If you’ve been inside a Walmart, Target or Home Depot in the past week, you may not realize that a trade war is underway between the U.S. and China, the world’s two largest economies. Store shelves are well stocked, and prices have largely held steady.
All of that is set to change by mid-May if forecasts turn out to be correct.
Logistics firm Flexport reports that liners are slashing their China-to-U.S. carrying capacity at a faster rate than they did at the start of the pandemic.
Meanwhile, data provided by container ship tracker Vizion shows that bookings from China to the U.S. are dropping sharply due to President Donald Trump’s 145% levy on Chinese-imported goods. In the week ended April 21, liner vessels bound for U.S. West Coast ports were carrying only 90,831 TEUs (20-foot equivalent units), which is close to half the volume a year earlier.
Gene Seroka, executive director of the Port of Los Angeles—the United States’ busiest port—told Bloomberg that “import-export with China is very limited right now.”
Economists Warn of Recession as Job Cuts Accelerate
Below is a near-term timeline of projected events, based on analysis from Torsten Slok, chief economist at Apollo Global Management. By mid-May, the first containerships are expected to arrive at West Coast ports since President Trump announced “Liberation Day” tariffs on April 2. As previously noted, these ships will be carrying significantly less cargo than usual, resulting in empty shelves later in the month.
Consequently, layoffs in the trucking and retail sectors are expected by late May or early June as shipping demand collapses. FreightWaves reports that job cuts have already begun, with up to 1,800 freight-related positions eliminated across Alabama, Florida, Georgia, Tennessee, and South Carolina.
Mr. Slok expects the U.S. economy to fall into recession this summer, and it’s worth mentioning here that real GDP contracted slightly in the first quarter, the first time it’s done so since the pandemic. A decline in Q1 was earlier projected by the Atlanta Fed’s GDPNow model, though a contraction of 2.4% was expected.
The International Monetary Fund (IMF) has slashed nearly 1% from its forecast for U.S. growth in 2025. The institution now believes the U.S. economy will advance only 1.8% this year.
Back-to-School and Christmas Inventory Face an Uncertain Future
Even once differences between the U.S. and China are ironed out—whenever that may be—it could take weeks for trade to normalize and goods to be fully restocked. Inventory for back-to-school and holiday sales is at risk, Flexport says.
The Toy Association, a U.S.-based trade group, is warning that Christmas 2025 could be in jeopardy.
Nearly 80% of toys sold in the U.S. are manufactured in China. The Association notes that 96% of American toy companies are small or mid-sized businesses, and about half say they could go out of business in the coming weeks or months without immediate relief from the new tariffs.
Short-Term Pain May Lead to Long-Term Industrial Gains
The president and his advisors say that his protectionist trade policies will spur manufacturers to return to the U.S. His commerce secretary, Howard Lutnick, has described a future where U.S. citizens work in factories “for the rest of your life, and your kids work here and your grandkids work here.”
Since Trump took office four months ago, a number of companies have announced plans to invest and expand their presence in the U.S. These include Apple, Honda, IBM, Merck, NVIDIA and Taiwanese semiconductor maker TSMC.
My belief is that if Trump manages to bring these kinds of jobs back to the U.S. permanently, the short-term pain due to tariffs may be worth it in the long run. China joined the World Trade Organization (WTO) in December 2001, and since then, the U.S. has seen an overall decline in manufacturing jobs and output. Manufacturing as a percentage of the U.S. economy is now below 10%. That’s down from about a quarter of the economy in the 1950s.
What Should Investors Do?
It may not surprise you to learn that gold glitters as my safe haven of choice for investors concerned about economic and financial turmoil surrounding Trump’s trade policies. I’m clearly not the only one who feels this way.
Inflows into gold-backed ETFs have remained positive in each of the four months of the year so far.
From January 1 to April 30, a net 6 million ounces of gold were added to these ETFs’ holdings.
Meanwhile, the precious metal rallied 25.3% year-to-date through the end of April, marking the best first four months of the year since 2006, when it climbed 26.6%.
I believe there could be further upside potential as long as Trump’s tariffs remain in place, increasing investor demand for stability.