One unintended result from the trade war? Shipping costs have doubled.
The Trump administration’s on-again, off-again approach to trade policy has had a notable side-effect in recent weeks: Shipping costs have spiked.
Container rates between Shanghai and Los Angeles have nearly doubled since this time a month ago, according to the research company Drewry.
And in the near-term, those elevated shipping costs could stick around.
Back in April, when the Trump administration slapped a 145% tariff on Chinese imports, trade between the U.S. and China basically halted.
Meagan Schoenberger, senior economist at KPMG, said when shipping freezes up like that, shipping companies have to move their ships somewhere else: “To Atlantic shipping routes. To inter-region routes, so think about shipping within the Asian region, or within the Americas, or within Europe,” she said.
But a month later, the Trump Administration lowered that tariff on Chinese goods and importers decided to load up.
The problem is, Schoenberger said, container ships can’t just meet demand that quickly. Especially if those ships are off floating in the Atlantic.
“You can’t just pick your ship and move it over 3,000 miles. It takes a very long time to move,” she said. As in, more than a week.
And when you couple that surge in demand with a lack of available ships?
“The predictable outcome was that there was a spike in rates,” said Simon Heaney, senior manager of container research with Drewry, which tracks shipping prices.
He said container rates have started to ease off in the last few days, because many shipping companies have been scrambling to take advantage of those high prices.
“High freight rates are like a magnet for shipping capacity. So that capacity that moved away from the Trans-Pacific is now coming back,” Heaney said.
But there are plenty of reasons why those elevated shipping costs could stick around. Heaney said the conflict in the Middle East could push up oil and insurance prices — and by extension, shipping costs.
Meagan Schoenberger at KPMG said we still don’t know what’ll happen with tariffs this summer. Because if they ramp up, shipping capacity could drop off once again.
“So it’s the off-and-on that really causes the supply chain disruptions more than anything,” she said.
Schoenberger said that’s a concern for the broader economy. Because just like tariffs themselves, those higher shipping costs will eventually cause consumer prices to rise.