Trump’s tariffs loom over the economy as shipments from China fall
Headline News
American businesses are cancelling orders from China, postponing expansion plans and hunkering down to see what trade policy surprises President Donald Trump plans to spring on them next.
The president’s massive and unpredictable taxes on imports seem likely to mean emptier shelves and higher prices for American shoppers, perhaps within weeks.
And the higher costs and paralyzing uncertainty could exact an economic toll: U.S. consumers are in the biggest funk since COVID-19 hit five years ago, and economists say recession risks are climbing.
An early sign of the damage emerged on Wednesday when the Commerce Department released its first look at first-quarter economic growth.
The U.S. economy shrank 0.3% from January through March, the first drop in three years. Gross domestic product — the nation’s output of goods and services — was down from 2.4% in the last three months of 2024. Imports shaved 5 percentage points off first-quarter growth. Consumer spending also slowed sharply.
Asked how much of deterioration in the world’s biggest economy could be traced to Trump’s erratic policies, Boston College economist Brian Bethune said: “All of it.’’
As he promised on the campaign trail, Trump has upended decades of American trade policy. He’s been imposing — then sometimes suspending — big import taxes, or tariffs, on a wide range of targets. He’s currently plastered a 10% levy on products from almost every country in the world. He’s hit China — America’s third-biggest trading partner and second-biggest source of imported goods – with a staggering 145% tariff.
China has responded with retaliatory tariffs of its own – 125% on American products. The take-no-prisoners trade war between the world’s two biggest economies has shaken 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 within two weeks arrivals to the port “will drop by 35% as essentially all shipments out of China for major retailers and manufacturers has ceased.’’ Seroka added that cargo from Southeast Asia also “is much softer than normal 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 stayed there, said Ryan Petersen, founder and CEO of Flexport, a San Francisco company that helps companies ship cargo around the world. With orders down, ocean carriers have reduced their capacity by cancelling 25% of their sailings, Flexport said.
Many companies tried to beat the clock by bringing in foreign goods before Trump’s tariffs took effect. In fact, that is a big reason that first-quarter economic growth is expected to come in so low: A surge in imports swelled 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 next few 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 them: furniture, baby products and plastic goods, including toys.
Jay Foreman, CEO of toymaker Basic Fun, said he 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 but very quickly we will be out of stock and stock product will disappear from store shelves, ” he said.
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 about $25,000 would wipe out his profit on the games, so he is launching a Kickstarter campaign next week to help defray the cost of the duties.
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