves freight carriers focused on U.S.-EU trade concerned.

Andrew Abbott, CEO of Atlantic Container Lines, a niche ocean carrier on the Europe/US trade lane, told CNBC the pace of exports and imports has been good, but he is worried a major correction is coming because of the tariff uncertainty and lingering fears of a recession.

“The transatlantic trade has seen an increase in cargo volume in both directions during the last month, averaging 15% compared to last year” said Abbott. “An increasing number of our U.S. import customers are expressing fears of reduced sales because of a potential U.S. recession in the second half, so this is weighing heavy on people’s minds,” he added.

As a result, Abbott said many companies are choosing the “wait and see” strategy ahead of any deal being made.

The trade headlines and concerns come ahead of an expected increase in orders in July and August, peak season for when containers are scheduled to arrive for the holiday shopping season. But logistics experts say there will be no Covid-level surges at U.S. ports.

“Companies pulled in freight to get out of the tariff crosshairs in March, April, and May,” said Dean Croke, DAT Freight & Analytics principal analyst. “Warehouse distribution surged at that time. We are essentially in peak season now,” he added.

The first customers to take advantage of the tariff pause window were those with time-sensitive cargo, like medical supplies and high-value cargo, like automotive parts, luxury furniture, and fashion, according to Mike Short, president of global forwarding for CH Robinson.

Noah Hoffman, vice president for retail logistics for C.H. Robinson, told CNBC that when he was visiting one of its biggest retail customers last week, “I was only sort of surprised to see jack-o’-lantern dinner plates in their distribution center already.”

“We’re four months out and already moving Halloween items to be ready for store delivery the next day. We’re seeing the same thing in our retail consolidation centers, where we’re pulling in seasonal and holiday freight from multiple retail suppliers. This is a combination of carryover inventory from last year and freight front-loaded in Q1 to avoid the higher tariffs that were coming in April,” Hoffman said. 

‘Damage is done’ in trucking

After the U.S. agreed to a pause in the trade war with China, plans were made for shipping that will result in “a busy four-week period this summer,” Croke said. But he added, “trucking carriers are worried about the rest of the year. The second quarter is normally an important setup quarter for the rest of the year, which drives rates up. This means as of now, they are worried they will play catch-up for the rest of the year.”

In the current tariff pause window, there is still time to bring merchandise in from China before the 90-day window closes in mid-August, Hoffman said. “Domestically, we might be moving some of that freight in late June and into July. So, shoppers may have fewer back-to-school items to choose from, but at this point, glow-in-the-dark skeletons and fake vampire teeth will probably make it,” he added.

The trucking industry, in particular, is facing a variety of challenges. While imports contribute approximately 10% of trucking demand, domestic manufacturing is traditionally the main driver, but demand is down. Produce season, another industry driver, is adding to headwinds due to colder spring temperatures in California and decreased consumer demand.

“I think the damage is done this year,” Croke said. “Carriers will struggle to recover this year. The supply chain will not recover until these trade deals are done. When you lose trust, how do you make business decisions when it can be undone in a tweet? You have to expect the worst-case scenario, and anything better than that is an upside. I don’t see how the market recovers,” he added.

The trickle-down impact of the lower freight volumes can be seen in intermodal volume, down 7.42% year over year, and truckload volume, down 13.37% year over year. Both the rail and trucking industries make their profits in moving containers.

The Ocean TEU Index, which represents the volume of ocean container bookings, shows 2025 is trailing 2024 slightly year-over-year. Historically, cargo volume has been an early U.S. consumer demand prediction tool.

The National Retail Federation’s forecast, based on orders and container analysis for June through October’s holiday shipping season, is down 14% year over year. Jon Gold, vice president of supply chain and customs policy at the National Retail Federation, said once a deal is signed, the tariff rate on China will be critical for business decisions.

“We look forward to getting more information from the administration. However, agreeing to a 55% tariff that maintains the current IEEPA, fentanyl, and Section 301 tariffs is still extremely high, particularly for small businesses that continue to struggle with the current tariffs,” said Gold.

Manufacturing out of Asia fell to a 17-month low, according to the latest GEP Global Supply Chain Volatility Index, a leading indicator tracking demand conditions, shortages, transportation costs, inventories, and backlogs, based on a monthly survey of 27,000 businesses.

Another leading indicator warning of a decrease in manufacturing orders and leaner holiday inventories is empty ocean freight containers.

In ITS Logistics’ June U.S. Port/Rail Ramp Freight Index, empty container return issues persisted at the nation’s busiest ports of Los Angeles and Long Beach, “Empty container buildup continues despite higher outbound empties; congestion challenges remain,” the report stated.

CH Robinson expected softer conditions to persist at the Port of LA and Long Beach, with volume to rise month-over-month in early June, but remain lower than this time last year.

According to North American port data analysis from ITS Logistics, the terminals which process the containers at ports nationally are running at 60-75% capacity.

The U.S. export market will also continue to experience challenging conditions due to limited vessels after a pullback in sailings by ocean freight companies.

At the Port of New York, a surplus of empty containers is a result of New York port terminals restricting returns and limiting some export bookings to free up vessel space and improve flow. “Ongoing blank sailings have hindered carriers’ ability to reposition equipment efficiently. With limited vessel calls and mounting backlogs, this imbalance is expected to persist in the weeks ahead,” C.H. Robinson reported.

At Gulf Coast ports, tariff-related demand shifts and blank sailings significantly reduced the volume of incoming containers. “As a result, exporters should expect tightening container availability, particularly at inland rail ramps and U.S. Gulf Coast ports such as Houston, starting in July or August,” C.H. Robinson reported.

During Covid, the transport of empty containers back to China took precedence over U.S. exports. Manufacturers in China and Asia needed those containers so they could fill them with products quickly to keep up with the tremendous U.S. consumer demand.

“With the significant reduction in vessels calling LA/LB due to the tariff activity, we are seeing significant increases in empty container dwell outside of the terminals,” said Paul Brashier, vice president of global supply chain at ITS Logistics. “It is getting very difficult to find locations to terminate empties and in addition many ocean carriers are implementing laborious termination policies not seem since the post- Covid era.”

The UK tariff pause resulted in the restoration of more “normal” volume in that market, Abbott said, and the fear of an EU tariff pause ending in July fueled the increased EU shipments as manufacturers stocked shelves a bit more in case a UK-type deal for the EU, and deal on steel and aluminum tariffs, are not agreed to in a way that favors greater trade.

But the ongoing uncertainty can be seen in the exports of the top countries to the U.S.

Departed container volumes (twenty-foot equivalent units) show Italy is down 15% year over year. China is down 11% year over year, while South Korea is down 9%. Vietnam and India, both beneficiaries of the China-plus-one supply chain strategy, are up 21% and 13%, respectively.

Factoring in the travel time and the trade pause deadlines, U.S. importers only have one more week to place ocean freight orders from the EU to have their products arrive in the U.S. before the tariff pause deadline.

Orders from China need to be placed by the end of June to beat out the existing tariff pause deadline.