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By now, anyone with even half an eye on the news has seen headlines about how the economy is suddenly in trouble because of President Donald Trump’s tariffs: Markets are swinging wildly, investors are panic-buying gold, bond yields are surging, and the dollar is falling.
It’s not great. But as you glance up from your phone and look around, maybe nothing feels all that different? You may still have a job. There’s still plenty of produce at the grocery store. Your morning coffee and bagel cost the same as they did a month ago. Maybe the media are blowing everything out of proportion?
While I’ll admit we reporters live for a good drama, that’s not exactly what’s going on here.
When you think of the trade war, think of a summer storm rolling in. There’s a flash of lightning. One. Two. Three. Four. Then a crash of thunder.
Right now, most consumers are in that quiet pause in the middle. The crash is coming.
There are effectively two shocks hitting the economy right now: Trump’s tariffs on foreign goods and the paralysis caused by Trump’s messaging about those tariffs.
The latter is proving the most broadly disruptive so far, as we saw in the Fed’s Beige Book report Wednesday. The theme of the latest Fed survey of businesses: Uncertainty. The word was mentioned 81 times, the most ever, and up from 47 in March.
But the tariffs themselves, especially the 145% tax on Chinese imports, have had an almost immediate impact, especially on American small businesses.
Take Busy Baby, a small business based in Minnesota, which specializes in products that tether baby toys and utensils to keep them off the floor. (Side note: I want one for every distraught parent I’ve seen picking their kid’s pacifier off the NYC sidewalk.)
Sales have been booming, my colleague Alicia Wallace reports. The veteran-owned company got its foot in the door at Walmart and Target, and it recently placed its largest-ever order from its manufacturer in China.
But as of last week, that $158,000 order, which is already paid for, was sitting in a warehouse 7,500 miles away. If it were to get shipped to the US, Busy Baby would be on the hook for an additional $229,100 to cover the 145% tariff. (The founder, Beth Fynbo Benike, launched a crowdfunding campaign to try to cover the cost.)
“I’m at risk of going out of business completely,” she told Alicia.
Dilemmas like this are playing out across the United States. Many small business owners — which employ nearly half of the US workforce — told Alicia that US-based manufacturing simply doesn’t exist for a lot of products, and hasn’t for decades.
If the tariffs hold, business owners’ options become limited: eat the added costs, try to pass the costs onto customers, or fold.
For the rest of us, the pain will come in the form of higher prices and fewer options. After years of waiting for pandemic-era inflation to ease, prices are set to surge again. In the fall, the International Monetary Fund predicted US inflation would clock in at 2% in 2025. Now, under Trump’s tariffs, the group expects inflation to hit 3%.
Economic shocks don’t hit everyone equally, or all at once. Right now, the folks closest to the lightning strike are the people running businesses. Like Busy Baby, they’re doing everything they can to keep the lights on.
After all, it’s only been three weeks since Trump’s “Liberation Day” tariff speech, and many importers bulked up their inventories in advance to try to get ahead of the tariffs.
That front-running is winding down, according to Brendan Duke, senior director for economic policy at the Center for American Progress, who notes that the number of vessels coming into the Port of Los Angeles this week are up 57% from a year ago.
Next week, that number is projected to normalize, falling just 8% year-over-year. But the crash is just around the corner.
“Two weeks from now we’re in The Bad Place,” he wrote on Bluesky, noting incoming shipments were set to fall 44% from the same week last year.
But even the “bad place” scenario won’t affect you overnight, Duke said in an interview Thursday.
That’s because it takes three to four weeks for a container ship to go from Asia to southern California, Duke said, and most of the ships arriving at the ports of Los Angeles and Long Beach this week left when US businesses were still in stockpiling mode — before super-size tariffs on China were announced on April 9.
It could be several more weeks or months before customers start seeing less variety on store shelves, because retailers will draw from their stockpile before resuming imports.
Trump has signaled he might take some of the heat off China, but the White House has said the 10% universal tariffs now in place aren’t up for negotiation.
Those tariffs alone are still painful for American businesses and consumers.
“It’s still going to increase overall prices by 3%. It’s still going to lead to an economic slowdown,” Duke said. “It’s great that you’re averting the worst scenario, but the baseline scenario is pretty horrible, too.”
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