What tariff turbulence means for the consumer goods supply chain

The U.S.-China trade landscape is shifting rapidly. Nearly all industries will see the effects of evolving dynamics, but consumer goods companies that sell wares made in China are some of the first to see immediate impacts. Retailers, distributors, and direct-to-consumer brands are likely to experience new supply chain challenges.

Here’s what to know, and how to keep track of what comes next.

Unpredictable tariffs on China are changing quickly

In early April, U.S. tariffs imposed on Chinese imports escalated to 145%. However, on May 12, the U.S. and China established a 90-day truce, reducing U.S. tariffs on Chinese goods to 30% and Chinese tariffs on U.S. goods to 10%. The stock market, which has been tumultuous since the introduction of U.S. tariffs, rallied sharply in response that same day.

The U.S. also adjusted the “de minimis” exemption, which previously allowed low-value imports to bypass tariffs. On May 2, the de minimis rule was reversed, subjecting small consumer e-commerce orders to substantial levies. But as part of trade negotiations, the U.S. adjusted tariffs on these low-value shipments to 54% (down from 120%) plus a $100 flat fee starting May 14.

Tariffs in flux create volatility at the ports

During the first week of May, tariffs caused a sharp slowdown in imports from China. Cargo bookings were down 42% from March and 61.5% year-over-year across ports. Ports on the West Coast, where more than half of Chinese imports enter the U.S., saw a dramatic decline in activity. The Ports of Los Angeles and Long Beach had a combined 70 blank (cancelled) sailings from China. The Port of Seattle was completely empty.

Immediately following the truce announcement on May 12, importers began moving quickly to take advantage of the reprieve. Cargo bookings increased 277% week-over-week as businesses scramble to bring in goods during the window of reduced tariffs. This spike reflects both pent-up demand and strategic stockpiling in an attempt to hedge against future tariff uncertainty.

How consumer goods businesses are navigating supply chain challenges

The tariff reduction is good news for consumer goods businesses, but it also adds new complexities to inventory planning. Retailers and distributors must now balance short-term cost savings with the risk of overstocking, especially if tariffs are raised again later this year.

According to Reuters, many retailers are unfreezing previously paused shipments. Others are prioritizing what to import now or declining to add inventory at all, due to space and cost constraints. Some large suppliers and distributors are flying in shipments from China to create a stockpile.

For those impacted, it’s also prudent to zoom out and consider long-term supply chain strategies.

Trade disruptions during COVID-19 underscored the need for resilient supply chains. Now, it’s more necessary than ever to implement strategies that can withstand geopolitical shifts, policy changes, and logistical challenges.

One key trend is the diversification of manufacturing and warehousing outside of China, such as Southeast Asia, Mexico, and parts of the U.S. Companies can take steps by avoiding a single manufacturer or region, shortening supply chains where possible, and developing contingency plans if goods become cost-prohibitive.

Resources to monitor tariffs

By staying up-to-date with current events, businesses can better manage volatility and strengthen supply chain resilience against future shocks. Helpful resources include the following:

Government and trade agencies

• U.S. International Trade Commission (USITC)
  The USITC offers official data on tariffs, trade regulations, and ongoing investigations. The DataWeb tool lets you look up tariffs by product and country.
• Office of the United States Trade Representative (USTR)
  The USTR publishes a complete list of the executive orders, press releases, and updates on trade negotiations and enforcement.
• U.S. Census Bureau
  The Census Bureau’s data on international trade tracks import and export statistics, publishing monthly trade reports that reflect tariff impacts.

Business and economic research tools

• World Bank
  The World Bank has information on tariffs by product and trading partner, including applied and bound rates.
• World Trade Organization (WTO)
  The WTO provides a global view of tariff structures, including most favored nation (MFN) rates.