UPDATE: 8:30am ET, May 12: The US and China have agreed to a 90-day trade deal in which the United States will impose a 30% tariff on goods coming from China, down from 145%. Further trade talks are ongoing.
Sixteen cargo ships sit idle in ports, waiting to be summoned into duty. For now, their horns will remain quiet. No sailors will climb aboard to brave the stormy seas. Instead of crossing the ocean laden with books, cars, or children’s toys, the ships will sit in the harbor, because the orders that they were tasked with carrying have been canceled.
Ordering goods from China has become too expensive for some businesses, and their cutbacks in shipping mean that soon, shortages could be upon us, and prices might be climbing. And with gas and groceries both already trending upward, new price increases from tariffs are going to be challenging for many.
Tariffs are taxes on imported goods, paid by the company that is doing the importing. These taxes are generally passed on to the consumer, which makes sense: if a company has to pay more to get its product in front of a customer, it has to recoup those extra costs somehow.
This doesn’t affect just finished goods like sweaters and blenders, but also imported parts that are used to manufacture things in the US. Some cars are assembled in the United States, but nearly all have components made in other countries. In some cases, those parts are now subject to substantially higher taxes.
But there is another way tariffs can lead to price increases: they can cause shortages. As companies realize that the tariffs drive up prices beyond what consumers are willing and able to pay, they may cancel their orders. These canceled orders can lead to shortages, and the goods that are left will often become more expensive.
For example: One year Dwight Schrute, a character in the TV show The Office, does research to determine which Christmas toy will be the most popular. He rushes out to purchase all the Princess Unicorn dolls he can find, and then he sells them at an incredible markup as the shortage of the doll spreads. The segment shows a dad forking over $200 to buy the Barbie-with-a-unicorn-horn toy, and Dwight singing to the camera, “Fa-la-la-la-la, la-la-ka-ching.”
Dwight helped facilitate a shortage by buying up the Princess Unicorn dolls. And when there was a shortage, it drove up the prices of the dolls that were available.
Shortages also contributed to the roughly 30% price increase in cars during the pandemic. When carmakers faced shortages of component parts — like computer chips — prices rose.
In recent months, a new trade war driven by tariffs has erupted, including a back-and-forth with China, with each country setting progressively higher rates as it felt disrespected or wronged.
Trump posted on Truth Social: “Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately.”
Days later, the White House clarified that this 125% tariff was on top of a separate 20% tariff Trump had previously levied against China, bringing the current total rate on Chinese goods to a whopping 145%. That means that if a Chinese product has an import value of $100, it will be taxed an additional $145, making the cost to the importer $245.
Cargo ships that were loaded in China before April 9 weren’t subject to the new tariff rates. But the ships now pulling into US harbors are going to be slapped with these taxes, and companies are beginning to feel the effects. Many have announced price hikes that will hit consumers this month.
The prices of at least 930 products sold on Amazon have risen since early April, with an average price increase of 29%. And customers who were hoping to place orders on Chinese e-commerce sites like Shein or Temu are also out of luck. Trump eliminated a loophole that allowed packages valued under $800 to enter the US without being subject to tariffs — and this has made products on both of those sites more expensive. Temu is now itemizing import charges as customers check out, and Shein tells buyers that “tariffs are included in the price you pay.”
Procter & Gamble makes household and baby products out of raw materials sourced from China. Anticipating the 145% tariff, it said at the end of April that it would have to raise prices to counteract the new import costs.
German sportswear company Adidas makes many of its products in China, and its CEO had a warning for American consumers in an earnings call a couple of weeks ago: “Since we currently cannot produce almost any of our products in the US,” he said, “these higher tariffs will eventually cause higher costs for all our products for the US market.”
Other companies have started ordering less or canceling orders entirely because of the higher Chinese tariff. The Port of Los Angeles had planned on the arrival of 80 ships this month, but 20% of them — those 16 ships sitting idle — now won’t show up because American companies canceled their orders.
And the tariffs might cause price increases even on domestically produced goods. If the price of French or Italian cheese or wine goes up, American companies can raise their prices by a lower amount and still be the cheaper option.
Should I buy?
There are some things that might be worth purchasing now, if you can.
China is a major exporter of big-ticket electronics. Trump exempted smartphones and computers from the 145% tariff — instead, they are taxed at a 20% rate. If that changes, they could quickly become unaffordable for many people. About 90% of Apple’s iPhone production and assembly takes place in China, and some estimates find that the price of an iPhone could rise as high as $3,500 under a 145% rate.
Last week, the company’s CEO, Tim Cook, said that he expects that the “majority of iPhones sold in the US will have India as their country of origin and Vietnam to be the country of origin for almost all iPad, Mac, Apple Watch and AirPods products.” This could mean that the products will still be made in China, but shipped to India or Vietnam before coming to the US, to avoid the high tariff rates.
Jason Miller, a professor at Michigan State University’s Eli Broad College of Business, says that it’s impossible to know what lies ahead. “Given all the uncertainty about what tariffs will actually be, I would tell folks only to go forward on purchases for something like a smartphone if they were planning on replacing that phone anyway in the next few months. The same applies with items like laptops.”
Many major appliance brands manufacture their machines in China, so if dishwashers, washing machines, or dryers are in your future, it might be helpful to snap one up before the ships with high tariff rates land.
Car prices are likely to jump in the near future as well. CarEdge.com, which gives advice on car purchases, said: “Automakers are absorbing the costs to keep prices competitive — but that won’t last forever. As supply chains adjust, expect higher manufacturers’ suggested retail price and fewer discounts on imported vehicles later in 2025. That means spring and early summer could be your last chance to buy before price hikes hit.”
Unfortunately, there are some things you won’t be able to stockpile, like fresh food. Grocery store prices have already gone up under the Trump administration, and they are likely to continue heading upward. About 15% of food supply in the US is imported, including 32% of fresh vegetables, 55% of fresh fruit, and 94% of seafood.
"Consumers will feel these price hikes at the grocery store, especially for products where we rely on imports to meet year-round consumer demand,'' said David Ortega, a food economist and professor at Michigan State University.
Though tariff rates remain uncertain, one thing seems clear: for the time being, life in the US is getting more expensive.
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