Global container booking volumes fell by 49% between the last week of March and the first week of April 2025, according to Freight Waves. Imports from China to the United States collapsed by 64%, with imports of apparel and textiles declining by a whopping 59% and 57%, respectively. The figures coming from shipping companies are worse than those seen during the Covid-19 crisis.
These alarming figures suggest that importers are unwilling to accept higher prices in the middle of a tariff war, that exporters cannot simply choose to move their products elsewhere easily, and that the excess capacity in many sectors is much larger than initially expected.
No one wants to accept the cost of tariffs, and this means that the only option for the economies with elevated productive overcapacity is to negotiate a trade deal, and quickly, or face an economic depression.
The mainstream view about tariffs was that United States consumers would pay the entire negative impact. This news suggests otherwise. The purchasing power of importers is higher than expected. The number of order cancellations is so large that ports in China have had to take emergency measures to address the challenges created by piles of unsold containers.
The negative impact is enormous on ports, as fees plummet, but we cannot forget the dramatic effect on producers with excess capacity. Many global exporters are going to face bankruptcy if no trade deal is reached due to insufficient working capital.
In the European Union, leaders are concerned that the trade war between the United States and China will bring a flood of cheap products from China that could endanger local producers and create a significant economic problem.
Many exporters are facing a harsh reality: They cannot sell their products if they don’t export them to the United States, and the importers are not going to accept higher prices due to tariffs.
The reason why exporters cannot pass the cost of tariffs to United States consumers is because most of the products they delivered to America were only attractive because they were exceedingly cheap. When prices rise, demand decreases significantly. The tariff war has shown that demand is not inelastic.
The collapse in container orders proves Menger’s imputation theory. Output prices determine factor prices, not the other way around.
The unsustainable state of global shipping will compel countries to expedite trade agreements with the United States, failing which they risk a cascade of economic collapses within their business structures.
The slump in container orders proves that United States importers are not going to accept any price, that excess capacity in the main retail sectors is enormous, and that there is no straightforward alternative for American consumers.
If you believed that other countries would hesitate to negotiate trade agreements with the United States, you need to reconsider. The American consumer loves cheap products but does not want the same goods at twice the price.
The United States economy may suffer a contraction due to this sudden slump in imports, but the consequences are much larger for the exporter nations.
The outcome is not positive for any country, so there is only one choice to make: negotiate or lose. If countries fail to establish significant trade agreements with the United States in the near future, their retailers are likely to face a severe working capital crisis.
