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WAITING FOR THE SUPPLY SHOCK  
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David Dayen
April 30, 2025
The American Prospect
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_ It’s coming, and we know approximately when. The economy
contracted by 0.3 percent, and imports have contracted. Tariffs of 145
percent on China are a trade embargo for many sectors. China’s
retaliatory measures are an embargo in the other direction. _

The port of Seattle on Elliott Bay saw a decline of 27% in container
vessels arriving or departing compared to the previous first half
April of last year. Photo from April 24, 2025., Photo: Ivy Ceballo /
The Seattle Times

 

Two milestones converged this week that seem important in the moment
but in retrospect will be minor blips historically: yesterday’s
reaching of the first hundred days of Donald Trump’s second term,
and today’s announcement of first-quarter gross domestic product
showing the economy contracted by 0.3 percent
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annualized basis.

The former is just a news hook to overlay “what it all means”
stories that are as light as air. The second covers the period before
the April 2 Liberation Day, though it was influenced by it. The reason
the economy contracted is that imports, in the calculation of GDP,
take away from economic growth, and companies bulked up imports in
anticipation of tariffs. That’s more of a noisy statistical quirk
than a recession setting in.

The import surge also shows that Treasury Secretary Scott Bessent
wasn’t completely out of his mind the other day when he downplayed
incoming supply shocks by saying
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“I think retailers have managed their inventory in front of this.”

He was just _mostly_ out of his mind.

This moment feels to me like February 2020. If you were decently
well-read, you knew that a global pandemic was coming to our shores in
weeks, and the upheaval would change society. But not everybody was
paying attention, so you had this special knowledge, a crystal ball
into a hideous moment ahead. It was nerve-racking to know that
everyone else wasn’t freaking out as much as you.

That’s how I feel about the supply chain right now.

I don’t care how well-stocked a company is; if they rely on finished
goods or component parts from China, there will come a point pretty
soon when they won’t have enough. West Coast ports are just about to
feel the effects of this, because it takes around 30 days for
container ships to make the journey from Asia to the U.S. Next week,
ships entering the Port of Los Angeles will drop 35 percent
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to last year at this time, and a quarter of the ships scheduled for
May are already canceled. The Port of Long Beach is down 38 percent
this week. Chinese exporters are just stopping production
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either looking for new markets or finding another business.

Tariffs of 145 percent on China, in short, are a trade embargo for
many sectors. And China’s retaliatory measures are an embargo in the
other direction.

In the near term, that means cratering business for longshoremen and
truckers and warehouse workers. But there is this buildup of inventory
that businesses can draw down. For several weeks, they can fend off
the spectacle of empty shelves. But not forever.

Many businesses are trying to wait out the situation in case Trump
blinks, announces new deals circumventing the tariffs, anything
hopeful. Trump did that just yesterday, exempting imported auto
components
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tariffs. But he also dug in
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a rally in Michigan, suggesting this won’t end anytime soon.
(There’s apparently one trade deal done
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an unnamed country. There are multiple countries out there!)

And much of this damage is unavoidable even if Trump reversed
everything today. The realities of time mean that there’s now a big
gap in shipments. And you don’t just call up a supplier and say
“Restart production” again and have it happen. That supplier may
have moved on to other orders, or gone out of business. Shipping
experts estimate
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months of impact from the current three weeks of depressed cargo, and
it won’t be just three weeks.

So this is why UPS announced
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job cuts yesterday. This is why companies are pulling back all their
forecasts of future earnings
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because they are essentially unknowable, and desperately cutting
spending
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they can. This is why, during earnings season, Procter & Gamble
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practically everyone else are talking about price increases and cuts
to their outlook. This is why people are posting
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and Shein orders
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giant “import charges” attached (that’s about a different
tariff, the closure of a loophole that allowed direct shipments from
China). This is why farmers, seeing China cancel pork shipments
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one of the retaliatory measures, are already in a state of depression
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for bailouts
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(Which cannot come unless Congress replenishes the farm bailout fund,
as I explained last week
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And this is why shortages are a matter of time, with supply-linked
inflation accompanying them. That accompanies layoffs in the logistics
sector, then retail, and eventually across the economy.

Some of this is further out; normally, planning would be going on
right now for holiday orders of toys and Christmas decorations,
and nobody can do that
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Even fireworks orders
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America’s semiquincentennial are being affected now. But the
collapse in production, combined with the timing of shipping and
trucking and the wearing down of inventories, means people will see
these effects on store shelves around midsummer, precisely when
economists at Apollo Global Management (I’m no lover of private
equity, but hey, they know money) place the start of the recession
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If the tumult stopped at novelty items, that would be one thing. But
China dominates things like transformers for electricity, and pumps
and other component parts for air conditioning. The near-term gap
could mean serious disruptions in the summer months.

I’m not an oracle. All of this information is readily available. But
the majority of Americans just have a wisp of it, a vague sense
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something bad is going to happen. Trump’s poor approval ratings
reflect that. But if I’m right, and I’m just doing a basic reading
of things happening in the real world, you ain’t seen nothing yet.

_[DAVID DAYEN is the Prospect’s executive editor. His work has
appeared in The Intercept, The New Republic, HuffPost, The Washington
Post, the Los Angeles Times, and more. His most recent book is
‘Monopolized: Life in the Age of Corporate Power.’]_

_Read the original article at Prospect.org.
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_Used with the permission. © The American Prospect
[[link removed]], Prospect.org, 2025 [[link removed]].
All rights reserved.  _

_Support the American Prospect [[link removed]]._

_Click here [[link removed]] to support the Prospect's
brand of independent impact journalism._

* Supply Chains
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* global supply
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* Trade
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* Tariffs
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* Trump economy
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* Economy
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* Economic Policy
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* China
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* ocean shipping
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* inflation
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* Retail
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* Donald Trump
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* Trump 2.0
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* MAGA
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* clueless
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* recession
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* economic recession
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