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Miami Herald
30-04-2025
- Business
- Miami Herald
Empty ports, empty shelves? Trump tariff battle set to hit home soon
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 U.S. 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 U.S. 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 U.S. economy that could stretch all the way to Christmas. "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 U.S. 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 U.S. 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 U.S. 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 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." The leading edge of that supply jolt is evident in Asia. There are currently about 40 cargo ships that recently stopped at ports in China and are now bound for the U.S., down by about 40% from early April, according to ship tracking compiled by Bloomberg. Those vessels are carrying about 320,000 containers, according to the data, about a third fewer than just after Trump announced he was raising tariffs on almost all goods from China to 145%. Judah Levine, head of research at cargo booking platform Freightos, said a lot of U.S. importers will be front-loading orders from other American trading partners through the 90-day reprieve on Trump's so-called reciprocal tariffs. That could help cushion any China-centric shock through ports and logistics networks. With Chinese merchandise too pricey, some cargo owners in the U.S. are turning to suppliers in Southeast Asia. Hapag-Lloyd AG, the world's fifth-largest container carrier, said in an emailed statement last week that it's seeing cancellations of about 30% of bookings from China to the U.S. But business is sharply up from exporters in Cambodia, Thailand and Vietnam, the Hamburg, Germany-based company said. However, the whiplash effect on the economy still might be difficult to navigate in the months ahead, Levine said. "It is likely there will be a significant slowdown," he said, and "the restart could cause some congestion, with the strength of the rebound and resulting disruption probably correlated to the length of the pause." With demand for goods from China to the U.S. sinking fast, cargo carriers have slashed capacity to keep ocean freight rates from cratering. In April, there were about 80 canceled sailings from China to the U.S., roughly 60% more than any month during the COVID-19 pandemic, according to figures cited by John McCown, a veteran industry executive. "It's a fair statement to say that the container shipping sector has never faced the sort of macro headwinds that it is now facing," McCown said in a recent research note. The World Trade Organization has warned that goods traded between the U.S. and China could decrease by as much as 80%, backing U.S. Treasury Secretary Scott Bessent's description of the current situation as essentially a trade embargo. The uncertainty is partly why economists say a U.S. recession is almost a coin flip. Forecasters surveyed by Bloomberg expect imports to fall at a 7% annual rate in the second quarter - which would be the biggest drop since the onset of the pandemic. The looming supply shock has prompted economists to revise up their inflation forecasts because it could push prices higher. Executives say price tags on goods from China could double on some items. And that would come at a time when consumer sentiment is deteriorating sharply. If America's trade war with China goes on for a few more weeks, suppliers and retailers will have to make some hard decisions about the second half of the year, including which goods to ship and how much to raise prices. Suppliers are expecting lots of orders to be canceled. That will push retailers to scour the U.S. and other markets for goods to fill their shelves, even if they're from last Christmas. It's also going to be a big financial hit that many companies will likely respond to by cutting costs, including jobs, or taking on pricey debt. The risk is that supply problems morph into a "credit crunch," according to Steven Blitz, TS Lombard's chief U.S. economist. "U.S. firms could find themselves at risk from tariffs, and then the economy more broadly, if these leveraged operations find credit less available because tariffs force them to operate with smaller margins," Blitz wrote in a research note Friday. For Foreman, the past few weeks reminds him of the pandemic, but there are key differences. The COVID lockdown was a shock, but global supply chains bounced back relatively quickly and several sectors, including toys, ended up having record years. This has the potential to be "more treacherous because the longer this goes, the more catastrophic this is," he said. COVID was also littered with lots of unknowns about the virus and how long it would take to rebound. This dilemma could be eased by Trump removing the levies at any time. "The lingering effects could be worse," Foreman said. "But the solution could come much faster." Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
Yahoo
30-04-2025
- Business
- Yahoo
Empty ports, empty shelves? Trump tariff battle set to hit home soon
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 U.S. 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 U.S. 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 U.S. economy that could stretch all the way to Christmas. '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 U.S. 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 U.S. 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 U.S. 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 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.' The leading edge of that supply jolt is evident in Asia. There are currently about 40 cargo ships that recently stopped at ports in China and are now bound for the U.S., down by about 40% from early April, according to ship tracking compiled by Bloomberg. Those vessels are carrying about 320,000 containers, according to the data, about a third fewer than just after Trump announced he was raising tariffs on almost all goods from China to 145%. Judah Levine, head of research at cargo booking platform Freightos, said a lot of U.S. importers will be front-loading orders from other American trading partners through the 90-day reprieve on Trump's so-called reciprocal tariffs. That could help cushion any China-centric shock through ports and logistics networks. With Chinese merchandise too pricey, some cargo owners in the U.S. are turning to suppliers in Southeast Asia. Hapag-Lloyd AG, the world's fifth-largest container carrier, said in an emailed statement last week that it's seeing cancellations of about 30% of bookings from China to the U.S. But business is sharply up from exporters in Cambodia, Thailand and Vietnam, the Hamburg, Germany-based company said. However, the whiplash effect on the economy still might be difficult to navigate in the months ahead, Levine said. 'It is likely there will be a significant slowdown,' he said, and 'the restart could cause some congestion, with the strength of the rebound and resulting disruption probably correlated to the length of the pause.' With demand for goods from China to the U.S. sinking fast, cargo carriers have slashed capacity to keep ocean freight rates from cratering. In April, there were about 80 canceled sailings from China to the U.S., roughly 60% more than any month during the COVID-19 pandemic, according to figures cited by John McCown, a veteran industry executive. 'It's a fair statement to say that the container shipping sector has never faced the sort of macro headwinds that it is now facing,' McCown said in a recent research note. The World Trade Organization has warned that goods traded between the U.S. and China could decrease by as much as 80%, backing U.S. Treasury Secretary Scott Bessent's description of the current situation as essentially a trade embargo. The uncertainty is partly why economists say a U.S. recession is almost a coin flip. Forecasters surveyed by Bloomberg expect imports to fall at a 7% annual rate in the second quarter — which would be the biggest drop since the onset of the pandemic. The looming supply shock has prompted economists to revise up their inflation forecasts because it could push prices higher. Executives say price tags on goods from China could double on some items. And that would come at a time when consumer sentiment is deteriorating sharply. If America's trade war with China goes on for a few more weeks, suppliers and retailers will have to make some hard decisions about the second half of the year, including which goods to ship and how much to raise prices. Suppliers are expecting lots of orders to be canceled. That will push retailers to scour the U.S. and other markets for goods to fill their shelves, even if they're from last Christmas. It's also going to be a big financial hit that many companies will likely respond to by cutting costs, including jobs, or taking on pricey debt. The risk is that supply problems morph into a 'credit crunch,' according to Steven Blitz, TS Lombard's chief U.S. economist. 'U.S. firms could find themselves at risk from tariffs, and then the economy more broadly, if these leveraged operations find credit less available because tariffs force them to operate with smaller margins,' Blitz wrote in a research note Friday. For Foreman, the past few weeks reminds him of the pandemic, but there are key differences. The COVID lockdown was a shock, but global supply chains bounced back relatively quickly and several sectors, including toys, ended up having record years. This has the potential to be 'more treacherous because the longer this goes, the more catastrophic this is,' he said. COVID was also littered with lots of unknowns about the virus and how long it would take to rebound. This dilemma could be eased by Trump removing the levies at any time. 'The lingering effects could be worse,' Foreman said. 'But the solution could come much faster.'
The Star
29-04-2025
- Business
- The Star
Tariffs set to unleash supply shock on economy
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 United States 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 United States economy that could stretch all the way to Christmas. '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 US$100mil 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 United States 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 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 United States in roughly two weeks. 'We are paralysed,' said Jay Foreman, CEO of toymaker Basic Fun in Boca Raton, Florida, which supplies big retail customers such as 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 cancelling 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 US$200mil 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.' Supply shock The leading edge of that supply jolt is evident in Asia. There are currently about 40 cargo ships that recently stopped at ports in China and are now bound for the United States, down by about 40% from early April, according to ship tracking compiled by Bloomberg. Those vessels are carrying about 320,000 containers, according to the data, about a third fewer than just after Trump announced he was raising tariffs on almost all goods from China to 145%. Judah Levine, head of research at cargo booking platform Freightos, said a lot of US importers will be front-loading orders from other American trading partners through the 90-day reprieve on Trump's so-called reciprocal tariffs. That could help cushion any China-centric shock through ports and logistics networks. With Chinese merchandise too pricey, some cargo owners in the United States are turning to suppliers in South-East Asia. Hapag-Lloyd AG, the world's fifth-largest container carrier, said in an emailed statement last week that it's seeing cancellations of about 30% of bookings from China to the United States. But business is sharply up from exporters in Cambodia, Thailand and Vietnam, the Hamburg, Germany-based company said. However, the whiplash effect on the economy still might be difficult to navigate in the months ahead, Levine said. 'It is likely there will be a significant slowdown,' he said, and 'the restart could cause some congestion, with the strength of the rebound and resulting disruption probably correlated to the length of the pause.' With demand for goods from China to the United States sinking fast, cargo carriers have slashed capacity to keep ocean freight rates from cratering. In April, there were about 80 cancelled sailings from China to the United States, roughly 60% more than any month during the Covid pandemic, according to figures cited by John McCown, a veteran industry executive. 'It's a fair statement to say that the container shipping sector has never faced the sort of macro headwinds that it is now facing,' McCown said in a recent research note. The World Trade Organisation has warned that goods traded between the United States and China could decrease by as much as 80%, backing US Treasury Secretary Scott Bessent's description of the current situation as essentially a trade embargo. The uncertainty is partly why economists say a US recession is almost a coin flip. Forecasters surveyed by Bloomberg expect imports to fall at a 7% annual rate in the second quarter – which would be the biggest drop since the onset of the pandemic. The looming supply shock has prompted economists to revise up their inflation forecasts because it could push prices higher. Executives say price tags on goods from China could double on some items. And that would come at a time when consumer sentiment is deteriorating sharply. Tough calls If America's trade war with China goes on for a few more weeks, suppliers and retailers will have to make some hard decisions about the second half of the year, including which goods to ship and how much to raise prices. Suppliers are expecting lots of orders to be cancelled. That will push retailers to scour the United States and other markets for goods to fill their shelves, even if they're from last Christmas. It's also going to be a big financial hit that many companies will likely respond to by cutting costs, including jobs, or taking on pricey debt. For Foreman, the past few weeks reminds him of the pandemic, but there are key differences. The Covid lockdown was a shock, but global supply chains bounced back relatively quickly and several sectors, including toys, ended up having record years. This has the potential to be 'more treacherous because the longer this goes, the more catastrophic this is,' he said. Covid was also littered with lots of unknowns about the virus and how long it would take to rebound. This dilemma could be eased by Trump removing the levies at any time. 'The lingering effects could be worse,' Foreman said. 'But the solution could come much faster.' — Bloomberg Matt Townsend, James Mayger and Augusta Saraiva write for Bloomberg. The views expressed here are the writers' own
Business Mayor
28-04-2025
- Business
- Business Mayor
Empty Retail Shelves Could Disrupt Back-To-School And Holiday Shopping
Inbound cargo shipments from China have plummeted since early April, just as retailers and their wholesale partners need to bring in inventory for the critical back-to-school through holiday shopping season, according to Bloomberg. Each passing week of reduced shipments from China increases the prospects of 'Covid-like' shortages … More later in the year, Apollo Management economist Torsten Slok warned. (Photo by Bob Riha, Jr./Getty Images) Getty Images Key Facts The number of U.S.-bound cargo ships from China are down about 40% from earlier this month and they are carrying about one-third fewer containers since President Trump announced 145% tariffs on Chinese imports. John D. McCown, non-resident senior fellow at the Center for Maritime Strategy, reported that cargo carriers canceled 80 sailings from China to the U.S. in April, roughly 60% more than in any month during the Covid pandemic. Even if what Treasury Secretary Scott Bessent called a 'trade embargo' is resolved quickly – highly unlikely given current tensions – retailers are still looking at the possibility of critical inventory shortages for the second half of the year. Key Background In any normal year, retailers and wholesalers start to receive inventory for the back-to-school through holiday shopping season by mid-May through early June. While shoppers have yet to experience empty shelves because retailers pulled forward merchandise orders earlier this year, each passing week of reduced shipments increases the prospects of 'Covid-like' shortages later in the year, Apollo Management economist Torsten Slok warned. Last week, the CEOs of Walmart, Target, and Home Depot met with President Trump at the White House to tell him much the same thing. Crucial Quote 'It's a fair statement to say that the container shipping sector has never faced the sort of macro headwinds that it is now facing,' McCown said in a research note. No Quick Fix If and when trade issues are resolved, it could overwhelm the retail supply chain system. It takes about 20 to 40 days for container ships to reach the U.S. from China, then up to ten days of transit time for goods to move from the ports to cities. What To Watch For The longer the China-U.S. trade impasse lasts, the worse the disruption will be. 'Expect ships to sit offshore, orders to be canceled, and well-run generational retailers to file for bankruptcy,' Apollo Management's Slok wrote in a research note. By the end of May, he said domestic freight demand will 'come to a halt,' followed by significant layoffs in the trucking, logistics and retail industries in early June. Ultimately, it could lead to what he called a 'voluntary trade reset recession.' Further Reading Trump China Tariffs Set To Unleash Supply Jolt On US Economy (Bloomberg, 4/28/2025) Trump Trade War Update: Firm Predicts 'Empty Shelves' And Recession By June (Investor's Business Daily, 4/28/2025) Empty Shelves Are Coming, Apollo Economist Says — And So Is A 'Voluntary' Recession (Quartz, 4/28/2025)
Chicago Tribune
28-04-2025
- Business
- Chicago Tribune
Empty ports, empty shelves? Trump tariff battle set to hit home soon
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 U.S. 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 U.S. 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 U.S. economy that could stretch all the way to Christmas. '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 U.S. 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 U.S. 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 U.S. 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 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.' The leading edge of that supply jolt is evident in Asia. There are currently about 40 cargo ships that recently stopped at ports in China and are now bound for the U.S., down by about 40% from early April, according to ship tracking compiled by Bloomberg. Those vessels are carrying about 320,000 containers, according to the data, about a third fewer than just after Trump announced he was raising tariffs on almost all goods from China to 145%. Judah Levine, head of research at cargo booking platform Freightos, said a lot of U.S. importers will be front-loading orders from other American trading partners through the 90-day reprieve on Trump's so-called reciprocal tariffs. That could help cushion any China-centric shock through ports and logistics networks. With Chinese merchandise too pricey, some cargo owners in the U.S. are turning to suppliers in Southeast Asia. Hapag-Lloyd AG, the world's fifth-largest container carrier, said in an emailed statement last week that it's seeing cancellations of about 30% of bookings from China to the U.S. But business is sharply up from exporters in Cambodia, Thailand and Vietnam, the Hamburg, Germany-based company said. However, the whiplash effect on the economy still might be difficult to navigate in the months ahead, Levine said. 'It is likely there will be a significant slowdown,' he said, and 'the restart could cause some congestion, with the strength of the rebound and resulting disruption probably correlated to the length of the pause.' With demand for goods from China to the U.S. sinking fast, cargo carriers have slashed capacity to keep ocean freight rates from cratering. In April, there were about 80 canceled sailings from China to the U.S., roughly 60% more than any month during the COVID pandemic, according to figures cited by John McCown, a veteran industry executive. 'It's a fair statement to say that the container shipping sector has never faced the sort of macro headwinds that it is now facing,' McCown said in a recent research note. The World Trade Organization has warned that goods traded between the U.S. and China could decrease by as much as 80%, backing U.S. Treasury Secretary Scott Bessent's description of the current situation as essentially a trade embargo. The uncertainty is partly why economists say a U.S. recession is almost a coin flip. Forecasters surveyed by Bloomberg expect imports to fall at a 7% annual rate in the second quarter — which would be the biggest drop since the onset of the pandemic. The looming supply shock has prompted economists to revise up their inflation forecasts because it could push prices higher. Executives say price tags on goods from China could double on some items. And that would come at a time when consumer sentiment is deteriorating sharply. If America's trade war with China goes on for a few more weeks, suppliers and retailers will have to make some hard decisions about the second half of the year, including which goods to ship and how much to raise prices. Suppliers are expecting lots of orders to be canceled. That will push retailers to scour the U.S. and other markets for goods to fill their shelves, even if they're from last Christmas. It's also going to be a big financial hit that many companies will likely respond to by cutting costs, including jobs, or taking on pricey debt. The risk is that supply problems morph into a 'credit crunch,' according to Steven Blitz, TS Lombard's chief U.S. economist. 'U.S. firms could find themselves at risk from tariffs, and then the economy more broadly, if these leveraged operations find credit less available because tariffs force them to operate with smaller margins,' Blitz wrote in a research note Friday. For Foreman, the past few weeks reminds him of the pandemic, but there are key differences. The COVID lockdown was a shock, but global supply chains bounced back relatively quickly and several sectors, including toys, ended up having record years. This has the potential to be 'more treacherous because the longer this goes, the more catastrophic this is,' he said. COVID was also littered with lots of unknowns about the virus and how long it would take to rebound. This dilemma could be eased by Trump removing the levies at any time. 'The lingering effects could be worse,' Foreman said. 'But the solution could come much faster.'
