The European Commission is closely monitoring containerized imports from China amid growing fears that the high US tariffs will force a redirection of trans-Pacific trade flows and flood Europe with Chinese goods.
While there is no evidence yet of increasing volume from China above seasonal norms, the commission is taking no chances and has deployed an “Import Surveillance Task Force” to track any irregular changes in trade.
“The commission is monitoring imports closely to ensure that it detects in good time any potential increase in imports due to trade diversion,” Olof Gill, spokesperson for trade at the European Commission, told the Journal of Commerce Wednesday.
The US’ 145% tariffs on Chinese imports came into effect April 9, leading to significant frontloading ahead of that date and a large-scale cancellation of cargo bookings thereafter. Some shippers are requesting containers already in-gated at Chinese origins not be loaded on ships, while others have asked that containers be pulled completely from port, according to a trans-Pacific carrier executive.
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With the door to US trade effectively slammed shut, Chinese manufacturers are urgently looking for alternative markets in which to offload their surplus inventory. Europe’s huge consumer base is an attractive target, and the European Commission is shoring up its defenses against any incoming wave of cheap Chinese products that could displace European-made goods.
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The concerns of the European Commission might be valid. According to Sea-Intelligence Maritime Analysis, carriers have announced an all-time high in capacity sailing out of Asia toward North Europe this week at 411,600 TEUs, beating the record set in early March of 2021, with very limited capacity blanked.
“Surely not a coincidence, and even though some of it should have sailed last week, it’s not canceled but set to sail this week,” said Peter Sand, chief analyst for rate benchmarking platform Xeneta.
The average transit time from China to North Europe is 54 days, meaning the first shipments from any diverted trade will begin to arrive in early June.
Casper Ellerbaek, global head of ocean freight at DHL Global Forwarding, said strong bookings from Asia to Europe have been sustained through recent weeks, but that was aligned with DHL’s usual book of business.
“There is indeed speculation within the market that, as US demand decreases due to the Trump tariffs, China may seek alternative markets to offload its goods at competitive prices,” Ellerbaek told the Journal of Commerce, adding, however, that it was too early to definitively identify that trend.
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Also not yet seeing a significant rise in China volume was Marc Meier, global head of ocean freight at Toll Group. But he warned that could change.
“One thing we can say is that all signs point towards China and others having to play more in other markets, so Asia to Europe will surely receive more focus,” Meier told the Journal of Commerce Wednesday.
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Another potential issue is that any surge in Chinese imports will quickly exacerbate the severe port congestion that is still causing delays across the major North Europe and Mediterranean gateways. A host of factors are responsible for the bottlenecks, including full container yards at most terminals, crane maintenance in some ports, berth congestion, rail disruption from line closures in northern Germany and low water levels on the Rhine River impacting inland connections.
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While Europe prepares for a possible wave of Chinese imports, the spot market has finally arrested its steady slide that began in late December. Xeneta data shows that China to North Europe rates are up 7% since April 1 at $2,514 per FEU.
But while an increase in Chinese imports may help rising rates, it won’t last, according to Rico Luman, senior economist at global Bank ING.
“It will be the first reaction because of this disruption but afterwards the massive overcapacity in container shipping will weigh on rates once again, because that is the backdrop to all of this,” Luman told the Journal of Commerce.
“This tariff discussion is not good news for global trade, and I expect rates to drop again over the course of this year,” he added.