Rising Power, Nervous Superpower
Rising Power, Nervous Superpower
Global trade dynamics are shifting rapidly. Recent US tariff increases are disrupting supply chains and raising costs. Retailers have been warned of price increases and potential stock shortages, while import volumes are already slowing according to data from freight companies. Unsurprisingly, consumer confidence in the US is weakening which often portends a slowdown in economic growth.
Countries across East Asia and other regions are also reassessing their economic priorities. With ongoing uncertainty, markets are trying to adjust to a changing investment environment.
Rebalancing act
The average US tariffs on Chinese exports currently stand at 124.1%. This is up from 20.8% at the end of 2024 (before President Trump started his second term), and is 40 times greater than 2017, when President Trump (in his first term) started to increase tariffs against China.
The chart below shows US exports and imports of goods with China. US imports from China rose sharply between 1990 and 2015. Since President Trump enacted tariffs in 2017, US imports from China have fallen. However, the difference in relative trade flow remains wide and President Trump is seemingly wanting a rebalance.
US-China imports and exports – Chinese exports to the US are nearly 3.5x greater than US imports to China in 2024
Source: Artorius, Bloomberg
Who ultimately suffers the cost of these sweeping US tariffs remains uncertain and will depend upon the duration that the tariffs are in place and whether companies can maintain profit margins by raising prices.
Land ahoy? Not so fast.
As an indication of the potential impact of supply chains, DAT Freight & Analytics* have recently forecasted that in May 2025, the 19-month streak of year-on-year growth in US imports is expected to come to an end, with a 20.5% decrease compared to May last year. Walmart and Target CEOs are warning that price increases are imminent, and consumers may face empty shelves and shipping delays in the near future as a result of the current US tariffs.
Even if the US were to remove tariffs on Chinese imports today, the impact on US store shelves wouldn't be felt immediately. It takes approximately 30 days for goods from China to arrive on the west coast of the US and around 50 days to arrive on the east coast via the Panama Canal. Therefore, the impact will only start to be felt in the coming weeks, and if tariffs are removed there will be a significant lag before trade resumes as it was. As we remember from the pandemic, once things shut down it can take a long time to get the economy back to normal.
Confidence Crises
Consumer confidence had already weakened before the recent announcement of US trade tariffs. Consumer expectations of unemployment have also risen, signalling concerns over job security. The chart below shows the relationship between consumer expectations of unemployment and the unemployment rate itself. This chart suggests that warning signs are beginning to emerge, indicating that the US economy may be cooling down and we think this will become a key risk to economic growth over the coming year.
Consumer unemployment expectations and change in the unemployment rate
Source: Artorius, Bloomberg
The Risky Road Ahead
In a multipolar world, long-standing alliances are no longer immune to pressure. Countries in East Asia that were once firmly allied with the US, now find themselves cast as adversaries and having to negotiate tariffs in order to placate President Trump. As these global relationships change, countries are increasingly turning towards China. With its emphasis on economic pragmatism and a growing role in regional stability, China is now seen as a more viable partner than it may have been in the past.
In response to US tariffs, China and Germany have announced new policies aimed at supporting their economies. President Trump's tariffs on imports, combined with lower valuations outside the US, may pose both a valuation hurdle and economic challenges for US equities.
Mark Christie
Investment Analyst
*Any feedback provided can be anonymous
Important Information
All expressions of opinion reflect the judgment of Artorius at 2nd May 2025 and are subject to change, without notice. Information has been obtained from sources considered reliable, but we do not guarantee that the foregoing report is accurate or complete; we do not accept any liability for any errors or omissions, nor for any actions taken based on its content. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. Past performance is not a reliable indicator of future results. Nothing in this document is intended to be, or should be construed as, regulated advice. Artorius provides this document in good faith and for information purposes only. Reliance should not be placed on the information contained within this document when taking individual investments or strategic decisions.
Artorius Wealth Management Limited is authorised and regulated by the Financial Conduct Authority. Artorius is a trading name of Artorius Wealth Management Limited.
FP20250502001