Global supply chains, which had experienced blockages due to the escalating trade tensions between the United States and China, are now showing signs of opening up following a recent truce between the world's two largest economies. Data indicates a significant revitalization of trade volumes, providing a much-needed relief to businesses heavily reliant on goods manufactured in both countries.

Maersk, a prominent global shipping and logistics company, reported a substantial increase in ocean freight volumes from China to the US after initial tariff adjustments in May, which stemmed from talks held in Geneva. This surge marks a stark contrast to April, when Maersk's freight bookings for the same route had plummeted by 40 percent. The company anticipates that this latest uptick in freight will likely put additional pressure on US West Coast terminals, particularly Los Angeles and Long Beach, as well as their associated inland networks, as more cargo moves through these critical gateways in the coming weeks.

This revitalization of shipment volumes into the US follows a period in April when North American and Asian manufacturing saw a decline after an initial rush to stockpile goods, according to the GEP Global Supply Chain Volatility Index. John Piatek, vice-president of consulting for GEP, emphasized the significance of the tariff pause, stating it offers "major relief for manufacturers in both the US and China." The interconnectedness of these two economic powerhouses is undeniable; their combined economies account for a staggering 43 percent of global GDP and nearly 48 percent of global manufacturing output, as per World Bank data. Resolving trade disputes is thus crucial not only for the US and China but for the entire international business community.

The tariffs imposed by former US President Donald Trump served as a stress test for the global supply chain, which was already in the process of a slow recovery from the stagnation caused by the COVID-19 pandemic in 2020. Experts highlight the profound intertwining of the two countries' trade relationships, suggesting that a complete decoupling is exceedingly difficult despite recent points of contention. While the US excels in supplying advanced technology, China depends on various US components for its automobiles, electronics, and technology products. Other significant US exports include minerals, appliances, oils, nuclear reactors, aircraft, spacecraft, and food and beverages. An analysis by the US-China Business Council revealed that approximately 930,000 US jobs are directly dependent on the export market to China.

Economist and professor Tom Fullerton from the University of Texas at El Paso pointed out that US tariffs on imports such as steel, aluminum, automobiles, and auto parts are particularly "problematic" for key trading partners like Mexico, China, and Canada. This issue arises because the United States does not produce enough of these items to meet its total domestic demand, relying on imports to bridge the gap.

Looking ahead, the 90-day pause on the "reciprocal tariffs," initially imposed on April 2 (dubbed "Liberation Day"), is set to expire next month. While the UK has already secured a trade deal with the US, other nations are currently engaged in similar discussions. Fullerton warns that a return to the prior "reciprocal tariffs" rates could trigger a blowback on US businesses or even lead to stagflation. He cautioned that if the combination of tariff schedules remains in place for an extended period, it could intensify inflationary pressures and potentially result in stagflation as businesses begin to falter.

The global supply chain also relies heavily on Chinese companies for the manufacturing of essential goods such as ships, ceramics, and textiles, given China's position as the world's largest exporter of these products, according to data from the International Trade Center, a UN-backed agency promoting open trade. For the US to identify and establish alternative suppliers for these goods would demand years, billions of dollars, and the development of numerous new supply chains outside of China.

Economists are closely monitoring the enduring impact of this brief trade war, both within the US and globally. In May, US retail sales experienced their largest monthly decline since March 2023, as reported by the US Census Bureau. This downturn is attributed to many consumers pulling back on spending after having shopped ahead to preempt potentially higher prices due to anticipated tariffs.