The Current - Fears of empty shelves as U.S. tariffs disrupt supply lines

Episode Date: May 9, 2025

Trump’s economic fight with China has already led to a drop in cargo coming into U.S. ports. Supply chain experts are warning that tariffs could soon mean half-empty shelves and higher prices south of the border, which could have a knock-on effect for Canada.

How did the internet go from this? You could actually find what you were looking for right away, bound to this. I feel like I'm in hell. Spoiler alert, it was not an accident. I'm Cory Doctorow, host of Who Broke the Internet from CBC's Understood. In this four-part series, I'm going to tell you

why the internet sucks now, whose fault it is, and my plan to fix it. Find who broke the internet on whatever terrible app you get your podcasts. This is a CBC Podcast. Hello, I'm Matt Galloway and this is the current podcast. Maybe the children will have two dolls instead of 30 dolls, you know, and maybe the two dolls will cost a couple of bucks more than they would normally." Not exactly the American dream. It's only the 9th of May and yet retailers are already thinking about Christmas.

That is because of what is happening when it comes to the supply chain and concerns that store shelves might not be as full as people are used to seven months down the line. The head of LA Ports, America's busiest, is warning that tariffs have led to a 35% decrease in cargo, slowdown mainly driven by the 145% tariffs the US has put on goods coming from China. Larry Gold is the owner of Aldic. It's a store in Los Angeles and most of their products come from China. We sell very very high-end Christmas trees. We already have lights on them, and they're very realistic. And we'll sell a 7 and 1 half foot Christmas tree

for about $1,000. With 145% duty, we'll be selling that tree for about $2,200. And nobody's going to buy that. So here's the math in dollars. We bought $600,000 worth of Christmas trees, and that was our order in January. When that comes in, I'm going to have to write a check

for $600,000 to the factory. And I'm also going to have to write an additional check for almost a million dollars to customs. This business has been in Larry's family for 70 years. This has him worried about the future. If 90% of our revenue is affected by tariffs and we're not going to have any product to sell, we're not going to be able to survive. The hard part is we've been around a long time, we have a second generation

working for us whose parents worked and retired and it's a shame to see this all go away for no particular good reason. Jason Miller is a professor of supply chain Management at Michigan State University's Eli Braude College of Business. Jason, good morning. Good morning. It is strange to be thinking about the way it may or may not be under a Christmas tree, a Christmas tree that might be on a boat many, many months down the line,

but that's what people are thinking about. How widespread is Larry Gold's example of what businesses in the United States are facing right now? So it's very widespread. Once the 145% tariffs were put in place, we've seen a large scale pausing by many importers of orders from China.

We just recently had the CEO of Maersk, which is the second largest container ship operator in the world say they've seen a 30 to 40% decrease in bookings from China to the United States. Put that into perspective. What does that mean? What does that look like?

So what that looks like is certainly a few months from now for various categories of goods where the US relies extensively on Chinese imports, small electrical appliances like mixers, blenders, microwaves, baby strollers and car seats, little plastic things for your bathrooms. Certainly the product variety that the consumers use to will decrease substantially.

And we could see if this stays, you know, stays pat, some more significant shortages emerging by let's say August or September. I was gonna say, how long until you start to see those things come around? People are talking about Christmas, but also you have parents and parents-to-be who are thinking about in the United States,

you hear them thinking about whether they should buy cribs now, for example, whether they should buy a car seat in advance because it may not be available. You're looking at sometime this summer when things really start to hit? Yeah, so you can figure most the inventory on the shelf now was ordered a couple months ago. And so you've got a little bit of lead time, which is why we're so closely watching to see

if the administration starts to exempt certain items like strollers and car seats. Reuters reported recently that that was being considered. Larry said the 145% tariffs on Chinese goods could force him to close his business. How much longer do you think this could go on before you see some businesses having to pull the plug? So especially for items with the holidays, orders must be placed with suppliers in China at absolute latest by the end of June. And that is assuming those suppliers are going to work overtime to get those products here. So if you are sitting in August and these companies have not decided to import, that

means they're not going to have the product to sell in the holiday season, and they'll be essentially either laying people off or they certainly will be not planning to hire folks in that November, December season. I think this is surprising to some people, not to you, because you study supply chains, but people may not know how supply chains work, and they would be surprised to hear that you need to order things that far in advance.

So how does a slowdown in what is being shipped and what is arriving in the ports ripple through that entire supply chain? Just briefly walk me through that. Yeah, so you can start thinking that means you need bus truck drivers at the ports ripple through that entire supply chain. Just briefly walk me through that. Yeah, so you can start thinking that means you need less truck drivers at the ports to move that freight, so you would expect to see lower employment there. You may see less workers in the warehouses around the ports that are processing freight, and so you need fewer workers there. You have less freight moving inland, so you need fewer long-distance truck drivers to

move some of that. And then also at the same time, US exports to China have plunged tremendously, which means you need less workers in factories that are producing the goods that China does buy from us, like high-end optical scanners, semiconductor machinery and things of that sort. We saw this during the pandemic. People suddenly realized that we live in this just-in-time sort of society. It's not as though there are giant warehouses that are stockpiling car seats for months

and months to come, that these things arrive as they're needed. No, exactly. It's because inventory costs a lot to hold. And so we typically have, you know, decent amounts of what we call safety stock to deal with uncertainty of demand and, you know, length of lead time from a supplier to us, but we don't anticipate, you know,

pausing orders for let's say months. That's not something that is taken into consideration. The US President Donald Trump was asked about this slowdown yesterday. Have a listen to what he had to say. When I see that, that means we lose less money. Look, China was making, you know, different numbers from 500 billion to a trillion or a trillion, I think it was 1.1 trillion. And frankly, if we didn't do business, we would have been better off. Okay, you understand that. So when you say it's slowed down, that's

a good thing, not a bad thing. What do you make of that? It's a good thing, not a bad thing, that things have slowed down. Complete lack of understanding about how modern supply chains work. He said, tell me more about this, because he has said in some ways it's a good idea, it's a good thing. This is what he wants. It's a good thing that the United States isn't doing as much business with China as it was in the past. That's one that the trade economists don't look at bilateral trade deficits. China is actually a major export destination for US goods.

It seems to be a, it's a mentality and understanding that none of us can really grasp. The fact that we source a lot from China has made prices lower for Americans over the years. And in many ways, the extent that there have been negative consequences from trade liberalization with China that showed up in the original academic research has largely been overwritten by subsequent work.

And so I really don't even know what to make of it because I cannot process this mentality that somehow running a trade deficit with the country means that we're being taken advantage of. He also said when he was asked about the rising cost of toys before Christmas, the kids would just have to do with two dolls, not 30. That you'll have fewer pencils. You don't need 500 pencils, you just have a few pencils. How do you think that goes over? You can make an argument that maybe we consume too much stuff, but how do you think that idea that, well, you'll just have fewer dolls under the tree and they'll cost you more. How does that go over with Americans?

Well, it doesn't go over well and it ignores the job implications. Simple example, there's only 5,600 individuals in the United States employed making dolls, toys, and games in factories, but there's over 128,000 individuals employed in retail stores that sell games and toys and hobby items. If you have Americans buying less, that means you need far fewer workers in these retail sectors, which means you end up having job loss, which is consistent with the initial clip you were playing from the person talking about the Christmas trees. What would you say to Canadians about what to expect? We're talking about what's happening in the United States and there are various negotiations

and deals being crafted apparently between various countries. But in this country, what should we be thinking about? I think the biggest thing is going to be the realization of the need to diversify export markets from the United States. Looking at Canadian trade data, Canadian exports to the US that came in in March, fortunately Canada was actually spared the worst of the tariffs. For example, the average tariff rate for Canadian goods was just 1.9% for all imports, so far, far, far less, for example, than China, China where that figures in the double digits now

And so in a lot of ways it does seem that Canada's been spared the worst And we're seeing evidence now from the active and call what was discussed with the UK a deal is generous But essentially for it seems outside of Canada and Mexico pretty much double digit You know 10% baseline tariff is going to be the name of the game moving forward at least. But the key thing is, is it's going to be diversify export markets. Jason, it's really helpful to have you walk us through this. It's fascinating and I think really alarming to people, but also just your insight in this

and something that people perhaps don't understand a lot about. They get the things at the end of the supply chain, they may not be part of the whole process is really helpful. Thank you very much. Thank you for having me. Jason Miller is a professor of supply chain management at Michigan State University's Eli Braud College of Business. For more CBC podcasts, go to cbc.ca slash podcasts.