Economic pressure mounts amid Trump's tariffs as imports from China tumble
American businesses are buckling under the weight of trade policy unpredictability from the Trump administration, resulting in canceled orders, delayed expansion plans, and a general hunkering down in preparation for further surprises.
The president's unpredictable taxing of imports may lead to barren shelves and elevated prices for American consumers within weeks. The higher costs and uncertainty could result in economic harm: U.S. consumers find themselves in their grimmest mood since COVID-19 struck five years ago, and economists are warning of recession risks soaring.
An early warning sign emerged on Wednesday with the Commerce Department releasing its initial peek at first-quarter economic growth. The U.S. economy shrank 0.3% from January to March, a drop not seen in three years. The nation's GDP, or output of goods and services, decreased from 2.4% in the last part of 2024. Imports alone shaved 5 percentage points off first-quarter growth, and consumer spending also slowed drastically.
Asked about the degree to which deterioration in the world's largest economy could be tied to Trump's erratic trade policies, Boston College economist Brian Bethune said, "All of it."
Following his campaign promises, Trump has overturned decades of American trade policy. He has imposed, then occasionally suspended, substantial import taxes, or tariffs, on a vast range of targets. He currently has plastered a 10% levy on products from almost every country, with China - America's third-largest trading partner and second-largest source of imported goods - hit with a staggering 145% tariff.
China has retaliated with its own tariffs, imposing a 125% penalty on American products. The trade war between the world's two biggest economies has disrupted global financial markets and threatened to bring U.S-China trade to a standstill.
Gene Seroka, executive director of the Port of Los Angeles, warned last Thursday that arrivals to the port will drop by 35% over the next two weeks with "essentially all shipments out of China for major retailers and manufacturers [having] ceased." Seroka added that cargo from Southeast Asia is noticeably lighter with tariffs now in place.
After Trump announced expansive tariffs in early April, ocean container bookings from China to the United States dropped 60%, and they have stayed that way, according to Ryan Petersen, founder, and CEO of Flexport, a San Francisco company that helps businesses ship cargo worldwide. With orders dwindling, ocean carriers have reduced their capacity by canceling 25% of their sailings, Flexport noted.
Many companies tried to beat the gun by bringing foreign goods into the United States before Trump's tariffs took effect. In fact, this is a significant reason why first-quarter economic growth is expected to come in so low - a surge in imports bloated the trade deficit, which weighs on growth.
By stockpiling goods ahead of the trade war, many companies "will be positioned to ride out this storm for a while," said Judah Levine, research director at the global freight-booking platform Freightos. "But at a certain point, inventories will run down."
In the coming weeks, Levine said, "you could start seeing shortages...it's likely to be concentrated in categories where the U.S. is heavily dependent on Chinese manufacturing and there aren't a lot of alternatives and certainly quick alternatives." Among these: furniture, baby products, and plastic goods, including toys.
Jay Foreman, CEO of toymaker Basic Fun, paused shipments of Tonka trucks, Care Bears, and other toys from China after Trump's tariff plan was announced in early April. Now, he's hoping to get by for a few months on inventory he's stockpiled.
"Consumers will find Basic Fun toys in stores for a month or two," he said, "but very quickly we will be out of stock, and stock products will disappear from store shelves."
Kevin Brusky, who owns APE Games, a small tabletop game publisher in St. Louis, has about 7,000 copies of three different games sitting in a warehouse in China. The tariff bill of approximately $25,000 would wipe out his profit on the games, so he is launching a Kickstarter campaign next week to help cover the duty costs. Regardless, his sales representative is urging him to import the games if possible, as she expects that retailers will soon be desperate for products to sell. If he does import the games, Brusky is contemplating raising its price from $40 to at least $45.
Worried that tariffs will force prices up and drive away customers, retailers have put expansion plans on hold for next year, said Naveen Jaggi, president of retail advisory services in the Americas for real-estate firm JLL. "What they are telling us is: 'We want to slow down the decision to open up stores and commit to leases because they want to watch how the consumer reacts.'"
Consumer confidence in the economy has fallen for the fifth consecutive month to the lowest level since the onset of the COVID-19 pandemic, according to the Conference Board, a business group. Nearly one-third of consumers expect hiring to slow in the coming months, matching the level reached in April 2009, when the economy was mired in the Great Recession.
Economist Joseph Brusuelas of the consultancy RSM puts the probability of a recession within the next 12 months at 55%, while Torsten Slok, chief economist at Apollo Global Management, sees a 90% chance of a recession by this summer if Trump's tariffs remain in place. Businesses, Slok says, are already planning for significant disruptions, particularly from the 145% duties on goods from China.
"You see that in company reactions: Orders are down, spending plans are down, costs are up, prices paid are up," he said. He anticipates massive layoffs by trucking firms and retailers as soon as late May, as the slowdown in goods coming into U.S. ports from China works its way through the supply chain.
Flexport CEO Petersen said shortages of products are "not a tragedy." According to Petersen, "the real pain is going to be felt in layoffs. That's where the stakes are highest." He anticipated U.S. and China deescalating their trade war and lowering tariffs, but more abrupt shifts in trade policy could increase uncertainty that has paralyzed businesses and worried consumers. Moreover, economist Cory Stahle of the Indeed Hiring Lab said, "conditions may worsen in the coming months if people start behaving like they are in a recession. Softening some of the recent trade policy changes may ease some business concerns, but it may already be too late."
- Unpredictable trade policies from the Trump administration have led American businesses to brace for further surprises, causing canceled orders, delayed expansion plans, and a general hunkering down.
- The president's tariffs may lead to barren shelves and elevated prices for consumers within weeks, resulting in a grim mood among U.S. consumers similar to that seen during the COVID-19 pandemic five years ago.
- Economists are warning of recession risks soaring as a result of these tariffs, with the U.S. economy showing signs of slowing down, such as a 0.3% drop from January to March in first-quarter economic growth.
- Boston College economist Brian Bethune stated that all of the economic deterioration could be tied to Trump's erratic trade policies.
- Trump has overturned decades of American trade policy, imposing tariffs on a vast range of targets, including a 10% levy on products from nearly every country and a staggering 145% tariff on goods from China.
- China has retaliated with its own tariffs, imposing a 125% penalty on American products, disrupting global financial markets and threatening to bring U.S-China trade to a standstill.
- Many companies have stockpiled goods ahead of the trade war to ride out the storm, but inventories will eventually run out, leading to potential shortages in categories such as furniture, baby products, and plastic goods.
- Worried about tariffs forcing prices up and driving away customers, retailers have put expansion plans on hold, and economists predict a 55% to 90% chance of a recession within the next 12 months if Trump's tariffs remain in place.
