According to the U.S. Census Bureau and the U.S. Bureau of Economic Analysis, trade with our three largest partners—Canada, China, and Mexico—accounted for more than $1.32 trillion in imports and $0.82 trillion in exports in calendar year 2024. This represented 40% of the total trade between the United States and the entire world that year.

The United States is heavily dependent on China for much of its commodity items. These range from hardware to furniture to electronics to clothing and much more. It’s also dependent upon its immediate neighbors—Canada and Mexico—for a variety of items, including those imported from China, but also autos, auto parts, potash, fruits, vegetables, nuts, beer, lumber, crude oil, and so on.

Tariffs that have been imposed unilaterally by the United States, not just on these three countries but scores of others around the world, have caused the countries on the receiving end to retaliate. There doesn’t seem to be a coherent policy or set of reasons for imposing these tariffs. The stated reasons and tariff amounts are constantly changing, sometimes by the day. Recently, there was a pause in the tariffs, and they now stand at 30% with China. The frequent changes in policy have caused companies in multiple countries, including the United States, to remain in a holding pattern, waiting for the dust to settle on the tariff wars. No meaningful capital expenditures have occurred, and businesses in all the continents are pausing or rethinking hiring workers in key sectors.

Nearly one-third of the imports into the United States occur at two terminals in Southern California. Most of the shipments are from China and countries in the Far East. Those terminals are used to handling 900,000 containers per month (not including empty containers shipped in either direction). In anticipation of the tariffs, importers of nonperishable consumer goods have ramped up their imports. For example, in January the number of containers was 25% more than the same period in 2024. On the other hand, the data for April suggest that container ship bookings have dropped by 60%, and 30% of Pacific Ocean bookings to the United States have been canceled.

The LoDI index co-created by me has been steadily declining during the past few months. This index, released monthly, predicts the logistics activity for the upcoming month. I believe the third quarter results will decline more rapidly than they have in the current quarter. This could change if the United States and China agree to a lower rate that is permanent.

Consumer items such as furniture, television sets, appliances, and electronic gadgets can be, and have been, ordered in larger quantities in anticipation of the tariffs. For example, Apple airlifted 600 tons, or $2 billion worth, of iPhones from India. These things can occur until the tariffs kick in. In many cases, they have.

But how are sustained tariffs going to affect the manufacturing, distribution, and consumption of products? It’s quite possible that we’ll see elevated prices for groceries in just the next three to six weeks. This will be followed by all the durable (nonperishable) items we consume. To increase profits, retailers will begin increasing prices, even though they are selling from the inventory of goods accumulated prior to the tariffs taking effect.

Beyond eight to 12 weeks, we’re likely to face shortages on retail shelves.

The current administration has been making small overtures to its trading partners, but many worry that the damage has been done. Businesses are already making plans to find new trading partners and alliances. Supply chains can’t be turned off and on like a light switch. It takes years to develop and deploy a strong and stable supply chain with vendors.

Consider the semiconductor chips that go into your smartphones, smartwatches, automobiles, and other products. These have a complex supply chain. For example, TSM, a leading manufacturer of chips based in Taiwan, imports wafers (silica sand heated with carbon to make ingots that are then sliced into wafers) from Japan, and chemicals from China. The equipment, software, and services for making the equipment that go into fabs are made by companies such as Applied Materials, which has factories in the United States and overseas. TSM purchases equipment from multiple countries and makes semiconductor chips in their fabs. The chips are then sent to a company, such as FoxConn, which sources components for the end product from various countries, assembles them, and distributes them directly to customers or sends them back to the parent company for distribution.

All this requires good faith negotiations on price, quality, and reliable and timely delivery. It also requires all the parties in the supply chain to be constantly working in concert, not only to satisfy their own goals but also those of their supply chain partners. Many aspects of design, manufacturing, sourcing, assembly, and logistics must come together perfectly to deliver what the consumer needs at a low cost but at high quality. The current models of supply chain not only help us achieve economies of scale, but also economies of scope.

Product innovations can also occur at a faster rate when these chains are stable. Apple wouldn’t have been able to keep innovating if it weren’t for its ability to design unique products and scour the world for sourcing, manufacturing, assembly, packaging, and delivery partners.

In my opinion, tariffs are a waste of time and talent because the world isn’t focused on bringing more efficient and effective goods and services, in a sustainable and profitable manner, to a growing world population that now stands at more than 8.2 billion. Instead, we’re focused on tariff wars that don’t seem to have a positive outcome for most industries, at least in the short term. As for the long term, it remains to be seen. My worry is that these actions could spell a steep decline in economic activity throughout the world.