What The Hell America!

Little more than a month has passed since Donald Trump announced his plans to upend the global economic order by imposing huge tariffs on almost every country in the world. The stock market sold off sharply following the announcement; within days, the S&P 500 had lost about 12 percent of its value. But if you look at the U.S. economy right now, it doesn’t look obviously different from the way it did just before Trump’s so-called Liberation Day. Job growth in April was respectable. Forecasts for April’s inflation number, which is due next week, suggest price increases have remained muted. Corporate-earnings reports have come in strong. And the stock market itself has regained the ground it lost in the weeks after April 2.

Unfortunately, none of this means the economy will emerge unscathed from Trump’s trade war. The conflict, after all, has barely begun: After markets’ steep sell-off, Trump put a 90-day pause on his higher tariff rates with every country except China, Canada, and Mexico; he also issued a host of exemptions from the minimum 10 percent global tariff he’s kept in place (though some of these tariff exemptions, such as the one on autoparts, were temporary and are now kicking in). Trump’s 145 percent tariff rate on Chinese imports did go into effect on April 9, but the administration then exempted semiconductor chips, smartphones, computers, solar cells, flat-panel TVs, and computer-storage devices. And U.S. retailers had already begun stocking up on inventory in anticipation of the tariffs, which is why we haven’t seen empty shelves or skyrocketing prices—so far.

We’re in a phony-war period of Trump’s trade conflict. Things appear fine on the surface, but look closely and plenty of signs of impending trouble are emerging. It’s still early enough that if Trump rolls back his tariffs on China and reaches deals with other U.S. trading partners, the damage will be limited. Stock-market investors seem convinced that Trump will come to his senses and make this happen, and it’s certainly in America’s best interest that he does so. But if the deals prove elusive and the tariff war escalates amid beggar-thy-neighbor tactics, economic reality will assert itself.

Worrisome data are already coming in. Trucking volumes—basically, a measure of how many goods are being moved around the country—have begun to fall. Starting this week, shipping volumes at West Coast ports appear to be plummeting as shipments from China simply dry up: Container-ship arrivals in L.A. this week will be down 35 percent year over year.

Treasury Secretary Scott Bessent said this week that Trump’s exorbitant tariffs have created an effective “embargo” on Chinese goods. The steep decline in imports from China will translate into even less demand for trucking within the U.S. by the end of this month, which will almost certainly lead to layoffs in that industry. Depending on where a product is made, we’ll see empty shelves in some stores by the end of June, and that could lead to layoffs in retail as well.

American importers have, to a degree, diversified away from Chinese-made goods in recent years, but they still account for almost 13 percent of imports—and a higher percentage of imports of manufactured goods. So retailers and consumers have no way to entirely dodge the impact of a virtual trade embargo with China. And Trump has acknowledged this with his odd riffs on how American kids might have to make do with three expensive dolls rather than 30 cheap ones, or with five pencils rather than 250—which one Republican pollster has called a “Marie Antoinette” moment.

Annie Lowrey: How to prepare for the Trumpcession

Those who are going to take a hit are not limited to the retailers that sell imports and the consumers who buy them. American exporters are already feeling the effect of other countries’ retaliatory tariffs. That’s especially true of U.S. farmers, who lost tens of billions of dollars in sales thanks to Trump’s trade war with China during his first term (and were made whole only thanks to a hefty bailout). Those farmers are already facing a renewed wave of canceled orders, to the point that the head of the Agriculture Transportation Coalition, an export-trade group, told CNBC that farmers are in a “full-blown crisis” as their sales nosedive. This not only is leading to job cutbacks in agriculture but also means that container-ship departures, as well as arrivals, are falling at U.S. ports. That will put the jobs of dock workers, warehouse workers, and truckers in further jeopardy.

The deeper concern is that reduced demand from consumers because of higher prices will combine with layoffs in retail, trucking, logistics, and allied sectors to create a cascading effect: weaker demand leading to lower sales, triggering more layoffs, leading to still lower demand, and so on. Amid such concern, consumer confidence has been severely shaken by the insecurity Trump has injected into the economy. The business-intelligence nonprofit Conference Board’s measure of consumer confidence fell in April for the fifth month in a row, and consumer expectations for the short-term future tumbled to a 13-year low as survey subjects expressed pessimism about business conditions, employment prospects, and future income—in other words, pretty much every practical dimension of the economy.

Concrete signs of reduced consumer spending are already appearing: McDonald’s said last week that sales in its nationwide restaurant chain fell unexpectedly in the first quarter of 2025 because customers were “grappling with uncertainty,” while Harley-Davidson reported a double-digit decline in sales because of consumer uncertainty. The motorcycle manufacturer said it was pulling its guidance for future quarters’ revenue and profit because it cannot predict where the economy or consumer sentiment will be just a couple of months hence.

Even so, the more far-reaching effects of the trade war may not be felt until late summer, after the inventories that businesses have stockpiled run out and when companies realize they have to cut back on investment and hiring in order to adjust to the higher input costs and reduced demand they’re facing. For now, companies are mostly holding off on any big changes—because they’re counting on the possibility that Trump will either cut deals with China and other trading partners or indefinitely extend the pause on higher tariff rates.

The fact that Trump should do these things does not mean, however, that he will. Hardly a day goes by when he does not propose some new tariff—on Sunday, it was on movies made abroad—or tell Americans they don’t need to buy so much stuff. No investor or business person should be all that surprised if Trump went back to his Liberation Day rates and continued to try to strong-arm China, which would almost certainly send the U.S. economy into a self-inflicted, utterly unnecessary recession. The markets are betting that the phony war will never become a real one. We can only hope they’re right.