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(Bloomberg) -- Investors are in for a shock in the next few weeks as the slowing flow of goods from China underscores the risks tariffs bring to the US economy, the latest MLIV Pulse survey showed.
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Of the 248 respondents to a poll conducted April 28-30, 82% said the impact of fewer shipments from China to American businesses is either somewhat or heavily underpriced in markets. A large majority also see tariffs triggering a US recession this year.
Since President Donald Trump raised tariffs on China to 145% in early April, cargo shipments have fallen sharply. But it takes about 30 days for a shipment from China to get to US ports on the West Coast, meaning the US is still receiving ships that departed before the tariff increases were unveiled.
Economic Contraction
Businesses have clearly anticipated the impact well before any formal announcement, with first-quarter gross domestic product data showing the US economy contracted for the first time since 2022 as imports surged.
“GDP tells us about the pull forward of demand, not about the potential for a collapse in demand from tariffs — which is what the high-frequency port data is suggestive of,” said Jake Schurmeier, portfolio manager at Harbor Capital Advisors.
“The data is noisy, but directionally consistent with what you would expect if US-China tariffs amount to a de facto trade embargo,” Schurmeier added.
While economists expect the sharp widening in the trade deficit to reverse next quarter, they also warn of a risk supply shock resulting from higher levies.
In a Cabinet meeting on Wednesday, the president argued a recent decrease in cargo flows signaled Beijing would soon need to engage. “I want China to do well,” Trump said. “I want every country to do well, but they have to treat us fairly also.”
Brace for May
Asked when Americans will start seeing the impact of that drastic reduction in shipments, 49% of respondents said in the second half of May, while nearly a third expect it in June or later.
Even if trade-war hostilities ease, the ripples are already reverberating. The executive director of the Port of Los Angeles said this week the port is already seeing the flow of cargo slow.
Retail stocks will be the most vulnerable to disruptions from a China supply shock, according to more than two-thirds of survey participants. Technology came in a distant second, garnering 12% of responses.