US tariffs will hit its own consumers. Retailers and suppliers are bracing for impact.

Washington and Wall Street have been in turmoil for nearly a month over President Donald Trump’s tariffs, and the fallout is now approaching US households. Retail giants like Walmart and Target warned Trump last week of looming shortages and higher prices, Bloomberg reports.

The tariffs hit during a crucial inventory buildup season for back-to-school and holiday sales, forcing retailers to choose between canceling orders, raising prices, laying off workers, or facing empty shelves and financial strain, the business news service writes.

Shipping disruption deepens: Since the US raised tariffs to 145% in April, cargo shipments from China have dropped by up to 60%, with overall volumes down 40%, according to Bloomberg data. Bookings for standard containers were 45% lower by mid-April, the Financial Times reports, citing Vizion data.

As it stands, the World Trade Organization projects that US-China trade could fall by 80%, fueling recession fears. US imports are expected to drop 7% in 2Q — the steepest fall since the pandemic.

Damage management window closing: Huge retailers have been pausing orders from suppliers outsourcing their products from China and are expected to cancel them if the standoff remains, Jay Foreman, CEO of toymaker Basic Fun, told Bloomberg. “We’re in a period where the damage is manageable, but every week the damage level is going to increase,” he was quoted as saying by Bloomberg.

Rising prices are dragging consumer spending down, with consumer confidence weakening, Momentum Commerce CEO John Shea told the Financial Times. Some executives anticipate consumer goods prices could double, further tightening sentiment and spending, Bloomberg writes.

To mitigate the tariff impact, importers are shifting sourcing to Southeast Asia, with rising exports from Cambodia, Thailand, and Vietnam. Container prices are already rising from Vietnam but falling sharply on China – US routes, data from the cargo booking platform Freightos shows.

BUT- Unlike the Covid era crisis, a rapid resolution is still possible if tariffs are quickly removed, executives noted. However, any sudden trade rebound could overwhelm logistics systems and creating new bottlenecks, Judah Levine of Freightos told Bloomberg.

IN CONTEXT- Washington and Beijing have granted minor tariff exemptions for select products, with Trump suggesting the 145% rate could “come down substantially.” However, no formal negotiations are underway, and industry leaders warn that higher baseline tariffs — possibly locking in at 10% — could permanently raise costs, worsening the squeeze on businesses and consumers, said Secretary-General of the International Chamber of Commerce John Denton.

MARKETS THIS MORNING-

Asian markets are mixed this morning, with Japan’s Nikkei unchanged, while Hong Kong’s Hang Seng is down 0.5% and Shanghai Composite is down 0.1%. Meanwhile, Wall Street futures are signalling a lower opening, after markets were given a boost yesterday after US officials hinted at a trade agreement to be finalized soon with an unnamed country.

THE CLOSING BELL-

The DFM rose 0.5% yesterday on turnover of AED 482.7 mn. The index is up 1.6% YTD.

In the green: National General Ins. (+11.9%), National Cement (+5.8%) and National Industries Group Holding (+5.6%).

In the red: National International Holding (-7.7%), Orascom Construction (-3.7%) and Dubai Islamic Ins. and Reins Co. (-2.3%).

Over on the ADX, the index rose 0.6% on turnover of AED 2.3 bn. Meanwhile, Nasdaq Dubai was up 1.0%.