Tariffs in Transit: The Delayed Shockwave Begins to Hit US Trade
Macro Insights
QuantCube’s latest insights into the US economic outlook
Global investors have long understood that tariffs distort trade and disrupt supply chains. What they may have underestimated, however, is the timing. By early June, the S&P 500 had fully recovered its losses from ‘Liberation Day’. But beneath the surface, QuantCube’s high-frequency indicators started flashing warning signals.
The delayed impact of the sharp, albeit temporary, escalation in US-China trade tariffs in April now appears to be taking effect.
Turning Point in US-China Container Flows
QuantCube’s real-time container flow indicator—derived from AIS ship tracking data—signals a clear inflection point. As of June 17, inbound container volumes from China to the US had dropped by more than 60% from their peak, as shown in Exhibit 1. The slump reflects a double impact: fewer vessel arrivals and a 10 percentage-point drop in average fill rates, a trend that quietly began as early as March.
This is not just about fewer ships —it seems to be a collapse in trade activity. In Q1, many US firms rushed to front-load imports ahead of the tariff hike. But once stockpiling ended, new orders collapsed. Shipping companies responded quickly, first by reducing vessel loads, and then by cancelling routes entirely. Blank sailings—already flagged by several US ports in April—are accelerating fast.
The Trade Shock Hits with a Time Lag
The delayed impact is consistent with how global trade works: tariffs hit purchase orders first, but it takes weeks for the impact to be felt across manufacturing, shipping, and customs. The tit-for-tat tariffs were only active for about a month before the early-May truce, but the economic effects are just now surfacing and could continue into June.
Importantly, the shock is highly asymmetric. Container flows from Europe—shown in Exhibit 2—have already returned to normal after a brief Q1 stockpiling surge. Imports from other regions remain largely stable, buffered in part by a more modest 10% reciprocal tariff rate. For now, the disruption remains concentrated in US-China trade, where the tariff escalation was both sudden and severe.
Growth Implications: A Foggy Q2 GDP Print
The economic consequences of the tariff shock are multi-layered, and difficult to interpret through traditional data.
From a GDP accounting perspective, the effects may appear contradictory. Falling imports mechanically boost GDP, while an inventory drawdown drags it lower. If both effects are significant and offsetting—as we expect— the headline number could once again obscure the underlying picture. This reflects the ambiguity of the Q1, when simultaneous increases in net trade and inventories obscured the GDP reading.
QuantCube’s nowcasting models suggest a high likelihood of another distorted GDP print in Q2. The US economy may not be weakening materially, but headline data could mislead.
Labour Market Risks: Spotlight on Logistics
The employment impact is likely to be uneven and sector-specific. Logistics—ports, freight, warehousing—is particularly exposed. If the slump in container volumes persists, it will weigh on hours worked, overtime, and potentially employment in regions dependent on maritime trade activity.
Inflation Outlook: Temporary Shock or Persistent Scarcity?
Inflation is where the greatest uncertainty lies. The key question is: can the Q1 inventory buffer shield consumers and firms from higher prices, or will shortages emerge as those stocks run down?
So far, our goods inflation nowcast remains broadly subdued. But early warning signs are appearing in regional manufacturing surveys. In product categories with limited alternative sourcing—especially intermediate manufactured goods—inventory depletion could soon feed through to prices.
If the supply chains fail to adjust quickly, even a “temporary” tariff shock could have longer-lasting inflationary consequences. Despite the truce and rollback to a 30% tariff rate on Chinese imports, headline inflation could still surprise to the upside in late Q2 or early Q3.
China’s Slowdown Reflects Demand-Driven Drag
On the Chinese side, the story is mirrored. QuantCube’s manufacturing sentiment nowcast for China fell sharply in April and May, in line with collapsing US orders. Container flow data confirms a sharp drop in exports to the US.
China’s Q1 growth had been supported by robust external demand, particularly from US firms restocking ahead of the tariff hike. That support has now evaporated, and industrial activity decelerated. However, following the early May tariff truce, sentiment indicators have begun to recover. If restocking resumes under the new, lower tariffs, a rebound in Chinese industrial activity may follow.
No Evidence (Yet) of China Exporting Deflation to Europe
Despite concerns during the US election campaign, there is no evidence that China is redirecting exports to Europe in a way that would “export deflation”. Our indicators show that China-Europe container flows remain stable on average, close to recent historical levels.
Final Thoughts: When Real-Time Indicators Matter Most
The current disruption is a textbook example of why real-time monitoring matters. Traditional macro data lag and often smooth over precisely the kind of sharp, sudden shocks we are now seeing. The apparent calm in headline market indicators masks a far more volatile real economy, where trade flows, supply chains, and inventories are shifting rapidly in response to policy swings.
Whether the US-China tariff truce holds or unravels again, QuantCube’s nowcasting models will continue to capture the evolving impact, well before it filters through to conventional data. In a world of policy-driven dislocations, one message is clear: watch the flows.
