“Recession and stagflation risks are rising with tariff uncertainty,” Schenker said in a statement. “U.S. consumer confidence has recently fallen, while consumer inflation rates remain elevated. The prospects for Q1 2025 U.S. gross domestic product are currently negative, while year-on-year inflation rates are above the Fed’s 2% target.”
In fact, Schenker said the Atlanta Fed’s growth forecast for the nations’ gross domestic product (GDP) says that first quarter growth is likely to be -3.7% based on data available as of April 1. That would be an extraordinary mark if it occurs, since U.S. quarterly real GDP rates have only been at or below -3.7% in eight quarters over the past 50 years.
In reaction to the difficult new trade conditions, American supply chains are scrambling to contain the impact of higher costs from the tariffs through strategies such as shifting final product assembly operations to the U.S., according to an analysis by Moody’s.
“In the crucial area of cost management, U.S supply chain organizations have little room to maneuver, as tariffs drive prices and costs up across the board,” Andrei Quinn-Barabanov, Supply Chain Industry Practice Lead at Moody’s, said in a release. “With their hands tied on rising costs, supply chain professionals should focus on R&R – reliability & resilience of their existing supply base. Supply chain leaders can use forward-looking risk indicators to identify and collaborate with at-risk suppliers in order to enhance these suppliers’ reliability and resilience.”
Another way the new tariffs are costing American businesses money is through the increased cost of planning new strategies to cope with the disruption, according to a statement from Aman Khan, a partner at the management consulting firm Kearney.
That extra planning has already led to lost productivity as managers have been distracted from normal business tasks by new scenario modeling, legal and regulatory reviews, pricing revisions, forecast adjustments, supply chain rewiring, supplier renegotiations, capex reprioritization, customer discussions, and countless meetings, he said. Tallied together, Kearney estimates that tariff uncertainty has cost the top 2,000 U.S. nationals 2 million working hours per week, amounting to $10 billion lost annually. And extended to small and medium enterprises, the economic impact in the U.S. alone is estimated to exceed $100 billion per year, the firm said.
Retail and manufacturing groups sound alarm bells on tariff impacts
Trade groups for companies in the retail and manufacturing sector are sounding similar warning bells. While some groups acknowledge that the White House may be using its tariff threats as leverage to negotiate better trading terms for U.S. businesses, they said the speed and scope of the new terms have been too extreme to allow American importers enough time to react.
“We encourage President Trump to hold trading partners accountable and restore fairness for American businesses without creating economic uncertainty and higher prices for American families,” National Retail Federation (NRF) Executive Vice President of Government Relations David French said in a release. “The immediate implementation of these tariffs is a massive undertaking and requires both advance notice and substantial preparation by the millions of U.S. businesses that will be directly impacted.”
And without having sufficient time to find new suppliers and manufacturers to cushion the economic blow of the tariffs, U.S. companies have no option but to pass along those new costs to American consumers. “Tariffs are a tax paid by the U.S. importer that will be passed along to the end consumer. Tariffs will not be paid by foreign countries or suppliers,” French said.
A nearly identical message came from The Retail Industry Leaders Association (RILA), which said: “The American people are counting on President Trump to grow the U.S. economy and end inflation. Unfortunately, the President’s plan for universal tariffs on household goods – including clothing, groceries, home goods and school supplies – will raise costs on every American family.”
The tariffs could trigger even worse outcomes in the long term, said RILA Senior Executive Vice President, Public Affairs Michael Hanson. “These newly announced tariffs — and the expected retaliatory tariffs on American businesses — risk destabilizing the U.S. economy, undermining the goals of bolstering domestic manufacturing and growth. We urge the President and his economic team not to abandon the pro-growth policies that powered his first term — namely the Tax Cut and Jobs Act. Before lasting damage is done to the economy and family budgets, we urge the White House to reconsider its course.,” Hanson said.
Likewise, the National Association of Manufacturers (NAM) said the tariffs are simply too large for American manufacturers to cope with. “Needless to say, today’s announcement was complicated, and manufacturers are scrambling to determine the exact implications for their operations,” NAM President and CEO Jay Timmons said in a release. “The stakes for manufacturers could not be higher. Many manufacturers in the United States already operate with thin margins. The high costs of new tariffs threaten investment, jobs, supply chains and, in turn, America’s ability to outcompete other nations and lead as the preeminent manufacturing superpower.”
The American Apparel & Footwear Association (AAFA) also expressed concern. “To be clear, tariffs are taxes borne by the American companies that import the goods and the hardworking American families that buy those goods,” Steve Lamar, President and CEO of AAFA, said in a release. “While we welcome President Trump’s focus on reducing foreign trade barriers, we need to reduce America’s high trade barriers as well and do so in a predictable manner that enables long-term investment and supply chain decisions. For companies that had been in a ‘wait and see’ mode, the chaos of the last few months, coupled with the confusion from today’s announcement has only created more uncertainty.”
