April 30, 2025 – The Impact of US-China Tariff Dispute on Freight and Retail Sectors
Since the United States announced its implementation of the reciprocal tariff policy on April 2, nearly a month has passed, and the freight traffic between China and the US has been severely hit. In the past three weeks, the booking volume of freight containers from China to the US has plummeted by 60%, pushing the China-US freight business to the verge of a standstill. This grim situation is undoubtedly a huge crisis for the US retail industry, especially for those merchants whose supermarket shelves are filled with Chinese products.
The retail giants in the US are overwhelmed. On the evening of April 26, Lianhe Zaobao reported that the CEOs of leading companies in the retail industry, such as Walmart, Target, and Home Depot, collectively went to the White House, strongly demanding the government to adjust the tariff policy. The sharp increase in supply chain costs has made business operations extremely difficult. According to a report by The Wall Street Journal on the same day, after communicating with the US government, many large US retailers, including Walmart, have informed some Chinese suppliers to resume shipments, with the tariffs to be borne by US buyers. Prior to this, cross-border e-commerce enterprises like Temu and Shein had also reluctantly announced price increases. Meanwhile, survey data from the University of Michigan shows that the inflation expectation in the US for the next year has rebounded sharply to 6.7%, hitting the highest record since December 1981. Looking back at 1981, during the world oil crisis, the Federal Reserve raised interest rates to 20% at one go to combat hyperinflation. However, the situation is different today. Currently, the US is burdened with a national debt of as high as $36 trillion. The Federal Reserve can hardly afford to raise interest rates, and even maintaining the current interest rate without cutting it is a heavy burden on the US finance. The negative consequences of the tariff increase are gradually emerging.
The clothing industry has been particularly hard-hit, and US consumers are facing heavy pressure. CNN reported that 98% of clothing products in the US rely on imports. According to an analysis by the Yale University Budget Lab, due to the tariff policy, the prices of clothing in the US are expected to rise by 65% in the next year, and the price of shoes may increase by as much as 87%. Among them, cheap basic clothing such as T-shirts, which cost only a few dollars each and are deeply loved by US consumers, bear the brunt of the tariff impact. Basic clothing items, such as T-shirts, underwear, and socks, are daily necessities with stable demand, and sellers need to restock frequently. This makes it easier for the tariff costs to be passed on to consumers. Moreover, these products have a narrow profit margin, resulting in a more significant price increase under the impact of tariffs. The low-income families in the US, who have the greatest demand for these cheap basic clothing items, are particularly affected. It is worth noting that a considerable number of low-income families in the US are Trump’s supporters. Originally, due to the severe inflation during Biden’s tenure, they turned to support Trump in the general election. However, they did not expect to bear an even more severe inflationary impact now.
Currently, the Trump administration is considering various tariff adjustment plans. According to a report by The Wall Street Journal on April 23, senior US officials revealed that one plan is to reduce the tariff rate on Chinese goods to around 50% – 65%. Another plan, known as the “grading plan”, divides Chinese imports into two categories: “not a threat to US national security” and “strategically significant to US national interests”. Under the “grading plan”, the first category of goods will be subject to a 35% tariff, and the second category will have a tariff rate of at least 100%. Since textiles are classified as goods that do not pose a threat to national security, if this plan is implemented, textiles are likely to be generally subject to a 35% tariff. If so, combined with the nearly 17% tariff rate imposed in 2019 and the total 20% tariff added twice this year under the pretext of fentanyl, the total tariff rate will even be lower than that on April 2. In response to the US tariff adjustment actions, Chinese Foreign Ministry Spokesperson Guo Jiakun clearly stated that China’s position has always been clear. The tariff war was initiated by the US. If the US truly wants to resolve the issue through dialogue and negotiation, it should abandon extreme pressure tactics, stop threats and blackmail, and conduct dialogue with China on the basis of equality, respect, and mutual benefit.
Despite the huge tariff pressure, the market has gradually begun to adapt. Now, this round of tariff increases has evolved from an initial sudden shock to a protracted war. Many textile enterprises have gradually recovered from their initial panic and returned to normal business operations. Although the demand in the huge US consumer market has shrunk significantly, Chinese textile enterprises will not be unable to survive without the US market. Entering the late April, market sentiment has bottomed out and rebounded after hitting rock bottom. Orders are still being placed, and weaving enterprises have started to stock up on raw materials again. The price of raw materials has even seen a slight increase. Not only are there occasional positive news from the US side, but China is also taking active actions to stimulate domestic demand and explore new market demands by reducing the minimum threshold for duty-free shopping for outbound tourists. The upcoming May Day Golden Week is expected to bring a new round of consumption peak to the market and inject new vitality into relevant enterprises.