Almost no month has passed since Donald Trump announced his plan to disrupt the global economic order by imposing huge tariffs on nearly every country in the world. The stock market sold sharply after the announcement; within a few days, the S&P 500 lost 12% of its value. But if you look at the U.S. economy now, it doesn’t look noticeably different from what Trump calls the way before the liberation day. Job growth in April was considerable. Forecasts for April inflation, which will expire next week, suggest that price increases remain. The company's report is very strong. The stock market itself has recovered from the ground that has been lost in the weeks after April 2.
Unfortunately, none of these means the economy will stand out from Trump’s trade war unscathed. After all, the conflict has hardly begun: Trump has lowered his tariff rates by 90 days in the wake of a huge market sell-off in every country outside of China, Canada and Mexico; he has also issued many exemptions to the minimum global tariffs he has retained (although some of them (such as those on Autoparts) are temporary and are now being launched). Trump's 145% tariff on Chinese imports did take effect on April 9, but the government subsequently exempted semiconductor chips, smartphones, computers, solar cells, flat-screen TVs and computer storage devices. And, U.S. retailers have started stocking up, which is why we haven’t seen empty shelves or skyrocketing prices.
We are in a false period of Trump's trade conflict. It looks pretty good on the surface, but after careful observation, there are many signs of trouble coming. It's early enough that if Trump imposes tariffs on China and reaches an agreement with other U.S. trading partners, the losses will be limited. Stock market investors seem convinced that Trump will be sensitive and achieve this, and that he will certainly be in the best interest of the United States. But if these deals prove elusive and the tariff war will escalate in the beggar's neighbor strategy, then the economic reality will argue for itself.
Worrying data has emerged. Truck transport (basically a measure of how many goods are relocated across the country) began to collapse. From this week, transportation volumes at West Coast ports appear to be declining as China's shipping is only dry: container ship arrivals will drop by 35% year-on-year.
Treasury Secretary Scott Bessent said this week that Trump's high tariffs have already created an effective "embargo" on Chinese goods. By the end of this month, a sharp drop in imports from China will translate into less demand for trucking in the U.S., which will almost certainly lead to layoffs in the industry. Depending on where the product is made, we will see empty shelves in some stores by the end of June, which could also lead to layoffs in retail stores.
In recent years, U.S. importers have diversified to some extent from Chinese-made goods, but they still account for nearly 13% of imports and account for a higher proportion of imported goods. Therefore, retailers and consumers cannot completely avoid the impact of the virtual trade embargo with China. Trump recognizes this in his weird riff, explaining how American kids might have to do it with three expensive dolls instead of 30 cheap dolls, or with five pencils instead of 250 pencils (Republican pollsters call the "Mary Antoinette" moment).
Those who are going to hit are not limited to retailers selling imported goods and consumers buying goods. U.S. exporters have already felt the impact of retaliatory tariffs in other countries. This is especially true for American farmers, who lost hundreds of billions of dollars in sales due to the trade war with China during their first term (thanks only to a large amount of bailout). These farmers are already facing a new wave of cancellations, so that the head of the Agricultural Transport Alliance is an export trade group, who told CNBC that farmers are in a "full crisis" because their sales are expensive. This not only leads to agricultural cuts, but also means the departure and arrival of container ships are landing at U.S. ports. This will further dangerous jobs for dock workers, warehouse workers and truck drivers.
The deeper concern is that the reduction in consumer demand due to price increases will be combined with layoffs in retail, trucking, logistics and related sectors to create a cascading effect: weaker demand leads to lower sales, triggers more layoffs, leads to lower demand, and so on. While this attention is being taken, Trump injects economic insecurity and consumer confidence is seriously shaken. The Business Intelligence Nonprofit Conference Committee's measurement of consumer confidence fell for the fifth straight month, while consumer expectations for the short-term future fell to 13-year lows as respondents expressed pessimism about business conditions, employment prospects and future incomes, which are almost every practical aspect of the economy.
Specific signs of a decrease in consumer spending have emerged: McDonald's said last week that sales at its national restaurant chain fell unexpectedly in the first quarter of 2025 as customers "treated on uncertainty," while Harley-Davidson reported a double-digit decline in sales due to consumer uncertainty. The motorcycle maker said it is providing guidance for future quarterly revenue and profits as it cannot predict the economy or consumer sentiment for only a few months.
Even so, the far-reaching impact of the trade war can only be felt after the company runs out of stocks and after the companies realize they must cut investments and recruitment to accommodate higher input costs and the reduced demand they face. Currently, companies are mostly going to stick to any major changes as they expect Trump to cut deals with China and other trading partners or extend pauses at higher tariff rates indefinitely.
But the fact that Trump should do these things doesn't mean he will. There is almost no day when he doesn't propose some new tariffs - on Sunday, on films made abroad, or telling Americans that they don't need to buy that much. If Trump returns to his liberation day rate and continues to try strong China, this will almost certainly put the U.S. economy into a self-created, completely unnecessary recession, then no investor or businessman should be surprised. The market bets that fake wars will never become real wars. We can only hope they are right.