The United States and China have reached a temporary truce in their ongoing trade war, with both countries agreeing to lower tariffs on certain imports. According to a report by Freightos, a shipping research company, the truce was reached during a meeting between US President Trump and Chinese leader Xi in Washington last week. The agreement will see both countries reduce tariffs on imports worth $30 billion to "most-favored-nation" levels.
The truce is set to last for two months, with both countries agreeing to hold two more meetings before the end of the year. The US has agreed to extend the truce for only two months due to China's outstanding commitments to purchase US agricultural products. This move may indicate that further extensions could be possible once China has fulfilled its obligations.
The reduction in tariffs is seen as a positive development for US importers and consumers, particularly those importing products such as toys, which are among the most valuable categories. China's list of products subject to reduced tariffs includes over 1,600 items, mostly agricultural products and essentials.
Despite the positive developments, shipping prices have not seen a significant impact. Prices for shipping containers across the Pacific to the West Coast have seen a slight increase, reaching $8,400 per FEU, while prices to the East Coast remain stable at around $9,600 per FEU.
The global shipping industry continues to face challenges, including congestion in Eastern ports, which is estimated to account for over 8% of global capacity. This congestion is expected to take up to 10 months to clear, which may keep shipping prices high even during periods of low demand.
In other developments, the Panama Canal Authority has announced that it will increase the number of daily transits for Neopanamax vessels to 10, and raise the maximum draft to 49 feet, following improved weather conditions. However, this does not rule out the possibility of future restrictions, particularly if the expected El Niño phenomenon affects rainfall patterns.
Meanwhile, shipping prices on the Asia-Europe route have continued to decline, with prices on the Asia-North Europe route falling by 9% to around $3,400 per FEU. Despite this, some shipping companies are announcing price increases from late October. The global air freight index has seen a slight increase, with prices remaining over 30% higher than last year due to rising fuel costs.
Key points
- The US-China trade truce is expected to have a positive impact on global trade, with reduced tariffs on certain imports.
- The truce is set to last for two months, with further meetings planned between the two countries.
- Global shipping prices remain high due to congestion in Eastern ports and rising fuel costs.
