Biden Announces New China Tariffs Targeting EVs, Solar, and Medical Supplies

President Joe Biden has announced the new tariffs on Chinese imports this week, targeting key strategic sectors that include electric vehicles (EVs), solar panels, semiconductors, and medical supplies.

The updated Section 301 tariffs will uphold tariffs imposed on China by the Trump administration while also adding additional hikes for medical supplies like syringes and personal protective equipment. According to the Wall Street Journal, the latest update will result in the quadrupling of Chinese EV tariffs.

This latest increase in tariffs on Chinese imports comes after the federal government launched an investigation into unfair Chinese trade practices in the shipbuilding, maritime, and logistics sectors. The Biden administration is also pressuring Mexico to prevent Chinese metal products from illegally entering the US across the southern border.

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High Air Freight Demand to Continue Through Summer Months

There are currently no signs of a slowdown in US air freight demand as the traditionally slower summer months approach after a more than six-month-long bullish market. Forwarders and market analysts predict the strong demand will continue through the summer and potentially into the following peak season.

The boom in air freight demand is caused by exceptionally strong demand throughout North America for Chinese e-commerce, combined with a modal shift from ocean to air as shippers look to mitigate the effects of the Red Sea diversions.

In 2023, US Customs and Border Protection (CBP) processed more than one billion de minimis shipments worth a combined $50 billion through postal, express, and non-express facilities. In January alone this year, CBP processed approximately half a billion de minimis shipments, with around 2.5 million de minimis shipments arriving at CBP facilities daily.

Because de minimis shipments (shipments under $800 in value) are exempt from duties and taxes, US consumers can enjoy lower e-commerce prices. However, lawmakers and trade organizations in the US and Europe are scrutinizing the de minimis air freight shipping practice, calling it a tax loophole that allows e-commerce manufacturers and sellers to skip paying taxes and duties on larger containerized shipments.

US Retailers Upgrade Import Forecasts for the Remainder of 2024

The National Retail Federation (NRF) has upgraded many of its import forecasts through September thanks to stronger-than-expected consumer spending. Total import volumes into the US’s top 12 container ports are expected to stay above 2 million TEU per month well into peak shipping season.

According to data from the NRF’s Global Port Tracker (GPT), imports for May will total 2.06 million TEU, 6.8% higher than May 2023. GPT’s import forecast for May one month ago was for a year-over-year gain of 5.5%. This makes May the first month to total more than 2 million TEU in volume since October last year.

GPT predictions for June imports are 2.03 million TEU, 10.7% higher year-over-year and up from last month’s forecasted gain of 8.9%. July imports sit at 2.02 million TEU, gaining 5.5% on the previous year, but a decrease from last month’s forecast of 6.6% gains.

The GPT forecast for August, the beginning of the peak shipping season, sits at 2.1 million TEU, a 7.1% year-over-year gain and a slight improvement from last month’s expected 6.9% gain. By September, the large annual gains will slow down with a forecast of 2.04 million TEU, 0.5% higher than volumes seen in September last year.

High Import Demand and Bad Weather Is Stretching Asia-North America Ocean Shipping

Equipment availability on the East-Bound Asia to North America ocean trade lane has been slowly dropping over the last few months, pushing average spot rates from China to the US at the start of May to around two and a half times that of the contract rates shippers are currently hashing out with carriers.

Ocean capacity and the availability of shipping containers in China easily adjusted to the longer diversions around South Africa to avoid the Red Sea earlier in the year, but this was also at a time of reduced demand.

Now that American and European demand for Asian imports has returned unexpectedly, combined with port delays at Shanghai and Ningbo ports from bad weather end of April, westbound vessel utilization in mid-May is in the high 90% and container leases have surged in price. From the final quarter of 2023 to the first quarter of this year, high-cube FEU container lease prices jumped 67% to $1,173.

With ocean shipping and equipment availability on the trade lane stretched in recent months, shippers may have to be wary of equipment shortages should another significant event stretch capacity further.