Ripples from the 145% China tariff

This inventory buffer won’t last forever. Once warehouse stocks deplete and remain unreplenished, consumers will face the inevitable choice between higher prices, alternative products, or nothing.

Meanwhile, many large-scale importers started employing a quieter strategy: moving shipments to bonded warehouses. These special facilities allow goods to be stored without paying duties until they enter U.S. commerce. By frontloading shipments and placing them in bond, companies can strategically release products while negotiating with suppliers or waiting out policy changes. This has artificially extended pre-tariff economics, but only really benefits large companies with the resources to leverage complex customs procedures. Small business owners like my friend Elenor Mak, founder of Jilly Bing dolls, are scrambling to maintain quality and price without the same levers bigger players have.

At the same time, businesses are accelerating what trade experts call “tariff engineering.” Chinese manufacturers were quick to accelerate the shift of their final assembly operations to Vietnam, Malaysia and other border countries to evade origin requirements. In early 2025, Chinese companies accounted for 30% of the new investment projects in Vietnam. These strategic relocations enable products to undergo minimal processing while still qualifying as non-Chinese before being imported into the United States. While this creates jobs in Southeast Asia, it rarely brings manufacturing back home.

Perhaps the most telling signal is our ports. The Port of Los Angeles, the busiest container port in the country and the primary gateway for Asian imports, is beginning to see the arrival of vessels that sailed from China in mid-April. In the coming weeks, inbound vessel traffic from China is down 44% year-over-year, driven by a wave of canceled sailings from the announcement April 11. At the same time, empty export containers returning to Asia are up by 23%, indicating an unusually large imbalance in trade flows across the Pacific. 

For U.S. exporters like California’s agricultural producers who last year exported $1.24 billion in perishables to China, reduced port volume means higher costs, lower capacity and greater waste. Due to this drop in port volume, trucking activity out of the Port of Los Angeles is down 23% year over year. What happens to the domestic trucking and warehousing industries when more than 700,000 loads evaporate over just three weeks? We are about to find out.

Rather than broad tariffs that disrupt more than they solve, more surgical approaches could have been deployed at the onset. The de minimis rule, which allows shipments valued under $800 to enter duty-free, has in the post-internet e-commerce era become a massive loophole exploited by Chinese e-commerce giants like Alibaba, Temu, Shein and ByteDance. U.S.-based Wish benefited from this loophole as well, all the way to IPO in late-2020. 

The Biden administration first proposed closing this loophole, which allows nearly 800 million packages annually to bypass normal import controls, but ran into resistance from lobbyists and political bottlenecks. The current administration announced April 2 it will end de minimis eligibility for China starting May 2 citing the opioid crisis, but this change on its own without blanket tariffs would have significantly improved domestic competitiveness in key categories without the far-reaching consequences now unfolding.

In the end, it is consumers, independent operators and small business owners who bear the heaviest burden of these economic policies. Higher prices, delayed goods and disappearing  margins are very real outcomes of overly generic strategies with unintended consequences that are too easily brushed off by some.

While the short-term damage is already done, the long-term pain can still be contained to months instead of years. If the goal is truly to rebuild domestic manufacturing, then we must invest — not cut — at every level, from workforce redevelopment to infrastructure to energy. We are past the point where throwing more quantitative easing at the economy can inflate away real problems. It is time for our policymakers to focus on the problem, not the headlines.

Annie Tsai is chief operating officer at Interact (tryinteract.com), early stage investor and advisor with The House Fund (thehouse.fund), and a member of the San Mateo County Housing and Community Development Committee. Find Annie on Twitter @meannie.