David Dayen writes:

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 compared 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, 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 from tariffs. But he also dug in at a rally in Michigan, suggesting this won’t end anytime soon. (There’s apparently one trade deal done with 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 at least two 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 20,000 job cuts yesterday. This is why companies are pulling back all their forecasts of future earnings, because they are essentially unknowable, and desperately cutting spending wherever they can. This is why, during earnings season, Procter & Gamble and Colgate-Palmolive and Adidas and practically everyone else are talking about price increases and cuts to their outlook. This is why people are posting their Temu and Shein orders with 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 in one of the retaliatory measures, are already in a state of depression and begging for bailouts. (Which cannot come unless Congress replenishes the farm bailout fund, as I explained last week.)

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. [Continue reading…]