In the weeks since U.S. President Donald Trump began his tariff war against Canada and scores of other countries, consumers have been bracing for tariff-induced price hikes.
But a new threat has emerged with Trump’s tariff regime — the possibility of widespread product shortages.
If Trump doesn’t retreat from his tariff aggression, we can expect a summer of shortages.
Trump’s tariffs are disrupting the all-important global supply chain.
A great many goods purchased by Canadians and Americans are sourced from China. Trump has imposed tariffs as high as 145 per cent on Chinese imports.
China makes between 20 per cent and 70 per cent of the goods stocked by Canadian Tire, Simons, Leon’s Furniture, Walmart, Home Depot, Best Buy and Target.
Vietnam, hit with a 46 per cent to 49 per cent tariff by Trump, is the world’s biggest furniture maker.
And Bangladesh, subjected to a 37 per cent tariff on its U.S. exports, is one of the world’s largest apparel exporters.
It’s possible that many imported goods will not be available at any price.
Tariffs will cause “empty shelves in U.S. stores in a few weeks and COVID-like shortages for consumers and for firms using Chinese products” warned Torsten Slok, chief economist at Apollo Global Management, a New York private equity firm, in a recent blog post.
Many Canadian and U.S. wholesalers and retailers are balking at taking delivery of Chinese goods set to become about two-and-a-half times more expensive than last year.
Instead, they are leaving containers of goods destined for Canadian and U.S. consumers to languish at ports of entry, notably those near Los Angeles and Long Beach, Calif.
As a result, container-shipping traffic from China has dropped by as much as 60 per cent depending on the destination.
Canada’s internal supply chain for food should keep it in good supply. But there could be shortages for food imported from the U.S. and through the U.S. en route from Mexico and Central America.
The Retail Council of Canada has warned that the trade war will have a “negative impact pretty quickly on Canadians’ access to food and groceries.”
The impact of shortages will probably be greatest in the thousands of low-priced household goods that Canadians buy. They include apparel, infant formula, diapers, tools, kitchen appliances, toys and utensils.
Some big-ticket items could fall into short supply as well, such as furniture, flat-screen TVs and washer-dryers, and solar panels, for which China is the world’s leading supplier.
In an unusual development last week, the CEOs of Walmart, Home Depot and Target warned Trump in a White House meeting that his tariff policies could result in empty shelves in their stores.
“More tariffs equal more anxiety and uncertainty for American businesses and consumers,” David French, an executive vice-president of the U.S. National Retail Federation, said last week.
Relief from the spectre of lengthy shortages, and sharp price increases, could result from the lawsuits against Trump’s trade policies filed April 23 by 12 states, including New York and Illinois.
U.S. courts have often found for the plaintiffs in legal challenges to actions of the Trump administration.
Also suing the Trump administration is Learning Resources, a family-owned toy business in Vernon Hills, Ill.
The company’s thousands of niche-market toys, including Spike the Fine Motor Hedgehog and Pretend & Play Calculator Cash Register, will be subject to an estimated total of $100 million (U.S.) in import duties, up from $2.3 million (U.S.) last year.
Rick Woldenberg, Learning Resources’ CEO, describes the tariff hikes as “catastrophic” for his company of about 500 employees.
Trump’s goal is to relocate to the U.S. the foreign factories making goods sold in the U.S., increasing jobs and pay for Americans.
But economists doubt that can be done, because relocating factories to the U.S. would cost billions of dollars. And the U.S. has shortages of the low-pay workers required to make goods imported from China, Vietnam, Bangladesh and Indonesia.
Woldenberg has his doubts, too. “The fact that (Trump) believes in it is something that I think is irrelevant,” he told CBS News on April 25.
“There are people that believe in ghosts, OK?”
Ontario Premier Doug Ford, for one, has not waited for the outcome of U.S. court challenges to inveigh against Trump, who last week mused about a further hike in his tariffs on the Ontario-based auto sector.
Trump is “threatening tariffs, disrupting supply chains, putting all of us at risk, including the American people,” Ford said last week. Ford believes that 500,000 Ontario jobs are at risk from Trump’s economic attack on Canada.
Chaos in global supply chains will continue as the erratic Trump imposes, pauses then doubles his tariffs. With U.S. trade policy changing by the week, Ford said “I think the cheese slips off the cracker with this guy. Even the people around him are not too sure what he’s going to do.”
It won’t be long before many Canadians share the premier’s frustration.
