US, China collaboration vital for global supply chains

Businesses that rely on goods manufactured by the US and China are seeing blockages in the global supply chains opening up after the world's two largest economies agreed to a truce in the brewing trade war, data shows.

Maersk, a global shipping and logistics company, said ocean freight volumes from China to the US had risen significantly after the initial tariff adjustments in May following the talks in Geneva. In April, its freight bookings from China to the US had fallen by 40 percent.

It added that the latest uptick in freight would likely "add pressure to US West Coast terminals, particularly Los Angeles, Long Beach, and inland networks, as more cargo moves through key gateways in the weeks ahead".

The revitalization of shipment volumes into the US comes after North American and Asian manufacturing saw a decline in April after an initial rush to stockpile goods, according to the GEP Global Supply Chain Volatility Index.

"The pause on tariffs is a major relief for manufacturers in both the US and China," John Piatek, vice-president of consulting for GEP, said in a statement.

The combined economies of the US and China make up 43 percent of global GDP and nearly 48 percent of global manufacturing output, data from the World Bank show. Ironing out trade issues is vital not just for the two countries but for the international business community as a whole.

Stress test

The tariffs imposed by US President Donald Trump have been a stress test for the global supply chain which made a slow recovery from the stagnation caused by the COVID-19 pandemic in 2020.

Experts say the two countries' trade relationship is so intertwined that it's hard to decouple, despite recent sticking points over trade.

While the US leads the way in supplying advanced technology, China relies on some US components for its automobiles, electronics and technology products.

Other top US exports include minerals, appliances, oils, nuclear reactors, aircraft and spacecraft, and food and beverages. Approximately 930,000 US jobs are dependent on the export market to China, an analysis by the US-China Business Council showed.

Tom Fullerton, an economist and professor at the University of Texas at El Paso, told China Daily that US tariffs on imports of steel, aluminum, automobiles and auto parts are "problematic" especially for key trading partners like Mexico, China and Canada.

This is because the "United States does not make enough of those items to satisfy total demand for those products and imports make up the difference".

Next month, the 90-day pause on the "reciprocal tariffs" imposed on April 2, the so-called Liberation Day, is set to expire. The UK is the first country to strike a trade deal with the US. Other countries are in talks.

Fullerton warns that going back to the "reciprocal tariffs" rates could cause a blowback on US businesses or a stagflation.

"If the combination of tariff schedules is kept in place very long, it will increase inflationary pressures and possibly lead to stagflation as businesses begin to falter," Fullerton added.

The global supply chain is also heavily reliant on Chinese companies for the manufacturing of ships, ceramics and textiles as China is the world's biggest exporter of these products, data from the International Trade Center, a UN-backed agency that focuses on open trade, found.

For the US to find an alternative supplier of these goods, it could take years, billions of dollars, and be dependent on establishing many new supply chains outside of China.

The impact of the brief trade war in the US and abroad is still being closely watched by economists.

In May, US retail sales fell by the biggest volume recorded since March 2023, data from the US Census Bureau show. Many consumers pulled back on spending — after shopping ahead to avoid potentially higher prices due to tariffs.