Tariff uncertainty are prompting businesses to make short-term decisions, which analysts warn could hinder sustained economic growth, reports CCJ magazine.
Analysts warn the whiplash from the Trump administration’s “back-and-forth” tariff policy is causing businesses to make significant responses to the environment with short-term decisions, losing out on long-term growth.
“We’re kind of in this fog of war,” said Jonathan Starks, CEO of FTR Transportation Intelligence, during its State of Freight webinar on Thursday. “There’s also a lot of fear out there, and that creates a bit of a crippling environment when it comes to making decisions.”
Bill Witte, chief forecaster at Witte Econometrics, said the situation is so unprecedented that his forecasts require a trigger warning as it paints a bleak outlook.
Avery Vise, VP of trucking at FTR, said FTR estimated U.S. tariff rate from 2% to 21% globally, driven by a 121% increase in tariffs on China. Canada, Mexico and the European Union saw a 12% rise.
“It seems inescapable that we’ll have some degree of inflation,” Avery said. FTR projects that the core inflation would surge sharply around 4%, before easing gradually.
The import environment has seen a drastic distortion, Avery said, as businesses pull forward inventory in anticipation of higher tariffs that will increase the price of imported goods.
“That’s the beginning of the effect of the tariff situation,” Witte said. “You don’t have the effect of the tariffs themselves directly [yet]. What you have is the anticipation of the tariffs, which has produced a large increase in imports.”
This has prompted FTR to project a downturn for the GDP Goods Transport Sector: down 8.4% in Q2, -4.9% in Q3, and continuing in negative territory through year-end.
In the automobile market, vehicle sales are expected to decline, following a surge in purchases of cars and light trucks, which reached their highest non-COVID levels since 2017.
“Auto production is not keeping up with sales,” Avery said, “So, it does raise some question because that’s almost certainly going to come down again [next quarter], and the question is, how are automakers going to respond to that?”
Vise said consumers likely rushed to buy ahead of anticipated price increases, and businesses ramped up equipment investments. In Q1, equipment investment saw a strong 23% quarter-over-quarter jump.
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