Tariff turmoil disrupts holiday shipping

[UNITED STATES] Uncertainty looms over US importers as the Port of Los Angeles reports double-digit declines in cargo volume ahead of the critical holiday shipping season. Executive Director Gene Seroka noted a 30% drop in traffic during early May and 10 canceled vessel arrivals scheduled for June, attributing the slowdown to volatile trade policies. Over 60 trade-related announcements since January 2023 have left businesses hesitant to commit to orders, with Seroka stating, “Companies really don’t have the certainty, and they remain on pause.”

A federal appeals court temporarily reinstated Donald Trump’s “Liberation Day” tariffs on May 29, just one day after a lower court ruling threatened to block them. While the US and China agreed to temporarily reduce tariffs to 30% in early May, the legal back-and-forth has prolonged uncertainty. The tariffs—originally set at 145% in April—caused a delayed but sharp decline in shipments, with cargo volumes at major ports like Los Angeles reflecting the strain.

The Port of Los Angeles, handling nearly 40% of US-China trade, serves as a key indicator for bilateral commerce. Major clients like Walmart and Ford suppliers are navigating disrupted supply chains, with Seroka noting fewer ships are arriving “carrying less cargo.” Legal challenges to the tariffs will extend the ambiguity, as courts set response deadlines for early June, leaving businesses to speculate on whether to absorb higher costs or delay orders.

Implications

For Businesses

Retailers and manufacturers face heightened supply chain risks, as tariff volatility complicates inventory planning. Companies reliant on seasonal goods—such as holiday decor or back-to-school items—may struggle to secure stock, potentially leading to empty shelves or inflated prices. Smaller firms without diversified suppliers could face existential threats if tariffs persist.

For Consumers

Price hikes and product shortages loom if importers pass tariff costs to buyers. Delays in holiday merchandise shipments might push consumers toward last-minute purchases or alternative retailers. Industries like automotive, which depend on timely parts deliveries, could see production slowdowns ripple into higher vehicle prices.

For Public Policy

The legal turmoil underscores the challenges of implementing aggressive trade measures without bipartisan or judicial buy-in. Prolonged uncertainty may accelerate efforts to diversify supply chains away from China, reshaping global trade networks. Policymakers risk undermining economic stability if tariff disputes overshadow long-term strategic goals.

What We Think

The whiplash from shifting trade policies exposes a critical flaw in using tariffs as a negotiating tool: market destabilization. While intended to pressure trading partners, the barrage of announcements has eroded business confidence, creating a “wait-and-see” mentality that stifles investment. The auto and retail sectors, already grappling with post-pandemic recovery, now face compounded pressures that could dampen economic growth.

The administration’s reliance on tariffs as a primary lever risks alienating allies and incentivizing offshoring to non-targeted countries. Smaller businesses, lacking the resources of giants like Walmart, may bear the brunt of these disruptions. Meanwhile, the judicial system’s involvement highlights the fragility of executive-led trade measures, suggesting future policies will require stronger legal foundations.

Ultimately, the cycle of tariffs and court battles underscores the need for coherent, predictable trade strategies. Without stability, the US risks ceding its role as a reliable trade partner, forcing global suppliers to seek alternatives—a shift that could take decades to reverse.