With President Donald Trump threatening a “straight” 50% tariff on the European Union and at least a 25% charge on iPhones and other handsets manufactured elsewhere, attention was once again focused on U.S. supply chains as the Memorial Day weekend approached.
In an early social media post, Trump stated that he was thinking of implementing the new EU fee as early as June 1 because negotiations with the EU “are going nowhere!” This caused the stock market to plummet even more, resulting in significant weekly losses for all three of the major equity-market indices, SPX DJIA COMP.
Trump reiterated his warning against the European Union Friday afternoon, saying that his 25% tariff would be applied to “anybody” that makes cellphones overseas, including Samsung (KR:005930) and Apple Inc. (AAPL), most likely in late June.
Despite early excitement about a possible second wave of tax frontloading following a 90-day U.S.-China freeze on some tariffs agreed upon earlier in May, shipping activity from China to the U.S. has dramatically decreased, marking the beginning of this new chapter in the hot-and-cold Trump trade battles.
See: The suspension in China tariffs reduces the likelihood of empty U.S. shelves, but investors should be aware of the catch.
Apollo Global Management senior economist Torsten Slok stated on Friday that any recovery in Chinese shipping doesn’t appear to be happening just yet, citing intraday-updating container-ship statistics.
Furthermore, according to Bloomberg data, the Baltic Exchange’s dry bulk sea freight index was around 1,340 on Friday, below its average of 1,763, indicating that rates for shipping products by sea do not indicate a global surge in demand.
Slok told MarketWatch that one reason for the decline in shipping from China to the United States could be because American businesses aren’t prepared to put in new orders just now, particularly in an environment where tariff policies are subject to change at any time.
Additionally, he said, companies may have enough inventory on hand to last for a long, which would reduce the demand for fresh purchases, or container ships may be entering the United States from other nations.
The Port of Los Angeles’ cargo activities supported the U.S. frontloading of Chinese inventory, a common topic in first-quarter financial reports. However, the port has not yet been overrun by ships from other parts of Asia.
In a conference on May 19, Port of Los Angeles executive director Gene Seroka stated that activity at the port was up roughly 9.5% in April compared to the same month last year. As many merchants sought “a last push of cargo” before tariffs took effect, it was a part of a 10-month trend of continuous annual growth.
However, Seroka reports that the situation has deteriorated in May, with 17 of the 80 scheduled sailings for the month canceled and a further 10 for June.
Higher tariffs already in place in 2025 have crushed U.S. agricultural and manufacturing exports and are expected to prevent a boom of incoming business at the L.A. port, Seroka said, adding that bookings from Singapore, Hong Kong, and other ports were beginning to pick up.
“What probably comes out of this are lower inventory levels across the board, less selection for American consumers and maybe higher prices,” he stated.
The price of rerouting
Although equities have quickly recovered from their April lows, Slok has been cautioning investors that tariffs might keep inflation pressures high and harm American businesses and the economy more than that might appear.
After the United States and the United Kingdom announced a new trade agreement in early May that contained 10% tariffs, stocks jumped. Despite the uncertainties surrounding tariffs, companies reported first-quarter earnings that were largely upbeat but cautioned about the pain ahead.
Read: Here is the current status of Trump’s tariffs as he threatens new European Union and phone manufacturers
History suggests they may have good reason to be concerned. According to a recent research for the Federal Reserve Bank of Atlanta, maritime trade data from Trump’s first term indicates a nearly 30% drop in trade from China to the United States between 2017 and 2023, but there are also substantial expenditures related to redesigning supply networks.
As with the rest of the globe, activity from other parts of Asia to the U.S. increased during Trump’s tariff campaign in 2018–19.
That significant change in supply chains, though, wasn’t cheap or quick. According to the Fed analysis, it took businesses an average of 21/2 years to reroute shipments by forming new trade partnerships and securing finance.
According to the report, it also cost each company an estimated $1.9 billion, or roughly 5% of yearly sales income.
EU bloc
Although the European Union enjoyed a trade surplus of about $225 billion with the United States last year, Barclays claims that some of the 27 member states have more at stake.
According to a note released on Friday by a Barclays equity research team, Germany, Ireland, and Italy are the EU member states that export the most goods to the United States. Chemicals, mostly used in pharmaceutical items, machinery, and vehicles, are among the major exports from the EU.
Oxford Economics’ team came to the conclusion on Friday that a 25% smartphone charge and a possible 50% tariff on EU goods would raise the average effective tariff rate from 15% to 19%, but they cautioned that the number might yet climb.
“With the economic outlook less bleak than it was a month or two ago, the risks are that the Trump administration is emboldened to ramp up tariffs again, which would add to the drag on economic growth in the second half of this year,” the team stated.
According to Dow Jones Market Data, the Nasdaq Composite Index COMP plummeted 2.7% and the Dow Jones Industrial Average DJIA loss 2.5% during the week’s trading sessions, while the S&P 500 index SPX fell 2.6% for the week, its largest weekly decline in seven weeks.
