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Tariff cut prompts rush to secure China-made goods

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Retailers face potential supply chain bottlenecks

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Freight costs expected to rise amid increased demand

By Casey Hall, Siddharth Cavale

NEW YORK, May 15 (Reuters) - U.S. retailers including

Walmart ( WMT ) and several clothing brands are racing to secure

China-made merchandise for the busy summer shopping season

starting in late May after Washington and Beijing agreed to

temporarily slash tariffs.

The agreement on Monday to lower U.S. tariffs on shipments from

China to 30% from 145% for the next three months prompted a

restart in orders and shipments for sundresses, bathing suits,

clogs and sunscreens from Chinese factories, according to

logistics company Portless, which helps U.S. e-commerce brands

import goods from China via air.

"Once the tariff cut was announced, our clients said 'we are

in go-go-go mode,'" said Izzy Rosenzweig, CEO of Portless, which

counts swimwear brand Hapari, and bug repellent maker NatPat

among its clients. "They said 'let's restart production and

let's restart shipping.'"

U.S. businesses largely rely on ocean shipping but that can

take between 30 and 60 days for goods to reach the United States

from China, depending on the destination and ship size, although

orders for the summer can start in late winter or early spring

to allow for the manufacturing of new designs, John Harmon,

managing director of technology research at Coresight Research,

said.

U.S. retailers and apparel companies typically begin

shipping merchandise from China at least two to three months

before the summer season starts on Memorial Day, which this year

falls on May 26.

But after U.S. President Donald Trump hit Beijing with

retaliatory and fentanyl tariffs totaling 145% on April

9, several U.S. companies paused their orders. Container

bookings from China to the U.S. fell nearly 50% in the last week

of April, according to data provided to brokerage TD Cowen by

container tracking firm Vizion.

This trend went into reverse on Monday, but Harmon said

restarting supply chains after the April pause could take some

time.

"It has been super busy these two days," said Liu, a toy

manufacturer from the export hub of Dongguan in Southern China,

who declined to give her full name for privacy reasons.

"We are booking containers and some of our goods are already

on the way to Shenzhen port. In recent months there were fewer

cargo buses on the road but today ... there is a traffic jam on

the way to the port," said Liu, who serves customers including

Walmart ( WMT ), the biggest single importer of container goods into the

United States.

CONTAINER-COSTS WORRIES

Despite the rush to deliver goods to the U.S., freight rates

have not yet spiked. The spot rate to send a 40-foot (12 m)

container from China to the U.S. West Coast rose 3% week-on-week

to $2,395 on Monday, data from freight booking and payments

platform Freightos shows, indicating that businesses were not

swamping shippers with bookings.

This is half of the price in February, when many large

players were rushing to stock up to defuse the expected tariff

action by Trump.

But companies like Bogg Bag are starting to worry that

container costs are soon going to go through the roof. Kim

Vaccarella, CEO of the tote-bag maker, sold at retailers

including Target ( TGT ), said on Wednesday that she has

drastically sped up manufacturing for her China-made totes to

get as many as possible en route to New Jersey by August. She is

sticking to a few popular items instead of many new products at

once so that they can move fast.

Retailers including Walmart ( WMT ), which reports earnings on Thursday,

and rivals Costco and Target ( TGT ) front-loaded orders at the

start of the year, CFRA research analyst Arun Sundaram wrote in

a note on May 13.

Walmart's ( WMT ) inventories rose about 3% in the quarter ended

January 31, its first rise in nearly two years, Sundaram said.

At warehouse club chain Costco, inventories were up nearly

10%, while those of surf and skateboard apparel retailer Zumiez ( ZUMZ )

rose about 14% in the three months to February.

Target's ( TGT ) inventories rose 7% during the same period.

While Monday's tariff reprieve is a potential boon for U.S.

brands eager to stock up on summer merchandise, the current rush

may create supply-chain bottlenecks, though likely less severe

than during the pandemic years of 2021-2022, said Sundaram, who

expects a rise in freight costs.

Some manufacturers of Halloween decorations told Reuters on

Wednesday that they would have to scramble to produce and ship

hanging skeletons and costume props to the United States within

the 90-day window.

Gene Seroka, executive director of the Port of Los

Angeles, said businesses may not be able to fully prepare for

both summer and back-to-school in July, another big retail

selling season.

"Right now we're looking at the last orders that would go in

for back-to-school, and maybe some lingering orders for summer

fashion. So that's really tight," Seroka said.

Stephen Lamar, who heads the American Apparel & Footwear

Association, which counts Adidas America as a member,

flagged a risk of congestion at ports if hundreds of companies

rush to bring in goods now.

"The tariff war has delayed back-to-school shipping by a

month. But it's not like school districts can delay school by a

month," Lamar said.