WASHINGTON — American businesses are pulling back on orders from China, delaying expansion plans, and bracing themselves as uncertainty looms over future trade policies under President Donald Trump. The imposition of substantial tariffs on imports is expected to lead to sparser shelves and rising prices for consumers, potentially affecting shopping habits in the coming weeks. Economists have expressed growing concerns, suggesting that the current economic landscape resembles a downturn similar to the one experienced during the COVID-19 pandemic.
Recent data from the Commerce Department indicates a 0.3% contraction in the U.S. economy for the first quarter, marking the first decline in three years. This drop follows a more robust growth of 2.4% in late 2024 and highlights the adverse impact of rising tariffs on imports, which have contributed significantly to this economic retraction. Consumer spending, a major driver of economic activity, has also seen a notable slowdown.
Economists are pointing to the erratic nature of Trump’s trade policies as a primary culprit behind the economic deterioration. Boston College economist Brian Bethune suggested that the current economic climate can largely be attributed to these unpredictable strategies. Trump has fundamentally altered trade practices by imposing varied tariffs on a broad spectrum of imports, including a staggering 145% levy on Chinese goods.
In response, China has retaliated with its own tariffs, reinforcing a contentious trade relationship between the two nations. The ongoing trade war has contributed to considerable volatility in global markets, and officials like Gene Seroka, executive director of the Port of Los Angeles, foresee a sharp decline in cargo volumes. He warned that shipments from China could plummet by 35% within weeks, disrupting supply chains for major retailers.
The fallout from these tariffs has already led to a dramatic 60% drop in ocean container bookings from China to the United States, a scenario that experts from Flexport, a logistics company, have noted continues to persist. As companies rush to stockpile goods in anticipation of further tariffs, this influx has contributed to an inflated trade deficit that weighs heavily on economic growth projections.
However, analysts caution that the brief period of stockpiling may soon give way to shortages, particularly in categories heavily reliant on Chinese production, such as furniture and toys. Jay Foreman, CEO of Basic Fun, reported that he has halted shipments of popular toys like Tonka trucks and Care Bears in response to the uncertainty surrounding tariffs, bringing attention to the looming inventory crisis.
Businesses are increasingly hesitant to commit to long-term expansion plans due to fears of consumer reaction amidst rising prices. Naveen Jaggi, president of retail advisory services at JLL, noted that many retailers are choosing to delay decisions on opening new stores until the economic outlook stabilizes.
Consumer confidence has taken a hit as evidenced by the Conference Board’s report showing a decline for five consecutive months, marking the lowest level since the onset of the pandemic. Nearly one-third of consumers now expect hiring to slow down, mirroring concerns prevalent during the Great Recession.
As consumer spending accounts for approximately 70% of U.S. GDP, the prospect of a pullback in consumer purchases could spell trouble for overall economic health. Some economists forecast an up to 55% chance of recession within the next year, while others suggest that the likelihood could be as high as 90% if current tariff measures remain in place.
The potential for significant layoffs looms as companies adapt to reduced orders and rising operational costs. Flexport’s Petersen emphasized that while shortages will be one aspect of the fallout, the more severe implications may arise from resultant job losses as businesses struggle with declining sales figures.
In a recent shift, some trade policy experts have suggested that reducing tariffs may alleviate some business concerns. Treasury Secretary Scott Bessent echoed this sentiment, stating that the current tariff structure is not sustainable. However, abrupt policy changes could amplify existing uncertainties that are already troubling for both businesses and consumers alike. As conditions evolve, economists warn that the economic climate could worsen if consumer sentiment continues to falter.