Has China caught Trump sleeping?

During Donald Trump’s first term China managed the imposed tariff regime by shifting some production to other jurisdictions, including Vietnam, Cambodia and Mexico among others. In Trump’s second term, Washington has ensured that tariffs will be imposed across the globe and particularly on those countries where Chinese production shifted to earlier. Beijing has not been idle in the intervening four years between Trump’s first and second terms. According to Xeneta chief analyst Peter Sand, since the first Trump presidency China has been focusing on the long-term precautions that will protect the Chinese economy from such shocks as tariffs.

Some 51% of US containerised imports are from China, but Sand said that just 2% of China’s overall exports are to the US. Beijing has been developing new markets in South America, the Middle East, and Africa that can soften the blow to its economy from harsh US tariffs, which now stand at 104%.

Sand cites former treasury secretary Larry Summers who said last week that Trump’s tariffs will be a disaster for families and could cost them hundreds of thousands of dollars a year. “Trump’s tariffs are the most expensive and masochistic the US has pursued in decades,” wrote Summers on X, adding: “A very crude estimate of Trump's tariffs puts the projected loss at $20trn, or well over $200,000 per family of four.” In a later interview with CNN, Summers updated the losses to $30trn on the stock market, with each family of four bearing the equivalent of $300,000 in losses.

“US consumers will eventually side with the Chinese,” claimed Sand, who added, “China will simply wait it out, they’re very good at that.” In the meantime, chaos in the markets is quickly translating into doubts within supply chains and industries across the economically globalised world.As stock markets burned, Nicolette van der Jagt, director general at forwarder representative Clecat, argued there was a silver lining: “Uncertainty creates friction, but it also creates opportunities for freight forwarders to support customers through the new complexities. Having said that, high tariffs are undeniably bad for global trade. We’re now seeing early signs of 'slowbalisation' - a structural cooling of global flows.”Van der Jagt expects slowbalisation to have a “devastating effect on volumes,” but urged forwarders to stay agile.

“As we’ve seen in past disruptions like Brexit, trade doesn’t disappear, it shifts. Diversification across markets, modes, and services is essential to build resilience. This isn’t just about protecting volumes but also about adapting smarter and faster.”Early disruptions to supply chains can already be seen, with freight rates declining substantially, 50% since January according to Xeneta, and Drewry reporting blanked sailings up from 135 in the first two months of 2024, to 198 in the same period this year on the three major trades across the Pacific, Atlantic and Asia-Europe.

“Carriers skip sailings in response to market extremes,” said ynamar analyst Darron Wadey. “Cancelling sailings is the first step that can be taken to manage an overcapacity situation. Although skipping departures starts as a temporary or occasional measure, this can start to take a structural form when repeated.”Wadey pointed to a rise in the number of ships being sent for much needed maintenance...For Sand it is too early to tell if the impact of tariffs have had a major effect on volumes, but he does not believe that overcapacity has had a major impact on shipping yet, because the Red Sea diversions have offered carriers a premium on rates...MDS Transmodal believes that US tariffs could become a second major disruptor, especially for US-inbound trade...With China now retaliating to Trump’s retaliation, answering the America’s 104% taxes with 84% import duties on US goods, the trade dispute looks far from over.Hookham pointed out that the rush to beat rates late last year and earlier this year means: “The stock for the next few months is already there. But for Halloween, Black Friday and Christmas, the peak season may be the worst hit.”