This week:
- USTR extends Biden-era Section 301 tariff exclusions on select Chinese imports through August
- A temporary pause on higher US tariff rates leads to an import surge, Trans-Pacific spot rates rise
- US LTL market faces weak demand, but shippers shouldn’t expect carriers to lower their prices
- Canada Post, CUPW submit proposals for arbitration process as stalled negotiations resume again
USTR Extends Section 301 Tariff Exclusions for Some Chinese Goods Through August
The Office of the US Trade Representative (USTR) has filed a notice extending tariff exclusions for some imports from China through August 31. The exemptions had been set to expire on May 31 and apply to the Section 301 tariffs targeting electric vehicles, rare earth minerals, semiconductors, and solar cells.
In the notice, the USTR indicated the tariff exclusions could be subject to further extensions or modifications.
The Section 301 tariffs were introduced in 2018, during the first Trump administration. Following an extensive review led by former USTR Katherine Tai, the Biden administration announced last year it would retain these levies while introducing and increasing others.
Several of the tariff hikes took effect in September 2024, including a 100% duty on electric vehicles from China. At the same time, the Biden administration also introduced the Section 301 exclusions.
The exclusion process aims to alleviate the tariff burden on some manufacturing equipment routinely used in US domestic production. Among the equipment eligible for exclusion are specific types of solar manufacturing machinery, industrial robots, and water filtration devices.
Tariffs and exclusions that fall under Section 301 are separate from the duties introduced since President Donald Trump returned to office for a second term in January. Trump signed an executive order on February 1, increasing all tariffs on imports from China by 10% due to the flow of fentanyl across US borders. This same order also eliminated the de minimis rule for Chinese goods, which previously exempted goods valued under $800.
On April 2, the President unveiled his reciprocal tariff policy, which established a baseline 10% duty for all imports into the US, with products from some countries levied at much higher rates.
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Trans-Pacific Spot Rates Rise During Pause on Higher US Tariff Rates
A temporary pause on higher US tariff rates has led to a surge in imports, causing Trans-Pacific spot rates to rise at a pace faster than the 2021 pandemic-driven boom. That’s according to ocean carrier executives and supply chain analysts who recently spoke to the Journal of Commerce (JoC).
The current import rush is directly linked to pauses on some higher Trump administration tariffs, industry observers say. A pause on tariffs for most nations (excluding China) will end on July 9. Another pause, which reduced a 145% tariff on Chinese imports to 30%, is set to expire in mid-August. The White House has indicated that it is actively negotiating new trade agreements that could potentially maintain lower tariff rates.
Ocean liners are capitalizing on the cargo surge and being “very aggressive on spot rates,” said one carrier executive in the JoC. So-called general rate increases (GRIs) were implemented on June 1, with two additional hikes planned for mid-June and July 1, the executive said.
Meanwhile, logistics professionals report that spot rates to the US West Coast have climbed to the low $6,000s per FEU, and rates to the East Coast have reached the low $7,000s. These rapid increases are now being reflected in major shipping indexes. Platts, a division of S&P Global, reported last week that the spot rate from Asia to the West Coast hit $5,600 per FEU, a 33% jump from the prior week. The East Coast rate increased by 25% to $6,500 per FEU.
Platts also notes that the West Coast spot rate has skyrocketed by 173% since mid-April, while the East Coast rate has doubled in the same timeframe. Even during the post-Covid import surge in the spring of 2021, spot rates rose by a comparatively modest 20% over a similar period.
Carriers are aiming to maximize profits from these elevated rates before a new wave of vessel capacity enters the trans-Pacific trade. This influx of extra-loaders and new services is expected to temper the current upward momentum on pricing.
“It seems like the next (rate) increase or two will be the last ones,” Jason Cook, CEO of Ardent Global Logistics, told the JoC. “I’m getting the impression that this capacity is already finding its way into the trade.”
US LTL Freight Market Softens, But Carriers Not Expected to Lower Prices
The US less-than-truckload (LTL) market is showing signs of weakening demand, a trend expected to be confirmed by upcoming mid-quarter reports from publicly traded carriers. Despite this, shippers should not anticipate a break in pricing, which remains at historically high levels as LTL carriers prioritize profitability.
According to JoC Senior Editor William B. Cassidy, the current softness in LTL demand can be explained by the sector’s historical reliance on industrial manufacturing. US manufacturers are currently grappling with high input inventories after frontloading earlier this year to get ahead of tariff increases. Fluctuating order volumes for manufacturers have resulted in reduced cargo for LTL carriers.
“A drop in LTL revenue, or shipments, may not point to a broader market slump, but may reflect a carrier’s refusal to lower rates to get freight at the expense of profitability,” Cassidy wrote in the JoC. For a real-world example, he pointed to Old Dominion Freight Line (ODFL), the nation’s second-largest LTL carrier.
ODFL saw an 8.4% year-over-year decrease in LTL tonnage and a 6.8% drop in daily shipments. This slowdown contributed to a 5.8% dip in total revenue for the month compared to the previous year. However, the company demonstrated strong pricing discipline, with LTL revenue per hundredweight — a key metric of profitability, excluding fuel surcharges — increasing by 5.6%. Cassidy suggests that some of the volume decline may be strategic, as carriers prioritize profitability over chasing lower-priced freight.
Canada Post, CUPW Resume Negotiations, Exchange Arbitration Proposals
Canada Post and the Canadian Union of Postal Workers (CUPW) have begun exchanging proposals for a potential arbitration process as negotiations resumed last Thursday. The week before, Canada’s national postal carrier had submitted what it called its “final offer,” which the union flatly rejected.
CUPW workers have been without a contract since May 23. The only strike action the union has taken so far is a ban on overtime work.
Talks fell apart after CUPW leaders rejected Canada Post’s “final offer” proposals. However, in a statement released late Thursday night, the union announced its readiness to bring the dispute to a “successful conclusion” via arbitration. The current proposals are limited to suggested terms for the arbitration process, and they do not cover labor matters.
The CUPW later confirmed that, through federal mediators, it had exchanged terms of reference for arbitration with Canada Post. The carrier has yet to comment on the latest developments.
