Trump Tariffs Set to Shock Supply Chains Within Weeks

President Donald Trump’s tariff onslaught has roiled Washington and Wall Street for nearly a month. If the trade war persists, the next upheaval will hit much closer to home.

Since the US raised levies on China to 145% in early April, cargo shipments have plummeted, perhaps by as much as 60%, according to one estimate. That drastic reduction in goods from one of the largest US trading partners hasn’t been felt by many Americans yet, but that’s about to change.

By the middle of May, thousands of companies — big and small — will be needing to replenish inventories. Giant retailers such as Walmart Inc. and Target Corp. told Trump in a meeting last week that shoppers are likely to see empty shelves and higher prices. Torsten Slok, Apollo Management’s chief economist, recently warned of looming “Covid-like” shortages and significant layoffs in industries spanning trucking, logistics and retail.

While Trump has shown signs in recent days that he’s willing to be flexible on the import taxes imposed on China and others, it may be too late to stop a supply shock from reverberating across the US economy that could stretch all the way to Christmas. Bloomberg's Brendan Murray reports.

“The clock is absolutely ticking,” said Jim Gerson, president of The Gersons Companies, an 84-year-old supplier of holiday decorations and candles to major US retailers. The company, based in Olathe, Kansas, sources more than half its products from China and currently has about 250 containers waiting to be shipped.

“We have to get this worked out,” said Gerson, who’s part of the third generation from his family to run the company, which generates roughly $100 million in sales a year. “And hopefully very soon.”

Even when hostilities ease, restarting transpacific trade will bring additional risks. The freight industry has reduced capacity to match weaker demand. That means a surge of orders sparked by a detente between the superpowers will likely overwhelm the network, causing delays and boosting costs. A similar scenario unfolded during the pandemic when container prices quadrupled and a glut of cargo ships jammed up ports.

“There will be a surge in ports and consequently for trucks and rail creating delays and bottlenecks,” said Lars Jensen, chief executive officer of shipping consultant Vespucci Maritime. “Ports are designed for stable flows, not the off-again, on-again volume shifts.”

The US tariffs on China came at a critical time for the retail industry. March and April is when suppliers start ramping up inventory for the second half of the year to fill orders for back-to-school shopping and Christmas. For many firms, the first holiday goods should be hitting the water bound for the US in roughly two weeks.

“We are paralyzed,” said Jay Foreman, CEO of toymaker Basic Fun in Boca Raton, Florida, which supplies big retail customers such as Amazon.com Inc. and Walmart. He called the tariffs a “de facto embargo” and said customers have been pausing orders so far, but he expects them to start canceling them if the China tariffs stay at this level for much longer.

“There’s a couple weeks, then it really starts to hurt,” said Foreman, whose company generates about $200 million in sales a year and sources roughly 90% of products from China. “We’re in a period where the damage is manageable, but every week the damage level is going to increase.”

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