The latest trade report released by the Economic Analysis Bureau of the U.S. Department of Commerce on May 6 shows that the total U.S. imports have increased by 23.3% this year. In March, the U.S. trade deficit in goods and services expanded to $140.5 billion, an increase of $17.3 billion (+14%) from the previous month.

This shows that American businesses are panic stockpiling to cope with the upcoming tariff storm. The Oxford Economic Research Institute said in a research report that the pre-stocking effect caused by tariffs is emerging and will continue and expand during the three-month suspension of so-called "reciprocal tariffs". But the agency warned that due to high tariffs, U.S. imports will decline sharply in the second half of this year.

Grace Zwemmer, deputy economist at the institution, told the First Financial reporter that US consumer confidence has declined at present, but this is due to concerns about tariffs. The rise in commodity prices caused by tariffs has not yet been reflected to the reality, and more impacts are coming.

"The adjustment of commodity pricing in the United States starts in late April, and the comprehensive impact will take some time to manifest. Most of the impact is expected to be transmitted from September to October, other chain reactions will take longer to adjust, and the uncertainty of supply chain disruptions will also extend the cycle of high inflation," she said.

Importers' Battle of Beach

Under the pressure of the Trump administration's tariff policy, U.S. Department of Commerce data showed that U.S. imports increased sharply by $17.8 billion in March, and exports increased by only a slight increase of $500 million.

From the perspective of sub-category, consumer goods imports hit a record high, an increase of US$22.5 billion, of which pharmaceutical preparations soared by US$20.9 billion, and categories such as clothing, footwear, furniture, jewelry and household appliances also increased further compared with February; capital goods imports increased by US$3.7 billion, of which computer accessories increased by US$2 billion; motor vehicles, parts and engines increased by US$2.6 billion, of which passenger cars increased by US$2.1 billion.

This abnormal import surge is largely attributed to the Trump administration's tariff policies. The U.S. government announced a high tariff of 25% on imported cars starting April 3, and imposed tariffs on auto parts at the same rate starting May 3. On April 14, the Trump administration launched another "Section 232" investigation into semiconductors and drugs. In May, Trump signed an executive order to try to promote localized production of drugs through policy incentives. These moves have triggered panic procurement in the market.

"We expect industries such as pharmaceuticals, semiconductors and films will face tougher tariffs, and the partially suspended reciprocal tariffs will eventually be implemented," Jan Hatzius, chief economist at Goldman Sachs, wrote in a client letter on the 6th.

Judging from regional trade data, the U.S. deficit with several major trading partners hit a record high in March, including a deficit with Mexico of about $18.6 billion, an Ireland of about $29.3 billion, a France of about $3.9 billion, an India of about $7.4 billion, and a Vietnam of about $13.5 billion. Among them, the trade deficit with Ireland soared by US$15.3 billion (109%), and the deficit with France increased by US$2.4 billion (160%).

It is worth noting that US$28 billion of the surge in U.S. imports from Ireland come from medicines and pharmaceuticals. Since the end of 2024, the monthly growth rate of drug imports from Ireland has continued to accelerate. Many large U.S. pharmaceutical companies such as Eli Lilly and Pfizer have reportedly outsourced most of their drug production to Ireland due to the Irish business-friendly tax environment. According to the U.S. Food and Drug Administration (FDA), U.S. pharmaceutical companies operate nearly 20 factories in Ireland to export products to the United States.

At the same time, the U.S. export market suffered a heavy blow. According to data from trade tracking company Vizion, exports from the port of Los Angeles plummeted by 17% in the five weeks before and after Trump's tariff policy was implemented, exports from the port of Portland, major agricultural export port plummeted by 51%, the port of Tacoma fell by 28%, and the port of Savannah fell by 13%.

"The goods won't arrive at all"

The freezing effect brought by tariffs to the supply chain has begun to appear. According to Vizion's latest data, container arrivals in ports across the United States plummeted 43% year-on-year in the week from April 21 to 28.

Bank of America predicts that the arrival of container ships at the Port of Los Angeles will plummet by 15% to 20% in the next few weeks, while the port's executive director Gene Seroka's estimate is even more pessimistic: The port's cargo throughput may drop by more than 35% year-on-year this week starting May 5. “Many retailers told me that they only have 5 to 7 weeks of stock left,” said Theroca. “If the situation continues to worsen, we will soon find that both offline supermarkets and e-commerce platforms, the product selection is decreasing and prices will rise.”

With the surge in import costs due to rising tariffs, many importers have difficulty operating the once stable supply channels. "The goods that are expected to arrive in the next six to eight weeks will not arrive at any time. Small businesses have suspended orders as tariffs push up costs. Once reliable products are now doubled, forcing importers to make tough decisions."

According to the schedule for the traditional American holiday consumption season, railroad and truck companies usually receive notifications from U.S. importers in June to learn about the volume of containers to be received in August and September to ensure adequate transportation equipment. Alan Baer, ​​CEO of US logistics company OL USA, said that "tax uncertainty, consumer hesitation and possible tariff cuts have lengthened the order cycle." Even if importers can place orders in June, they cannot guarantee full performance. He said that although the current transportation window is still open, it may be closed early if the number of cancelled voyages increases.

The Oxford Economic Research Institute forecast shows that although US imports can still maintain a high level in the second quarter, it will see a sharp decline in the second half of the year, and merchants that do not prepare stocks in time may be in a dilemma of no stock to sell. Bank of America's investigation found that many retailers' inventory can only support sales for one to two months, and any sudden supply disruption could quickly turn into a full-scale out-of-stock crisis.

What is even more worrying is that this supply chain crisis is spreading to the consumer side. "The tariff-related price increase will put pressure on real income growth this year. Concerns about the reliability of revenue growth, as well as the possible negative wealth effects of poor stock market performance, will prompt consumers to reduce spending and increase savings rates."

In addition, the dilemma of inventory shortages will affect retailers’ holiday promotions and discount strategies. During discount days such as July 4, Amazon Prime Day, Black Friday and Cyber ​​Monday, consumers may face reduced product choices and rapid exhaustion of inventory. "Spring and summer fashion products are mostly from China, and the school season and year-end festivals are also critical times. But consumers are unlikely to accept prices 2.5 times higher than last year," said Theroca.

Meanwhile, the manufacturing index of the Institute of Supply Management (ISM) has fallen to 48.7, with export orders shrinking sharply, and domestic demand in the United States has weakened and corporate confidence has been frustrated. "Even if trade tensions ease, confidence and economic activity are setbacks. Weak demand and contraction of new orders indicate a slowdown in economic growth and rising unemployment rates in the future. The Federal Reserve is focused on stabilizing inflation expectations and limited policy support."