According to Vincent Clerc, CEO of Maersk, container imports into the U.S. from China have decreased by 30% to 40% following the implementation of steep tariffs. This decline has pressured U.S. retailers to identify alternative sources for their inventory. Businesses are now sourcing inventory from Mexico, Canada, and vendors in the U.S., while awaiting clarity on U.S.-China trade policy.

Although not yet an issue, there is a potential for empty store shelves if inventory is not secured before summer. “There are certain commodities where you can’t substitute imports freely, both in terms of SKUs [stock keeping units] but also in terms of quantities, because the capacity there was in China is not readily available elsewhere to support the U.S. market,” Clerc said. “It’s going to start to hurt quite a lot across the board.”

Maersk revised its global container market forecast downward, from a 4% growth estimate projected earlier this year, to between 1% and 4%. The company kept its earnings forecast at zero to $3 billion but flagged risks of negative growth. New vessel deliveries are adding supply, but risk levels have not improved adequately to resume shipping on Red Sea routes despite an apparent ceasefire.

There are signs of positive trade developments emerging. A trade deal with the U.K. has been announced, and talks with China are planned. If multiple trade deals come through in the next 90 days, global demand could rebound to 4%. However, if tariffs remain, the U.S. could face recession risks as costs shift to consumers. “Because ultimately, given the lack of alternatives to China, both in terms of scale and breadth, this will have to be passed on to consumers,” Clerc stated.

Source: Journal of Commerce