Rob Handfield, Bank of America University Distinguished Professor of Supply Chain Management and executive director of the Supply Chain Resource Cooperative, discussed possible effects of the shipping slowdown, including product shortages, price increases and supply chain resets.<\/p>\n\n\n\n
Q: Incoming cargo shipments from China are slowing down. What products might that affect?<\/strong><\/p>\n\n\n \n A: Believe it or not, retailers are placing Christmas orders now. On things that have to be on shelves before Christmas, they\u2019re ordering now for delivery in October and November. And 80% of all of the toys manufactured<\/a> come from China. Electronics, furniture and home goods are other categories. Nearly all of that comes from China.\u00a0\n <\/p>\n \n <\/p>\n\n\n\n A lot of retailers have preloaded as much inventory as they can. They’ve taken early shipments and loaded up their warehouses, but that might only last a month or two. Normally, they’ve got a constant flow of stuff coming in and being distributed. And it’s likely they’re not going to do that as these tariffs go into place. <\/p>\n\n\n\n The CEOs of Wal-Mart, Target and Home Depot met with the Trump administration<\/a> and informed him they\u2019re not going to buy stuff that has a 125% tariff on it and put it on the shelves because shoppers aren\u2019t going to buy it. They don’t want to be stuck with all these products that aren\u2019t going to sell. <\/p>\n\n\n\n So you’re going to see a lot of empty shelves because of that. And that’s kind of scary. <\/p>\n\n\n\n Q: How likely are we to see shortages of essentials, like what happened early in the COVID-19 pandemic?<\/strong><\/p>\n\n\n\n A: During COVID-19, shortages of things like toilet paper, pork and poultry occurred because of panic buying. Pork, beef, chicken, toilet paper\u2014all those goods are produced here. We\u2019re in good shape on anything where we\u2019re self-reliant, like oil and gas and a lot of agricultural products. We don\u2019t have shortages right now, nor should we expect any in these areas.<\/p>\n\n\n\n The thing that\u2019s worrisome though is that China is imposing retaliatory tariffs on these same agricultural goods: pork, beef, poultry, soybeans, corn, and others. That\u2019s really going to hurt farmers. We export a ton of those products to China. If demand drops, than prices drop and farmers won\u2019t be able to get a decent return on investment. So they won\u2019t plant as much or they may cull their herds. In that case, we could eventually see shortages.<\/p>\n\n\n\n Q: Once products reach a port, how do the tariffs actually get applied?<\/strong><\/p>\n\n\n\n A: That\u2019s not a simple matter. You don\u2019t just check an HTS code and add 125%. (Editor\u2019s note: Harmonized tariff system (HTS) codes are numbers used across countries to identify products for the application of tariffs.) <\/em>You have to know what percentage of a product\u2019s components are from which country. And who pays for it\u2014the broker of the sale? The shipper? The buyer? How are the funds transferred? There are no published guidelines for how Customs and Border Patrol will handle it, although they are making progress on a framework.<\/p>\n\n\n\n The markup on these products\u2014where the retailers make their profit\u2014is a function of these tariffs. Large retailers like Walmart and Target are asking their suppliers to absorb some of the cost of tariffs. And those suppliers may on take some, but they can\u2019t take all of it.<\/p>\n\n\n\n The thing that worries me is how this will hit small businesses that rely on Chinese imports. They don\u2019t have the working capital to absorb these tariffs or buy extra inventory ahead of time. And they don\u2019t have anywhere to store it if they could.<\/p>\n\n\n\n Q: What are you hearing from supply chain practitioners?<\/strong><\/p>\n\n\n\n A: They\u2019re scrambling. They\u2019re looking at ways they can add clauses to contracts that would adjust prices based on different tariffs. They\u2019re trying to identify alternative suppliers in different countries where the tariffs are lower. Some are looking at how to move products through free trade zones or petitioning the (U.S.) Department of Commerce for tariff exemptions. <\/p>\n\n\n\n A lot more companies are looking at alternatives to sourcing from China. One company I\u2019ve talked to is thinking about India. To do that, you have to actually fly there and look at the manufacturing sites. And you have to ask a lot of questions \u2014do they have adequate logistics? Do the people there have the right skills? Will they have to train a lot of people? How are the water, electrical and transportation infrastructure? It\u2019s not a simple thing.<\/p>\n","protected":false,"raw":"\n\n\n\n\n Most of the reciprocal tariffs announced April 2 by President Donald Trump are on hold, pending negotiations with individual countries.<\/p>\n\n\n\n The largest, though\u2014125% on products from China, in addition to an existing 25% levy\u2014has been implemented, and one of its effects has been a reduction in Chinese imports. Officials with the Port of Los Angeles, where more than half of 2024 shipments came from China, expect this month to bring a 35-percent drop in incoming cargo<\/a>, according to CNN.<\/p>\n\n\n\n Rob Handfield, Bank of America University Distinguished Professor of Supply Chain Management and executive director of the Supply Chain Resource Cooperative, discussed possible effects of the shipping slowdown, including product shortages, price increases and supply chain resets.<\/p>\n\n\n\n![\"Rob](\"https:\/\/poole.ncsu.edu\/thought-leadership\/wp-content\/uploads\/sites\/423\/2025\/04\/Rob-Handfield-1.jpg\"\n)
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