Paul Wiseman, Anne d’Hynenzio, Christopher Rugaber, Business Writer for the Associated Press
WASHINGTON (AP) – American businesses have cancelled orders from China, postponed expansion plans, and trade policy surprises confirm President Donald Trump plans to dive into them next.
The large, unpredictable tax on presidential imports seems likely to mean American shopper shelves and higher prices within weeks.
And higher costs and paralysis uncertainty could make economic sacrifices accurate. US consumers have fallen into the biggest funk since Covid-19 hit five years ago, and economists say the risk of a recession is rising.
Early signs of damage appeared Wednesday when the Commerce Department first saw economic growth in the first quarter.
The US economy shrunk by 0.3% from January to March, marking its first decline in three years. Gross domestic product (production of national goods and services) has fallen from 2.4% in the past three months in 2024. Imports cut 5% points from first quarter growth. Consumer spending has also slowed down dramatically.
Separately, a report from the Payroll Provider ADP found that businesses added just 62,000 jobs in April, down about half of what was expected, down from 147,000 in March. This is a potential signal that businesses may be taking a more cautious approach amid uncertainty about tariffs.
Boston University economist Brian Bethune was asked how much he would degrade Trump’s volatile policies in the world’s largest economy.
As he promised in his campaign trajectory, Trump disrupted decades of American trade policy. He imposes large import duties or duties on a wide range of goals. He is currently covered with 10% collection for products in almost every country in the world. He is hitting China, America’s third largest trading partner and the second largest source of imports.
China responded with its own retaliatory tariffs – 125% of American products. Trading wars between the two biggest economies in the world is shaking global financial markets and threatening to halt US-China trade.
Jean Seroca, executive director of the Port of Los Angeles, warned last Thursday that he would arrive at the port within two weeks.
After Trump announced the vast tariffs in early April, ocean container bookings from China to the US fell 60% and remained there, said Ryan Petersen, founder and CEO of a San Francisco company that helps businesses ship cargo around the world. By the order, marine airlines reduced capacity by cancelling 25% of sailing, Flexport said.
Many companies tried to beat watches by bringing in foreign goods before Trump’s tariffs came into effect. In fact, that is a major reason why economic growth is expected to be very low in the first quarter. The surge in imports has escalated the trade deficit, focusing on growth.
By stockpiling goods ahead of the trade war, many companies will “become aboard this storm for a while,” said Judas Levine, research director at the global freight booking platform Freightos.
Over the next few weeks, Levine said, “We may start to see shortages. The US is heavily dependent on Chinese manufacturing and could focus on categories that don’t have many alternatives or quick alternatives.”
Jay Foreman, CEO of Toymaker Basic Fun, said he has suspended Tonka trucks, care bears and other toy cargo after Trump’s tariff plans were announced in early April. Now he hopes to pass through the stock he has stocked for several months.
“Consumers will find basic, fun toys in stores for a month or two, but they run out of stock very quickly and stock products disappear from store shelves,” he said.
Kevin Brusky, who owns APE Games, a small tabletop game publisher in St. Louis, has around 7,000 copies of three different games in a Chinese warehouse. The approximately $25,000 tariff bill will launch a Kickstarter campaign next week to wipe out profits in the game, covering the cost of the job.
Still, his sales representatives are urging them to import the game if possible. Because we expect retailers to crave sales soon. If he imports the game, Brusky is considering increasing the price from $40 to at least $45.
Naveen Jaggi, president of the American Retail Advisory Services for real estate company JLL, said retailers are pending expansion plans for next year, worried that prices will push prices up and drive away customers. “What they’re telling us is, “We want to slow down the decision to open our store and commit to a lease,” because we want to see how consumers react. ”
It seems that consumers are already going crazy. The conference committee, a business group, reported Tuesday that it has fallen to its lowest level for five months since the start of the Covid-19 pandemic. Almost a third of consumers expect employment to slow down in the coming months, roughly in line with what they reached in April 2009, when the economy was in the Great Recession.
Consumer spending accounts for around 70% of US GDP, so economic fallout can be ugly if nervous consumers stop shopping. Consultant RSM economist Joseph Brusseras will peg the chances of a recession at 55% within the next 12 months.
Even darker is Torsten Slok, Chief Economist at Apollo Global Management. He sees a 90% chance of a recession by this summer if Trump tariffs exist. He said the companies are already planning a major disruption, especially from their 145% obligation on goods from China.
“The company’s response shows that orders are declining. (Expense) plans are declining, costs are rising, prices are rising,” he said.
He expects massive layoffs by carriers and retailers will be slower in May as the slowdown of goods from China into the US continues through the supply chain.
Flexport CEO Petersen said the shortage of products was “not a tragedy.”
“It’s going to be more important about the layoffs that follow,” Petersen said. “That’s where the real pain comes from. A shortage means that businesses don’t have the profits they need to pay workers, rather than sell their goods.”
He said that the interests are so high that the US and China hope to remove the trade war and defeat tariffs. In fact, Trump and his advisors have sounded more reconciled recently. For example, Treasury Secretary Scott Bescent said the triple-digit tariffs that the US and China slapped each other were not sustainable.
But more rapid changes in trade policy risks lead to paralysis of businesses and increasing uncertainty that worries consumers.
Additionally, economist Corey Stahl, of the lab he actually employs, said, “If people act like they’re in a recession, conditions could deteriorate in the coming months. Softening up some of the recent changes in trade policy may ease business concerns, but it may already be too late.”
d’Hynenzio was reported from New York
Original issue: April 30, 2025 8:41am EDT
