The trade collapse between China and the US is creating an unstoppable domino effect: "We'll see empty shelves in a few weeks."

To date, the trade war between the US and China has primarily had consequences on financial markets. The outrageous tariffs between the two powers have battered global stock markets and bond markets , but the economy has barely felt the pinch (for now) . However, companies and analysts have already begun to see the storm on the horizon, and it doesn't look good: empty store shelves, inflation, and recession are the three components of this storm looming over the real US economy. Furthermore, this complex situation has another side (the other side of the coin): China has begun to reduce production in its factories, which is leaving a portion of Chinese employees jobless (with fewer working hours, at least). The trade war is already damaging the real economies of the world's two largest powers, which will undoubtedly impact global GDP.

Donald Trump's trade war with China, which began in February with an initial 10% tariff for its failure to cooperate against fentanyl trafficking, has now racked up tariff increases of up to 145% . While these moves have certainly shaken Washington and Wall Street, the real impact is about to be felt in stores and supermarkets across the US.

Retail giants like Walmart , Target , and Home Depot recently warned Trump that if the situation persists, Americans will face empty shelves and higher prices, especially starting in mid-May, when thousands of companies will need to replenish inventory.

Apollo Management's chief economist, Torsten Slok, has even warned of "Covid-like shortages" and a possible "job collapse" in sectors such as transportation, logistics, and retail. "We will soon see empty shelves," says this expert. The "blank sailings" (cancellations of voyages) of large Chinese container ships bound for the US, as well as images of some of these vessels sailing almost empty , are beginning to be the first indication.

According to Bloomberg , imports from China may have already fallen by as much as 60%, a decline that has not yet fully reached consumers but will begin to be felt drastically in a matter of weeks. The paralysis is already visible in ports: the number of ships sailing from China to the US has fallen by 40% since the beginning of April, according to data compiled by the financial news agency.

Shipping companies, such as Hapag-Lloyd, have reported cancellations of up to 30% in cargo bookings from China, while exporters in Vietnam, Thailand, and Cambodia are trying to meet some of the demand. However, the magnitude of the logistics gap is such that shelves could remain unstocked until Christmas, the report warns, according to information published by the prestigious North American agency.

On the other side of the equation, in China, things aren't much better. Companies have begun to reduce their production and labor demand, which doesn't bode well: " I know of several factories that have ordered half their employees to go home for a few weeks and have shut down most of their production," Cameron Johnson, senior partner at Shanghai-based consulting firm Tidalwave Solutions, told CNBC .

"Although it's not yet on a large scale, it's occurring in the major export hubs of Yiwu and Dongguan, and there are concerns that it could spread," Johnson added. "There is hope that tariffs will be lowered so orders can resume, but in the meantime, companies are furloughing employees and halting some production." For now, the damage appears to have been done, at least partially.

In the US, "there's a fundamental fear that we're on the cusp of going back to conditions like 2021 or 2022 , where inflation is out of control and costs are on everyone's mind," Chicago Federal Reserve President Austan Goolsbee told the Economic Club of New York last week. Manufacturers are telling Goolsbee that "this may take us back to the 2020 experience, with supply disruptions and not being able to get components ," the official added.

Senior White House economic officials believe the pandemic exposed a national security threat—the fragility of US manufacturing supply chains—that was already being considered during the Biden administration. The difference is that the Trump administration claims the impact justifies an aggressive tariff policy. It's a kind of "stick" to encourage companies to produce domestically. However, the pandemic also exposed the economic damage that can occur when manufacturers can't obtain key inputs from abroad and there's no domestic capacity to substitute them. Tariffs threaten a repeat of this situation.

Even if Trump were to ease the tariffs in the coming weeks, the revival of trade would bring new problems. "There will be a collapse in ports and in road and rail transport , creating delays and bottlenecks," warned Lars Jensen, CEO of Vespucci Maritime. Ports are designed for stable flows, not for the massive disruptions and restarts that would occur if there is a trade truce.

The timing of the impact couldn't be worse. April is the month when suppliers begin shipping goods for the back-to-school and Christmas seasons . Toy maker Basic Fun, which sells to Amazon and Walmart, is "paralyzed," according to CEO Jay Foreman, who called the tariffs a "de facto embargo." Foreman warned that if the trade embargo persists for a few more weeks, customers will begin canceling orders en masse.

The domino effect will be difficult to contain. The World Trade Organization warned that bilateral trade between China and the US could fall by up to 80%, while Treasury Secretary Scott Bessent called the situation a "full-blown trade embargo." Bloomberg estimates that imports will fall at an annualized rate of 7% in the second quarter, the largest decline since the start of the pandemic.

The tariffs will be a negative shock to US supply , permanently slowing productivity and output growth and temporarily increasing price pressures, the International Monetary Fund ( IMF ) warned reporters earlier this year as part of its latest forecasts. Combined with weaker growth, inflation will be around 3% this year in the US, about a percentage point higher than January's estimates, the IMF added.

Commerzbank: "If neither side (the US or China) gives in, the US economy faces a severe negative supply shock."

"Due to the tariff changes, the US economy is facing a significant supply shock , putting the Fed in a difficult position . Should it even react—policy could change this week—and which of the two opposing effects of increased tariffs (higher prices, lower growth) should be given more weight in the assessment?" ask analysts at Danske Bank. "So far, the Fed has remained patient in its assessment, and we expect this stance to continue until June, when we anticipate the next 25 basis point interest rate cut ," they answer. This scenario could lead Trump to turn against the central bank again, worsening the situation after his swift backtracking on the idea of ​​firing Jerome Powell.

Although Trump has so far left Powell alone and is sending clear signals of his desire to negotiate with China, the race to the bottom with Beijing has analysts in a remarkably pessimistic mood, which may make the photographs of empty supermarket shelves more than just an anecdote.

"Like the US government, Chinese leaders are likely to view the trade conflict as a conflict between the state and social systems. This means that the question of who will give in first comes down to which side is willing to inflict the most damage on its own economy. Call me stubborn, but I consider it fundamentally dangerous to bet against China's willingness to suffer and make sacrifices . However, if neither side gives in, the US economy faces a severe negative supply shock , while the rest of the world faces a positive one," concludes Ulrich Leuchtmann, analyst at Commerzbank.