Anna Wong: Empty Shelves Are Coming Soon

SPEAKER_2 (0:02)

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Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

Tracy, the number, one of the main things I'm watching right now are those container shipping numbers that at least looking out at the next few weeks, it looks like lots of actual orders are being canceled, and there is the risk of material shortage of things from China emerging in a fairly short period of time.

Tracy Alloway (0:45)

Yeah, I think we're kind of getting to the rubber meets the road portion of the tariffs, right? So everyone was talking about the potential of some sort of trade restrictions going into this year, because we knew that Trump had won the election and he wanted to do some of this stuff. And so what we saw broadly for the first quarter was people trying to get ahead of that. So building up their inventories, ordering a bunch of stuff before some of those restrictions were expected to get in. But of course that can only last so long. And on Liberation Day, April 2nd, Trump unveiled these really quite sweeping, quite dramatic tariffs as we all know by now. And so I think people are starting to get concerned that like now is when we're really going to begin to see some of that impact.

Joe Weisenthal (1:30)

That's right. So by the way, we are recording this April 23rd. It's 2:36 p.m. Yesterday, we got a little bit of softening and Trump saying, oh, it's not going to be 145 But then today we got stuff.

There's not going to be any unilateral concessions. We don't really know. There has been this little softening of the tone. But look, one point of tariffs is to reduce our reliance on China, to partially decouple, et cetera. But then when you look at the reality of, okay, well, that's what we're doing. We're decoupling. We're buying less. It looks like it's coming very sharp and fast and perhaps to a degree that's not even really about inflation per se. Because a year ago, people were talking about this in the abstract. What does the Fed get to inflation? People were talking about empty shelves of a lot of things.

Tracy Alloway (2:17)

Well, I think this is still a big question. Like I think there is some of this that could be attenuated by companies just choosing to raise their prices and maybe not order as many different types of things. But yeah, we are seeing some analysts start to talk about the possibility of empty shelves. And in fact, we're gonna speak to one now.

Joe Weisenthal (2:36)

That's right. We have the perfect guest. We are gonna be speaking with Anna Wong. She is our Chief US. Economist at Bloomberg Economics. Thank you for joining us, Anna. You tweeted about empty shelves in this sort of imminent term. What is the data you're looking at? And when would you expect to see people really start noticing it?

Anna Wong (2:56)

Yeah, Joe and Tracy, happy to be here again.

So, you know, many people have been talking about how based on the cancellation of shipments, and right now, we have, as you mentioned, we have seen plummeting container bookings. And already in April, the first two weeks of April, we have seen weekly imports data from China to US, even from South Korea to US, dropping very quickly. And typically, when we think about holiday season retail, which starts really with Halloween in October, the US companies should be planning right now, right? Usually they plan in the spring and then they start putting in the orders now, especially for items like toys and apparels and electronics for long lead time. And so in the summer, basically throughout June, July, August, is when China should be shipping these things to the US. So we are right in this period where all this planning has to happen, yet this is also when tariffs are implemented. So as a result, the basically the inventory for Christmas, for Halloween is already being disrupted right now. So even though it's still many months away and with the 90 day delay on the reciprocal tariffs, we are not, it's not until July 9th where we have, US firms have better clarity on whether these tariffs vis-a-vis other countries would be raised. And so basically it exactly fell on this planning and shipping and producing period for holiday season. So I think this is one reason why, just based on the high frequency data we have on the volumes, on the quantities, the dropping of it, and also just the timing of this period, it suggests that there's a high probability that we may be seeing some empty shelves in the holiday season. And even with less varieties, I basically consider that part of the empty shelves just having less varieties.