Odd Lots Podcast Summary: Episode Featuring Anna Wong on "Empty Shelves Are Coming Soon"

Release Date: April 25, 2025
Host/Authors: Joe Weisenthal and Tracy Alloway, Bloomberg

Introduction to Current Economic Concerns

Joe Weisenthal (00:56):
"Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Wiesenthal."

Tracy Alloway (01:02):
"And I'm Tracy Alloway."

The episode opens with Joe and Tracy discussing alarming trends in container shipping and the potential for significant material shortages originating from China. Joe highlights the recent cancellations of shipping orders, indicating an impending scarcity of goods.

Impact of Tariffs on Supply Chains

Tracy Alloway (01:24):
"We're kind of getting to the rubber meets the road portion of the tariffs... people trying to get ahead by building up their inventories before restrictions took effect."

Tracy explains that the initial surge in orders was a preemptive move by companies anticipating the new tariffs unveiled by the Trump administration on April 2nd. This buildup was unsustainable, leading to current order cancellations and fears of disrupted inventories.

Joe Weisenthal (01:24):
"One point of tariffs is to reduce our reliance on China... it looks like it's coming very sharp and fast and perhaps to a degree that's not even really about inflation per se."

Joe emphasizes that the swift implementation of tariffs aims to decouple from China economically, resulting in rapid changes that extend beyond mere inflation concerns, hinting at broader economic ramifications.

Expert Insights: Anna Wong on Empty Shelves

Introduction of Guest (03:15):
The hosts introduce Anna Wong, Chief U.S. Economist at Bloomberg Economics, to delve deeper into the possibility of empty store shelves during the upcoming holiday season.

Anna Wong (03:35):
"Many people have been talking about how based on the cancellation of shipments... suggests that there's a high probability that we may be seeing some empty shelves in the holiday season."

Anna discusses the decline in container bookings and imports from China and South Korea, stressing that the timing coincides disastrously with the critical planning and shipping period for the holiday season. She predicts disruptions in inventory for key retail periods like Christmas and Halloween, leading to reduced product variety and availability.

Price Dynamics Amid Tariff Pressures

Tracy Alloway (06:12):
"How much of that cost pass through actually makes it down to consumers... adds a sort of extra cushion for consumers."

Tracy explores the relationship between rising costs due to tariffs and their impact on consumer prices. She underscores the role of wholesalers in absorbing some costs, providing a buffer that may prevent immediate price hikes for consumers.

Anna Wong (06:45):
"Most of the Chinese tariffs have indeed been fully borne by the US side... another major part is China is going through a deflationary spiral."

Anna explains that importers have passed 100% of tariffs to U.S. importers, with some absorption at the intermediary (PPI) level but minimal impact on consumer prices (CPI). She attributes this to China's competitive domestic pricing and a deflationary trend within China, which offsets the potential for consumer price increases.

Economic Consequences: Investment, Unemployment, and Wages

Joe Weisenthal (10:44):
"By the way, yesterday, April 22nd in the newsletter I spotlighted this gap between prices received and prices paid..."

Joe references data indicating that profit margins are under significant pressure due to the tariff impacts, raising concerns about future investments and employment.

Anna Wong (11:27):
"When profit margins are squeezed... we are expecting investment to significantly slow down... unemployment is expected to rise to 4.8% by the end of this year."

Anna outlines the anticipated economic fallout, including reduced capital expenditures, increased unemployment rates, and declining real wages. She points out that sectors like travel and discretionary spending will face heightened disinflationary pressures as consumers cut back on non-essential expenditures.

Real-World Implications and Consumer Behavior

Tracy Alloway (16:13):
"How hard or easy will it be to actually start to rebuild inventories if we were to get some certainty on the substantial rollback on the tariffs."

Tracy questions the feasibility of inventory rebuilding amidst ongoing tariff uncertainties, highlighting the challenges businesses face in planning and restocking.

Anna Wong (16:13):
"Firms should be planning now for if they want goods to be on the shelf in October... there's a high probability outcome that we'll have empty shelves and lack of varieties."

Anna elaborates on the complexity of inventory management under uncertainty, explaining that the high risk of further tariff escalations discourages businesses from placing new orders, thereby increasing the likelihood of empty store shelves and limited product varieties.

Joe Weisenthal (19:23):
"... we don't know if the Trump administration is going to announce something completely different when it comes to tariff... day to day life when I go to the store is like pretty normal."

Joe observes the disconnect between the alarming economic indicators and the relatively normal consumer experience so far, noting that tangible signs of disruption may still be emerging.

Tracy Alloway (19:54):
"I’ve gotten an email from a company that sells fake flowers... saying that their prices are probably going to go up because so much of it is made in China."

Tracy shares anecdotal evidence of businesses beginning to signal price increases due to supply chain issues, indicating the early stages of consumer impact.

Looking Ahead: Potential Shifts and Long-Term Effects

Anna Wong (20:18):
"For anyone who will be having a broken AC system... nobody's importing any of those parts."

Anna predicts specific scenarios where consumers may begin to experience shortages, such as in essential home maintenance products, as imports dwindle.

Anna Wong (21:10):
"In the April, meaning next month we will get the April's import volume data... Start paying attention to that and you see that those three more left, two more left is dwindling with the increasing."

Anna advises listeners to monitor import data and product availability indicators (like stock levels on Amazon) as early signs of broader inventory shortages.

Disparate Impact on Businesses

Joe Weisenthal (22:59):
"There's been a lot of confusion up to now... the disparate impact that this will have on small versus big businesses."

Joe raises concerns about how smaller businesses may be disproportionately affected by tariff-induced costs compared to larger corporations, which can better absorb or negotiate these expenses.

Tracy Alloway (23:25):
"The scales seem very, very much tipped in favor of the big guys over the small... big businesses obviously do have some pricing power."

Tracy concurs, noting that big businesses like Walmart have more leverage to negotiate with suppliers and adjust pricing, whereas small businesses may not withstand the increased costs, potentially leading to closures.

Joe Weisenthal (24:11):
"... Anna's talking about empty shelves over the holidays. What is that?"

Joe humorously connects the discussion to cultural references, emphasizing the real-world implications of economic policies on everyday life.

Conclusion and Final Thoughts

Tracy Alloway (24:38):
"An exercise in austerity. Shall we leave it there?"

Tracy wraps up the discussion by framing the tariff-induced disruptions as a form of enforced economic austerity, signaling the end of the episode.

Joe Weisenthal (25:18):
"Thank you so much for coming on. Odd Lots."

The hosts thank Anna Wong for her valuable insights, concluding the episode with reflections on the potential long-term effects of the current trade policies.

Key Takeaways

1. Tariff Implementation: The sudden imposition of tariffs by the Trump administration has led to immediate disruptions in supply chains, particularly affecting imports from China and South Korea.

2. Empty Shelves Forecast: Due to canceled orders and reduced imports, there is a high probability of empty store shelves and decreased product variety during the upcoming holiday season.

3. Price Pass-Through Dynamics: While importers have fully absorbed tariff costs, the impact on consumer prices remains muted thanks to competitive pricing from China and price absorption by intermediaries. However, this is likely to change as pressure on profit margins intensifies.

4. Economic Ripple Effects: Squeezed profit margins are expected to slow down investments, increase unemployment rates, and decrease real wages, contributing to broader economic slowdown and disinflationary pressures in the services sector.

5. Business Disparities: Larger businesses are better positioned to handle tariff-induced costs, whereas smaller businesses may struggle, leading to potential closures and reduced market competition.

6. Consumer Experience: While current consumer experiences remain relatively normal, signs of disruption will become more evident in the near future, particularly through decreased stock levels and increased prices in specific sectors.

7. Long-Term Adjustments: The economy is likely to undergo significant adjustments, including a reallocation between goods and services prices and shifts in consumer spending patterns due to changing real wages and employment conditions.

Notable Quotes:

• Anna Wong (03:35):
  "There's a high probability that we may be seeing some empty shelves in the holiday season."

• Tracy Alloway (06:12):
  "How much of that cost pass through actually makes it down to consumers... adds a sort of extra cushion for consumers."

• Anna Wong (11:27):
  "We are expecting investment to significantly slow down in the second half of this year... unemployment is expected to rise to 4.8% by the end of this year."

• Anna Wong (20:18):
  "Nobody's importing any of those parts [for AC systems], and there will be more and more stories like that."

This episode of Odd Lots provides a comprehensive analysis of the immediate and projected impacts of recently implemented tariffs on the U.S. economy, emphasizing supply chain disruptions, potential shortages during key retail periods, and broader economic challenges that lie ahead.