A tumultuous wave of change is headed for the economy

Boston Globe

03-05-2025

Get Starting Point
A guide through the most important stories of the morning, delivered Monday through Friday.
Enter Email
Sign Up
The number of massive container ships carrying metal boxes of toys, furniture, and other products departing China for the United States tumbled by about one-third in April.
Advertisement
The reason consumers haven't felt many of the effects yet is because it takes 20 to 40 days for a container ship to travel across the Pacific Ocean. It then takes another one to 10 days for Chinese goods to make their way by train or truck to various cities around the country, economists at Apollo Global Management wrote in a recent report. That means that the higher tariffs on China that went into effect at the beginning of April are just starting to result in a drop in the number of ships arriving at American ports, a trend that should intensify.
Advertisement
By late May or early June, consumers could start to see some empty shelves, and layoffs could occur for retailers and logistics industries. The major effects on the US economy of shutting down trade with China will start to become apparent in the summer, when the United States might slip into a recession, said Torsten Slok, an economist at Apollo.
'US consumers will within a few weeks see empty shelves in clothing stores, toy stores, hardware stores, and retail drugstores, and higher prices of the goods that still are on the shelves,' he said.
Molson Hart, CEO of Viahart, a toy company, wrote on the social platform X: 'It's almost like we're speeding towards a brick wall but the driver of the car doesn't see it yet. By the time he does, it'll be too late to hit the brakes.'
The decline in Chinese imports was amplified Friday, when the United States eliminated so-called de minimis treatment for Chinese goods. The rule had allowed products up to $800 to avoid tariffs as long as they are shipped directly to consumers. It has boosted the business model of companies such as Temu and Shein, and it has resulted in a surge of individually addressed packages to the United States, many of which are shipped by air.
Advertisement
Supporters of the change say that this tariff loophole has given Chinese shippers an unfair advantage and hurt American businesses. But the decision to get rid of it is already resulting in higher prices for consumers. And the change is expected to weigh on airlines and private carriers like FedEx, which have steady business delivering small-dollar goods.
Port workers and logistics companies have been expecting their own disruptions. At the port of Los Angeles, the main entry point for Chinese products arriving in the United States, imports surged in recent months as businesses and consumers tried to stock up on goods in advance of the tariffs coming into effect. But that activity has now started to decline.
The number of containers arriving at the Port of Los Angeles is expected to drop more than 35 percent this coming week compared with the same period last year, port data show. Gene Seroka, the port's executive director, said that a quarter of the ships that had been scheduled for May had canceled because of light volume.
As of about three weeks ago, goods coming into the port from China have been 'very few and far between,' Seroka said.
Data show that sales of heavy trucks have fallen sharply, too, suggesting that companies in the logistics space expect to be moving fewer goods in the future.
Trade experts say that companies have stockpiled enough inventory in recent months that, if the White House reverses course soon and significantly drops tariffs on China, much of the pain for the economy and consumers can be avoided. Data from the Institute for Supply Management show that US inventories are at their highest level in more than two years.
Advertisement
Gabriel Wildau, a managing director at Teneo, who advises companies on doing business with China, said that the Chinese goods that US retailers had stockpiled in the first three months of the year would give stores some time before they would need to raise prices. But if the situation is not changed quickly, American consumers will feel the impact of trade changes unfold over the next three to six months, he said.
'We're going to have higher prices and, in some cases, empty shelves,' he said.
Trump officials have admitted that there could be some disruptions for consumers. The president seemed to acknowledge Wednesday that his trade changes could lead to fewer goods and higher prices.
'You know, somebody said, 'Oh, the shelves are going to be open,'' Trump said from the White House. 'Well, maybe the children will have two dolls instead of 30 dolls, you know? And maybe the two dolls will cost a couple of bucks more than they would normally.'
But administration officials have said any pain will be minimal. At a White House briefing Tuesday, Treasury Secretary Scott Bessent said that he did not expect to see supply chain shocks from tariffs on China. 'I think retailers have managed their inventory in front of this,' he said.
Some firms, however, that are in a more fragile financial position have not been able to stockpile and are rapidly being forced out of business. Even if the Trump administration finds a way to reduce its tariffs on China, it's not clear that the levies will fall enough to meaningfully restart trade.
Many companies say that tariffs above 50 percent on Chinese imports are enough to stop trade entirely. With tariffs now at a minimum of 145 percent, and in some cases much higher, that would mean that the Trump administration may have to drop its China tariffs by at least 100 percentage points to meaningfully restart the flow of goods.
Advertisement
Ryan Petersen, CEO of Flexport, a supply chain company, said that, even before the president hiked tariffs on China to 145 percent in April, the tariffs the Trump administration had put on China were high, at a minimum of 54 percent.
'The reality is that 54 percent was already an incredibly high tariff rate,' Petersen said. 'It depends on how far they walk it back. If they walk it back to 25 percent, maybe this all becomes a non-event.'
With so much unclear about where global trade is headed, companies are freezing their plans for expansion and halting new orders.
Data show that new orders from manufacturers have turned down sharply this year, while companies have trimmed back their plans for capital expenditures. Some major companies have stopped issuing guidance for their sales and profits. Mercedes-Benz on Wednesday suspended its financial forecasts for 2025, as did Stellantis, which makes the Chrysler, Dodge and Jeep brands.
It's not clear how quickly the current supply chain challenges could be resolved. But during the pandemic, supply chains disruptions took much longer to work their way through the economy than most forecasters had anticipated.
This article originally appeared in