In a recent note, RSM chief economist Joseph Brusuelas has warned of a potential tariff-induced recession, which could begin on the coast, leading to increased inflation and unemployment.
What Happened: Brusuelas expressed concern that inconsistent tariff policies could set off a recession, originating from the Los Angeles docks. About 22% of U.S. jobs are tied to transportation, warehousing, and trade, making import container volumes at Los Angeles and Long Beach ports a key indicator of economic activity and growth, as Brusuelas explained in a detailed note at RSM Real Economy.
He characterized President Donald Trump‘s tariff decision as a “misapplied consumption tax” that could prematurely halt economic expansion. Brusuelas predicts that the impacts of these policies will initially be felt at the ports, before permeating the rest of the economy. He foresees a decline in imports, resulting in higher consumer prices and reduced income for dockworkers, truckers, and other supply-chain-related occupations.
The economist also highlighted previous events that disrupted supply chains and caused economic damage, such as the 2018 trade war, the 2020 pandemic, and China’s 2022 zero-COVID policy. Brusuelas anticipates a rise in unemployment among dockworkers before it extends to other supply-chain workers, and an increase in prices due to a goods shortage.
“This has all the markings of yet another trade shock, resulting in a loss of employment and household income that will push the U.S. economy into recession,” Brusuelas wrote.
Why It Matters: The impending tariffs have already led to a sharp decline in trade volume, with several major U.S. retailers suspending all shipments from China, according to Gene Seroka, executive director of the Port of Los Angeles, who spoke to CNBC last week. Seroka previously stated that dock workers will be the first affected, facing reduced overtime and eventually fewer regular hours.
Federal Reserve Chair Jerome Powell has also cautioned about the threat of stagflation—a harmful mix of high inflation and sluggish economic growth—stemming from the administration's tariff policies. These tariffs pose a dual risk: driving up inflation while simultaneously dampening economic momentum.
Brusuelas shares these concerns, emphasizing that tariffs jeopardize the Federal Reserve's dual mandate of price stability and full employment. Retailers are projected to maintain full inventories for only five to seven more weeks, after which product variety will decline.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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