The recent US-China deal to lower tariffs may not immediately restore normalcy to supply chains. Although tariffs can change rapidly, supply chains cannot adapt as quickly. The previous retaliatory tariffs effectively created a trade embargo, pausing shipments and leading to empty containers at ports. Many factories halted production due to uncertainty, conserving costs.

Even with the tariff reduction, questions about absorbing costs and potential future increases remain. Companies face the challenge of rushing orders within the 90-day reduction period, but supply chains cannot quickly react. Space limitations and port congestion are anticipated, similar to post-Covid lockdowns. Factories will also take time to resume full production, especially with potential labour reallocation during the tariff war.

Impact Of Lower Tariffs

Although lower tariffs offer some relief, backlogs need addressing and shipments must ramp up again. Delays could persist for one to four months, impacting firms reliant on Chinese supplies. Significant port disruptions are now avoided with reduced tariffs, but the anticipated bullwhip effect from increased orders may exacerbate issues. Demand spikes will likely lead to overbooked shipments, rising costs, and port congestion. If tariffs rise again, supply chain challenges will resurface, taking months to normalise.

The agreement announced between the United States and China to reduce tariffs, while a welcome change for many, does not solve several deeper issues that have accumulated through months of uncertainty. Despite the headline relief, the direct operational improvements are unlikely to be immediate. Pricing may soften, but physical flows are still hamstrung. Because companies postponed orders during the height of tension, a large portion of goods never left their origin, and the backlog needs more than diplomacy to clear. We’re seeing that supply lines, designed for long-term consistency, lack the flexibility to rebound at short notice.

When shipments restart after a pause, it’s not just the warehouses that feel it. Transport firms suddenly face mounting orders, dock times stretch, space becomes scarce, and scheduling windows vanish. The bottleneck isn’t just a question of capacity—shippers are working through accumulated in-transit disruption. We’re revisiting the same constraints last seen during peak Covid shipping delays—vessels full, terminals stretched, and long-haul transport networks bumping up against their limits. Timing these movements suddenly becomes less about efficiency and more about availability.

Manufacturers, particularly those on the mainland, are now in the position of ramping up without much preparation. During the dispute, many re-deployed their facilities—either mothballing lines or shifting effort elsewhere. Bringing machinery and people back to a standing start is awkward. Without guaranteed consistency in orders ahead, scaling up quickly is risky. That won’t stop buyers from pressing for lead times, though. A compressed 90-day reprieve means some contracts must be filled under pressure, further crowding an already overstretched schedule.

Even with tariffs lower for now, we are preparing for trouble in the weeks ahead. There will be queues at ports—not necessarily because of mismanagement, but because too many are operating on the same clock. When delays hit inland freight operators, the knock-on effect can persist for days. Freight rates are already ticking up. Based on what we’re watching in existing transpacific lanes, demand is forecast to exceed available container slots within three to five weeks, unless bookings slow.

Expected Market Reactions

We also expect bulk commodity flows to return faster than consumer products, which adds weight to the wrong end of the system. Delicate timing in foreign exchange payments, import documentation, and customs clearance makes certain arrivals prone to slippage. If those start to stack up, it will become much more expensive to miss a delivery schedule.

Derivatives pricing tied to these movements has already started reflecting a tightening cycle. Short-dated contracts are spiking in parallel with forward bookings. This compression of lead-times into a narrow time window distorts price expectations further out. It’s not just market participants anticipating higher short-term demand—they’re also adjusting for relocation risk, in case tariff policies swing again. More volatility is being priced into longer tenors, as hedging continues to favour rapid exposure rather than extended carry.

Those reacting quietly will be better positioned. Inaction now looks like a position, rather than a lack of one. The choice isn’t whether to re-enter, but where to place time versus volume—the faster lanes are crowded, the slower ones risk irrelevance should policy shift again. What we are seeing is a short fuse with a wide charge, especially within manufacturing-linked prices.

Notably, Liu’s remarks point to a broader confidence issue. Traders remain unconvinced about the long-term direction. As a result, risk has not evaporated—it has just shifted. For positioning strategies, it’s not about riding the rally. It’s managing the spread without assuming the trend will hold beyond the short agreement window.

Factories are restarting, shipments resuming, but that’s only half the story. What matters more is who prices in the shape of this reset and whether protective mechanisms are kept in place longer than needed. For now, we’re staying close to short-term contracts and parsing data for lags. The move in tariffs may solve part of the paperwork, but it hasn’t put containers on vessels just yet.

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