As the full-scale 'tariff war' between the United States and China enters its second month, concerns are arising that the U.S. supply chain is on the verge of collapse. The U.S. government imposed a 145% high tariff on Chinese imports starting on Sept. 9 (local time), causing a sharp decline in the volume of cargo heading from China to the U.S.
CNN reported on the 1st that "the last ships departing from China without tariffs are arriving in the U.S." and that "the countdown for supply shortages and price increases has begun." China is a major trading partner for the U.S., which imports thousands of products from China, including clothing, shoes, toys, electronics, and key parts for home appliances.
The Donald Trump administration imposed a 145% high tariff on China on Oct. 2, and this measure took effect at 12:01 a.m. on Oct. 9. According to CNN, cargo shipped from China to the U.S. since Oct. 9 is expected to arrive at U.S. ports starting next week. With high tariffs imposed on these products, price increases are inevitable.
Following the announcement of mutual tariffs by the U.S., the volume of cargo ships from China has sharply decreased. According to U.S. logistics company Flexport, the number of cargo ships heading to the U.S. from China last month decreased by 60%. CNN noted that "large cargo ships are waiting at the Port of Shanghai" and that "shipping companies have begun using smaller vessels to transport goods due to declining demand."
Earlier, on the 28th of last month, the Financial Times (FT) reported, citing the supply chain data company Visions, that bookings for 20-foot containers from China to the U.S. had dropped by 45% compared to the previous year as of mid-April. Shipping analytics firm Sea Intelligence also projected that bookings for containers on Asia-North America routes would decrease by 400,000 this month.
Immediate price increases are expected for products set to appear on U.S. retail shelves. According to a recent survey by the corporations research firm Gartner, 45% of supply chain leaders expect to pass on the cost increases due to tariffs to customers. CNN reported that once the inventory of products imported before the high tariffs runs out, products with significantly increased prices will be placed on the shelves.
Greg Aen, the chief executive officer of the American Toy Association representing 850 toy manufacturers, noted, "If production does not start now, there is a high possibility of toy shortages during this holiday season," adding that "the frozen supply chain jeopardizes Christmas." Chinese factories produce about 80% of the toys sold in the U.S.
The damage from the tariff increases is greater for small businesses. Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, said, "Retailers are currently trying to figure out how and when to place orders for the back-to-school season and Christmas," noting that unlike large retailers who can secure more inventory, small businesses do not have that luxury.
There are also forecasts that American corporations may cease to import Chinese products altogether due to rising costs from tariffs. JPMorgan stated in a report, "If the imports from other countries cannot easily replace this scale, such a collapse will not only trigger severe price increases but also seriously disrupt the supply chain." JPMorgan expects that the scale of imports from China to the U.S. may drop by up to 80%.
Ryan Peterson, CEO of Flexport, stated, "If this situation continues for a few more weeks, retailers will sell out their inventory and shortages of goods will frequently occur from the summer," while Jean Seroka, executive director of the Port of Los Angeles, said, "If a person wants to buy a specific type of pants, there may be various types available, but it would be difficult to find the desired type of pants."
It is expected to take a long time for the U.S. retail supply chain to recover. Retailers have been trying to shift production from China to Vietnam and other Asian countries since the COVID-19 pandemic, but the scale of imports from other countries is still insufficient to replace Chinese products. Gold noted, "Building a new supply chain could take months or even years."