The trade deficit grew a lot in March, the Census Bureau said in a report out Tuesday morning. It reached a record high, in fact, as imports surged by $16 billion. Retail inventories also grew.
But that was last month before new tariffs were put in place. This month, folks from all across the supply chain people are reporting a slowdown in trade as they figure out what the heck to do.
For one? Everybody’s been stockpiling.
“It’s been steady for the past several months,” said Jenae Ciecko, president of Copper Hill, which advises companies on how to minimize tariffs.
Large manufacturers started super early.
“Before the election, we certainly saw a spike in imports,” Ciecko said.
Not just businesses — everybody else who can has been stocking up on stuff, too.
“So we saw purchases of electronics, for example, jump 30% in the week after the tariff announcements,” said Mark Mathews, executive director of research at the National Retail Federation. “Last month, we saw car sales rise by, you know, 8% year-over-year.”
All of that pushed the trade deficit to a record high in March. But now that the tariffs are here, and the stocks have been piled, masses of businesses are doing something else. They’re holding their breath.
“So we are beginning to see ships leaving China, you know, half empty or more,” Mathews said.
Whatever hasn’t been put on a boat already is locked up somewhere else.
“I was talking with a number of clients who have rerouted shipments into Mexico, they’re holding in Japan, they’re holding in Singapore, they’ve moved things into Europe,” said Ashley Hetrick, supply chain lead at professional services firm BDO. “All of them vey much taking a wait-and-see approach before paying duties on those items to bring them into the United States.”
And while they’re waiting and seeing, they’re figuring out who is going to pay these tariffs — which, in a long and twisty turn-y manufacturing supply chain, is not a simple question.
“They might be delaying or slowing down, to the degree they can, to get commitment and agreement with their customer on some type of passing along or sharing of the tariff,” said Ciecko at Copper Hill.
According to the Retail Industry Leaders Association, which represents the country’s largest retailers, the next few weeks are going to be critical in determining what companies do, and whether we’re going to see shortages in the back to school and holiday shopping seasons, if not sooner.
