The recent tentative trade agreement between the U.S. and China, pausing the escalation of tariffs, offers a moment of cautious optimism for the logistics industry. While this development may ease some immediate pressures, companies must continue adapting their supply chain strategies to navigate ongoing uncertainties. Previously, supply chains were optimized for cost, but tariffs and related challenges, geopolitical tensions, talent shortages, and increasing regulations have exposed vulnerabilities.
Long-Term Implications for Business Relationships
The trade agreement pause may help preserve critical buyer-supplier relationships strained by the tariff environment. American companies reliant on export markets in China and Asia remain concerned about foreign buyers shifting to alternative suppliers. Even with tariffs paused, rebuilding trust and market share could take time. For smaller businesses sourcing from China, the combination of existing tariffs and the elimination of the de minimis exemption for China and Hong Kong continues to pose challenges. Unlike larger shippers, these businesses struggle to pull forward inventory and are increasingly turning to countries like Mexico and Southeast Asia for sourcing.
If the trade agreement holds, consumers may see some relief from rising prices and limited product variety, as importers face reduced pressure to pass on tariff-related costs. However, without a permanent resolution, the risk of higher costs and reduced choices persists. Millions of jobs for truckers, warehouse workers, factory employees, and logistics personnel remain tied to the stability of this agreement and its impact on trade flows.
Urgent Capacity Constraints and Space Planning
Several carriers have announced significant adjustments to their ocean freight structures starting mid-May and into June. In addition to these changes, we have been informed that space is currently overbooked through the first week of June, and some carriers are already declining any new bookings for May, only offering space from June onwards.
We are also anticipating further challenges in the coming weeks, including potential equipment shortages and port congestion, due to the current surge in demand.
If you or your customers have any upcoming shipping plans, we strongly recommend booking space as early as possible, ideally with a minimum of three weeks’ lead time, to ensure availability and minimize risk.
Ocean Freight: West Coast ports are worried about the tariffs’ effect on supply chain disruptions as well as on small businesses and the national economy as a whole. The economic forecast at U.S. ports has been somewhat dismal with the Port of Los Angeles estimating a 35% drop in imports if the tariff situation remains unchanged. At the Port of Seattle, the tariffs will disrupt agricultural exports as well as farmers depend on access to international markets. Warehouses around West Coast ports are full as importers are holding shipments due to the higher customs clearance costs.
Airfreight: Similar to last month’s update, airfreight volumes are still on the decline. The elimination of the de-minimis regulation for low-value parcel shipments from China and Hong Kong would greatly diminish air cargo shipments out of China. Air freight rates on the China to U.S. routes will drop anywhere from 30% to 40%. Many air cargo operators have stopped receiving new orders from China and that pricing and booking rates are fluctuating all over the place.
Ground Transportation: Retail truck sales have dropped 13% in North America for Volvo Group which is the first major truck manufacturer to report earnings since the global duties were announced. Overall truck sales fell 10% year-over-year in Q1 as tariff uncertainty increased. Because of this uncertainty, U.S. truck buyers have been reluctant to purchase new vehicles. As a result, Volvo has lowered its North American sales forecast for 2025. Volvo plans to offset the impact of the tariffs by optimizing its supply chain and changing production levels.
E-commerce: The elimination de minimis exemption, which allowed Chinese retailers to send packages to the U.S. duty-free if valued under $800 means that Chinese e-retailers have started adjusting their prices. What will this mean for American businesses and consumers? An American version of the e-commerce Chinese company Temu has started showing only “local” products. Temu is part of China’s largest online shopping platform, so it does not need the American business to survive.
American e-commerce companies are also concerned, particularly those retailers that do not sell on e-commerce websites because they are suppliers to major retailers like Walmart or Target or have their own brick-and-mortar stores. These companies often have complex supply chains that get raw materials from China.
An April report from Omnisend found that 30% of customers will reduce shopping on these e-commerce marketplaces if prices rise. The data also suggests that these e-commerce platforms are already seeing a decline in shoppers.
Many e-commerce companies have stockpiles of inventory that will last for a few months. However, if tariffs remain high, shortages could begin to become commonplace. U.S toy and Christmas ornament retailers are already concerned over the upcoming holiday season. And consumers can expect delays as shipments have to go through U.S. Customs and Border Protection (CBP) to determine the goods’ origins.
Your Trusted Partner
The complete effects of the tariffs will most likely take a few months to settle. If you have questions on how to optimize your supply chain during these uncertain times, please reach out.
Red Arrow offers the scale and scope of services, including air, ocean, and ground transportation to meet the budget and schedule requirements of the largest and smallest companies alike. If we can be of assistance, please email us at [email protected] or give us a call at 425-747-7914.
