Trade between China and America is already sinking
Apr 29th 2025
The Economist
Five years ago, when the pandemic shut down the global economy, frazzled economists turned to novel measures, such as mobility data and restaurant and cinema bookings, to track the closure in real time. Now the world is desperate to assess the damage caused by Donald Trump’s swingeing tariffs on Chinese imports, and pundits are again using innovative techniques. Their findings suggest the world’s biggest economy is not reeling yet. But trouble is coming.
Even before the implementation of many of the tariffs, on April 9th, polling suggested American consumers and businesses were worried. According to a survey by the Dallas branch of the Federal Reserve, manufacturers’ output fell to a record low in April. And figures released on April 30th showed that America’s gdp contracted by 0.3% in annualised terms. The trade deficit swelled as companies rushed to build up inventories of foreign goods before the tariffs came into effect.
Real-time data allow economists to see what has happened since. Many covid-era indicators are not relevant or no longer published. Fortunately, however, global trade is thoroughly tracked. Ships set off weeks in advance of their arrival, broadcasting their position to satellites and providing a list of what they contain.
Some indicators might suggest a limited impact from the trade war so far. In the week ending April 25th ten container ships, carrying 555,000 tonnes of goods, arrived at the ports of Los Angeles and Long Beach—America’s preferred entry gates for goods from China. That is about the same as a year ago. But many cargo ships arriving now set off before the tariffs began.
Chart: The Economist
Other readings look scarier. Bookings for new journeys between China and America plummeted by 45% year-on-year in the week beginning April 14th, according to Vizion, a data firm. The number of blank sailings, when a vessel skips a port or a carrier runs fewer ships on a route to even out the service, has risen to 40% of all scheduled trips. Pricing data suggests trade flows are being reshuffled. The cost of sailing between Shanghai and Los Angeles has fallen by about $1,000 a container in the past month, according to Freightos, a logistics company, as businesses have gone from front-running the tariffs to avoiding them. The price for ferrying goods from Vietnam to America has risen by a similar amount, suggesting importers have been looking for alternative suppliers.
Trade shocks take a while to propagate through the economy, meaning that the full extent of the damage may still be some time away.Companies can rely on their inventories for a time, for instance; demand for bonded warehouses, which allow firms to store goods near ports and pay customs only when they are released, has surged. Many firms are also opting not to raise prices—which in theory they should do, to ration their stockpiles—because they are bound by pre-existing contracts or want to preserve relationships with customers in case Mr Trump changes his mind. And a 90-day pause on the most extreme tariffs on other Asian countries will give importers a chance to shuffle production. Apple plans to source more iPhones for the American market from India rather than China, for instance.
Yet the flexibility of supply chains has limits. Studies of the far more modest tariffs imposed during Mr Trump’s first term found that they were eventually passed along in full to American consumers. It took around a year for businesses to find alternative suppliers. In the short term, the uncertainty created by Mr Trump’s erratic policies has caught many shipping firms off-guard, says Peter Sand of Xeneta, a logistics consultancy, even after a decade of problems caused by the pandemic, a blockage of the Suez Canal and Houthi attacks in the Red Sea. That will take a toll on trade and the wider economy even if America cancels its most punitive measures. Ships that failed to depart on time will arrive with a lag, or not at all. Inventories will be run down. Many businesses will have frozen investment and hiring plans which they may be slow to restart.
Could these economic costs lead to a swift political reckoning? Free traders hoping that they might do so could be disappointed. A recent paper by David Autor of the Massachusetts Institute of Technology and colleagues finds that most places harmed by the tariffs imposed by Mr Trump during his first term have since leaned Republican. The authors speculate that voters may have thought it was important to “confront” China in spite of the costs. America is not yet suffering from a self-inflicted trade storm. But the shipping forecast is not good. ■
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