At the Global Interdependence Center’s 2025 Monetary and Trade Conference last week, Jeremy Schwartz, Global Chief Investment Officer at WisdomTree, and I shared an in-depth discussion on his Behind the Markets podcast. The entire podcast is a valuable listen; our discussion starts at 30:19. I invite readers to listen.
Here’s the program description:
Host Jeremy Schwartz and Professor Siegel covered the market impacts of tariffs, interest rate policy, and long-term inflation expectations. Professor Siegel emphasized the case for lower interest rates, highlighted trends in manufacturing decline, and discussed market resilience amid tariff concerns. (30:19) Jeremy is joined by David Kotok to discuss the economic consequences of tariff shocks, Federal Reserve policy, and insights from Kotok’s new book, The Fed and the Flu. They explore historical responses to pandemics, current financial stability risks, and the evolving role of central banks, while also addressing municipal bonds, gold, and global trade dynamics.
Now, to today’s focus — how the Trump tariffs are yanking global trade and supply chains and sabotaging American businesses and consumers. MSN offers this report about Chinese containers not reaching the US. It opens with a striking photo of the Port of Los Angeles, where loaded cargo ships would normally be arriving. They are not.
“Essentially all shipments’ from China have ceased at Port of L.A.,” https://www.msn.com/en-us/money/markets/essentially-all-shipments-from-china-have-ceased-at-port-of-l-a/ar-AA1DD9FN?ocid=entnewsntp&pc=DCTS&cvid=4526b561d7ca4c50a9da009be5f3bca9&ei=21
The supply chain shock, which will soon be visible in stores and on price tags, presages the forthcoming recession induced by the Trump tariff policy. Torsten Slok of Apollo has given kind permission to share his observations. I thank him for that.
He has been watching where cargo ships laden with containers of goods are heading — or not. He writes:
We are monitoring satellite images of marine traffic between China and the US, they remain a bit messy to look at, but you begin to see more vessels anchored near China’s shores and fewer ships near US shores. The best data remains Bloomberg’s daily data for the number of container ships sailing from China to the US, see the second chart, which includes data for yesterday.
(“Satellite images of US/China trade,” Torsten Slok, email, April 27, 2025)
Here, he notes a specific example applicable to the toy industry within the United States:
The Toy Association conducted a member-wide survey to assess the potential business impact of the newly imposed 145% tariffs on toy imports from China. With responses from more than 400 member companies, the findings show that nearly half of small and medium-sized enterprises (SMEs) state they may soon go out of business due to the current US tariff policy.
(Torsten Slok, email, April 26, 2027; see “Christmas and Toy Companies are at Risk! Toy Association Member Survey Reveals Alarming Impact of 145% Tariffs,” https://www.toyassociation.org/PressRoom2/News/2025_News/toy-association-member-survey-reveals-alarming-impact-of-145-percent-tariffs.aspx)
Let’s get to the macro. Torsten projects this trajectory. I fully agree with his assessment.
Daily data for container traffic from China to the US is collapsing…. The consequence will be empty shelves in US stores in a few weeks and Covid-like shortages for consumers and for firms using Chinese products as intermediate goods. In addition, we will soon begin to see higher inflation because there are a significant number of product categories where China is the main provider of certain goods into the US market. In May, we will begin to see significant layoffs in trucking, logistics, and retail—particularly in small businesses such as your independent toy store, your independent hardware store, and your independent men’s clothing store. With 9 million people working in trucking-related jobs and 16 million people working in the retail sector, the downside risks to the economy are significant.
(Torsten Slok, The Daily Spark, April 25, 2025)
To understand the mess that the Trump tariffs rollout, math errors, bombastic threats, and chaos have caused, you need only put yourself in the position of a merchant in America. You have ordered a container shipload of stuff from China. That order and plan was set up many months ago. You may have expected some small tariffs or even a 10% tariff level. You never expected a tariff war that would take the tariff rate on your order to 145%. You can deliver and pay the tariff — or you can keep the stuff offshore on the ship. The delivery price with a 145% tariff makes the transaction unprofitable, and the loss may be so large as to injure your enterprise. (See the Yahoo piece below.)
Remember, the tariff is a sales tax imposed on Americans and is collected on entry into the US at the custom-agent level. No entry, no tariff. The container shipping company will accept the time-extension payment and be your warehouse at sea. This is a tragic mess. Trump has punched American businesses in the eye. The damage is unfolding, and a serious recession is evolving. We will see it in the second quarter, and it is likely to worsen.
Yahoo Finance offers a great summary piece. Take four minutes to read a superb description about what’s coming and why.
“4 of your biggest Trump tariff questions answered,” Morning Brief, April 27, 2025,
https://view.newsletters.yahoo.net/messages/174574803200088c945b30d20/raw
Watch for new data points as this preventable economic tragedy unfolds. For example, Shein just hiked its prices — its health and beauty products are up 51%, its women’s clothes are up 8%, and a set of kitchen towels has been marked up an astounding 377%.
“Shein hikes US prices as much as 377% ahead of tariff increases – CNBC TV18,”
https://www.cnbctv18.com/business/shein-hikes-us-prices-as-much-as-377-pc-ahead-of-tariff-increases-19595157.htm
Finally, please do tune into Jeremy’s Behind the Markets podcast for a fascinating and wide-ranging conversation. Here’s the link on Spotify:
If you enjoyed this commentary and the podcast, please share it with a friend! New readers are invited to subscribe to the Kotok Report by entering their email address in the “Subscribe To The Kotok Report” section at the bottom of any Kotok Report site page:
David R. Kotok, April 29, 2025
(The above was first published on The Kotok Report website and via LISTSERV. For details, and to subscribe to The Kotok Report, visit https://kotokreport.com/.)