Washington – A wave of uncertainty has gripped U.S. businesses currently entangled in the complex web of President Donald Trump’s fluctuating trade policies. Companies are putting a hold on orders from China, with expansion plans also seeing delays, as they brace for the next surprise in trade directives.
The president’s hefty and unpredictable import tariffs could soon result in dwindled inventories and increased costs for American consumers. Economists note that this could severely impact the U.S. economy, with recession risks on the rise amidst the biggest consumer unease since the COVID-19 crisis five years ago.
The impact of these policies was evident when the Commerce Department revealed a contraction in the economy, marking the first decline in three years. From January to March, the U.S. economy shrank by 0.3%, a significant drop following the 2.4% growth at the end of 2024. A surge in imports, driven by the urgency to beat looming tariffs, notably contributed to this economic downturn, shaving considerable points off the GDP.
Boston College economist Brian Bethune attributed the downturn to Trump’s volatile trade strategies. Abandoning decades of trade agreements, the president continues to impose substantial tariffs under his protectionist policies. Currently, a 10% duty is applied to products from nearly every country, with an astonishing 145% tariff targeting Chinese imports.
In retaliation, China has also imposed hefty tariffs on U.S. products. This fierce trade conflict between the two nation’s largest economies is disrupting global financial markets while bringing U.S.-China trade flow to a grinding halt. Gene Seroka, head of the Port of Los Angeles, indicated that shipments from China for various manufacturers and retailers have virtually ceased, predicting a significant drop in port arrivals.
The ramifications are widespread, with ocean carrier bookings from China suffering a 60% decline after Trump’s tariff announcements. Many companies sought to circumvent expected tariff hikes by importing goods before the tariffs came into effect, but this has resulted in heightened trade deficits. Judah Levine from Freightos suggests that current stockpiles may allow companies to initially buffer against the storm, but warns of imminent shortages as inventories deplete.
Shortages, especially in categories crucially dependent on Chinese production like furniture and toys, are anticipated. Basic Fun CEO Jay Foreman has already pulled back shipments of popular toys and must rely on existing inventory briefly before stock runs out.
In another instance, Kevin Brusky, head of APE Games, finds his products stuck in a Chinese warehouse, the hefty tariffs slashing potential profits entirely. In response to this financial strain, Brusky plans to crowdsource support to manage these duties while contemplating a price increase for his games.
Retailers are reacting by stalling store expansions, apprehensive about the potential hikes in consumer prices and reduced demand. Naveen Jaggi of JLL notes that such hesitation reflects a broader wait-and-see approach as brands assess consumer behaviors.
Feedback from consumers indicates anxiety, with confidence dipping to the lowest since the last economic crisis. A substantial portion of consumers anticipate a slowdown in hiring, evoking parallels to the Great Recession.
Given that consumer spending constitutes a significant share of GDP, reduced consumer activity may have dire consequences. Economist Joseph Brusuelas tinges this scenario with the potential of recession, acknowledging a more than half probability within the year.
An even bleaker forecast comes from Torsten Slok at Apollo Global Management, positing a near-certain recession if current tariffs persist. Adjustments in business operations are already visible, considering decreased orders and higher operational costs.
Future job loss projections in transport and retail sectors are alarming, highlighting goods shortages and marking substantial disruption in supply chains. Ryan Petersen from Flexport perceives these shortages as less impactful compared to potential layoffs, which directly affect livelihoods.
With the severe economic stakes, expectations lean toward a de-escalation of the trade standoff. While Trump’s administration recently adopted a more softer tone, suggesting tariffs are untenable, profound uncertainty clouds the commercial arena.
Economist Cory Stahle warns that current recession-like behaviors could exacerbate conditions unless softening trade practices are rectified – a reversal to stable, predictable policies might come too late to avert broader economic drawbacks.