In an interview with Yahoo media on April 15th, Treasury Secretary Scott Bessent said, "No one thinks steep China tariffs are sustainable over the long run".
He was referring to the 145% tariffs President Trump had put on China in retaliation for China's retaliation for American retaliation to China's response to Trump's "Liberation Day" tariffs on April 2nd.
At 145%, it isn't even worth shipping the goods, as no sane consumer will pay more than double for the things they normally buy.
This is now showing up in shipping statistics. Here are the ocean booking for April 1st to April 8th when tariffs on China were a mere 54%:
It will only have got worse since then.
American retailers are running down their inventories, while frantically looking for alternative suppliers. If the suppliers are American, the prices will be higher. If they're from the rest of the world, they'll incur a 10% tariff, which may go up at the end of 90 days.
A lot of the goods supplied by China will have no alternative supplier. We saw this during covid when China was locked down for longer than western countries. There were long delays for deliveries. And because alternatives couldn't be found, prices rose.
We're going to see the same thing again, but magnified by many orders.
If demand for a good stays steady, but supply of it is restricted, there are only two responses: the price of the scarce good climbs, so only the wealthy can afford to buy. Or if the govt freezes prices and introduces rationing, you get long queues of people hoping to buy, like in the Soviet Union.
Either way, bare shelves represent a failure of policy.
That's why we're getting increasingly frantic statements from the White House saying that China should "show respect" by phoning Trump to negotiate.
But China has it's pride too. They're not going to come crawling to Trump to bail him out of a problem he caused.
They're going to wait till inventories have gone and shelves are bare. It'll take 30 to 60 days for that to happen.