The recent pause on steep tariffs on Chinese goods has offered a glimmer of hope for importers, prompting a surge in orders from Asia. However, a new CNBC Supply Chain Survey reveals that this increase isn’t enough to quell fears of widespread retail shortages in the coming months. The survey, conducted between May 14th and 16th, polled nearly 100 freight and logistics providers, retailers, and consumer goods companies. A significant portion (59%) reported no noticeable restart in holiday orders following the tariff announcement, and even among those who did see increased activity, a substantial number (53%) described these orders as only partially filling holiday needs.
Even with the reduction in tariffs from a staggering 125% to 30%, many companies are still facing import taxes well above 30% due to the stacking of existing tariffs. This continues to hinder full order fulfillment, leaving retailers and manufacturers in a precarious position. Stephen Lamar, CEO of the American Apparel and Footwear Association, aptly summarized the situation: “While the de-escalation deal moves us in the right direction, we need to move much farther and much faster to avoid more damage to the economy.” The need for clarity and reduced costs is paramount.
The Port of Los Angeles, a crucial gateway for US imports, anticipates only a modest increase in container volume in the coming weeks. Gene Seroka, executive director of the Port, highlights the critical timing of orders for seasonal goods like back-to-school supplies and Halloween costumes. The typical three-month lead time for manufacturing and shipping from Asia leaves little room for error, and the current volume is far below pandemic-era peaks. This translates to fewer product choices and higher prices for consumers.
The impact extends beyond retail shelves. Freight companies are grappling with a significant decline in volume due to high tariffs, although some relief has come from front-loading and alternative sourcing. Paul Brashier, vice president of global supply chain at ITS Logistics, expects this downward trend to persist for several weeks. Alan Murphy, CEO of Sea-Intelligence, emphasizes the urgent need for ocean carriers to ramp up capacity to meet the impending surge in cargo before the August 14th peak season deadline. The survey highlights that concerns about available ocean freight space remain high among respondents.
Interestingly, the “front-loading” of orders earlier this year has created a temporary buffer. Retailers were forced to abandon some expensive-to-tariff freight at ports, which has flooded the secondary market, creating a surplus of goods. Brett Rose, CEO of United National Consumer Suppliers, notes this surplus is mitigating immediate price pressures, but this cushion is temporary. The National Retail Federation also points out the uncertainty surrounding future tariff adjustments and the challenges of balancing holiday inventory needs with increased freight costs.
Consumer spending optimism is notably low. The CNBC survey reveals that a vast majority (75%) anticipate a consumer pullback, with over half (53%) reporting that this pullback has already begun. This is impacting retailers’ strategies, with some, like Home Depot, choosing to maintain prices despite tariffs, while others, like Target, are cutting sales outlooks. Pricing pressure is evident, with retailers likely to implement selective price increases on specific items rather than across the board. Small businesses, with their limited margin for error, are particularly vulnerable to these escalating costs.
The uncertainty surrounding the trade war and its economic impact continues to fuel concerns about a recession. A significant portion of the survey respondents anticipate a downturn, with opinions divided on the timing. This uncertainty, coupled with shifting sourcing patterns and consumer pullback, creates a complex and challenging landscape for supply chains. The coming months will be crucial in determining the long-term impact of these tariff fluctuations, and the extent to which the current “pause” will alleviate the ongoing supply chain pressures.
