Markets Prepare for Disruption as Chinese Products Disappear

In the coming weeks, investors are set to encounter unsettling news, as the dwindling supply of goods from China underscores the risks of tariffs on the US economy, according to the latest MLIV Pulse survey.

From a poll of 248 participants conducted between April 28-30, 82% believe that the impact of reduced shipments from China to American businesses is either somewhat or severely underestimated in the markets. A significant portion also foresees that tariffs could instigate a recession in the US within this year.

 

 

 

 

 

 

 

 

 

Since President Donald Trump increased tariffs on China to 145% in early April, cargo shipments have experienced a notable decline. However, it generally takes about 30 days for a shipment from China to arrive at US ports on the West Coast, indicating that the US is still receiving vessels that departed before the tariffs were announced.

Economic Contraction

Businesses have clearly been bracing for this impact long before any official announcements, as first-quarter gross domestic product data shows that the US economy contracted for the first time since 2022 due to soaring imports.

“GDP gives a glimpse of forward demand but doesn’t accurately represent the potential drop in demand due to tariffs — something that the high-frequency port data reflects,” commented Jake Schurmeier, a portfolio manager at Harbor Capital Advisors.

“Although the data is somewhat erratic, it directionally aligns with expectations that if US-China tariffs create a de facto trade embargo, outcomes could be serious,” Schurmeier added.

While economists predict a reversal in the widening trade deficit next quarter, they warn about a potential supply shock triggered by escalating tariffs.

During a Cabinet meeting on Wednesday, the president implied that the recent downturn in cargo flows indicated that Beijing would soon need to respond. “I want China to succeed,” Trump stated, “but they must treat us fairly, too.”

Brace for May

When asked when Americans might start to feel the impacts of this drastic decline in shipments, 49% of respondents pointed to the latter half of May, while almost a third expect it to be in June or later.

Even if trade war tensions ease, the repercussions are already manifesting. The executive director of the Port of Los Angeles reported this week a slowdown in cargo flow.

More than two-thirds of survey participants indicated that retail stocks are most likely to be adversely affected by a supply disruption originating from China, with technology also highlighted by 12% of respondents.

 

 

 

 

Walmart Inc, Home Depot Inc, and Target Corp. alerted Trump last week about expected shortages when the goods are needed. Other sectors, including automotive, brewing, airlines, and packaged food manufacturers, have also raised concerns about the tariffs disrupting their operations.

United Parcel Service Inc, which is often viewed as an economic barometer due to its extensive delivery network, has retracted its 2025 financial forecast this week, citing “current macroeconomic uncertainty.”

‘Growth Shock’

Almost two-thirds of respondents predict a significant reduction in tariff threats as the likely outcome if US markets react aggressively to a supply shock.

 

 

 

 

 

 

 

 

 

 

 

 

Trump has shown a readiness to soften his trade rhetoric. After announcing global tariffs of up to 50% on April 2, the president indicated a week later that he would pause the implementation.

“While the recent reversals reduce some of the risks to the global economy, the existing tariff measures remain substantial, and threats persist,” stated economists from ABN Amro Bank NV, including Arjen van Dijkhuizen, Jan Paul van de Kerke, and Aggie van Huisseling.

“The current high level of uncertainty related to trade policy is harmful to growth on its own, and the tariffs are likely to cause a significant growth shock once implemented,” the economists highlighted in a recent report.

© 2025 Bloomberg

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