Sunday Scaries 4/20/25: Resurrection of the Economy
Praying for the tariffs to pass over us all
Over the last 3 weeks since "Liberation Day", thousands of American businesses have been crucified on the altar of bad economic policy. After some initial volatility, financial markets have finally calmed. However, instead of suffering in silence, I have noticed the blood stains of small and medium-sized businesses (SMBs) becoming more visible for the world to see. Whether or not the economy recovers in three months or three years, depends on how quickly this crisis is resolved.
Similar to the supply chain disruptions we witnessed during the pandemic, a substantial portion of transcontinental trade has effectively ground to a halt. CNBC reported on this last week in an article titled - Trade War Fallout: Cancellations of Chinese Freight Ships Begin as Bookings Plummet. The article had a chart I witnessed go viral on Twitter, showing overall U.S. imports falling a sharp -64% the first week after the tariffs.
I think most people can easily imagine how bad it is economically when a bunch of importers suddenly cancel their orders. What I believe is less well understood, is the cascading ripple effect this cessation in economic activity causes across many businesses, some of which probably consider themselves “safe”.
The article goes on to highlight this fact. “The impact of the diminished freight container traffic to North America will be significant for many links in the economy and supply chain, including the ports and logistics companies moving the freight.”
What that means in layman's terms, is fewer imports will lead to “decreased crane operators at the ports, lower fees that could be collected, and declines in container pick-ups and transports by trucks, rails, and to warehouses for storage.”
Basically, a whole lot of businesses are going to be eating less, not just the importers.
One place where the anguish of business owners is starting to show up is Reddit. On the subreddit called “r/smallbusiness” - you can see for yourselves different owners freaking out in real time as they realize how much more their costs will go up due to the tariffs.
When I’m not scouring markets for new investments, I unwind with casual / retro video games. Anecdotally, I’ve noticed several SMBs that make retro game consoles have been broadcasting to their followers the pain the tariffs are putting them through. The tech site Gizmodo covered the phenomena quite well in their article “Trump Tariffs May Kill Super-Cheap Retro Handhelds—but They Won’t Kill What Made Them Popular”.
While the biggest manufacturers like Nintendo can come up with workarounds, smaller hobbyists who program DIY versions of classic games could see their businesses wiped out overnight.
For example, Gizmodo profiled the Anbernic RG35XX, a modern classic Game Boy-style handheld game, whose price would go from $50 to “over $90 to $200 at minimum”. These are not businesses where the customer can absorb an 80% – 300% price increase.
The website The Verge profiled another retro video game maker. But this time, it wasn’t necessarily the size of the tariffs, but the lack of details that hurt the business owner. The company RetroTINK, wanted to pre-pay their upcoming tariff bills, but ultimately had to cancel product shipments “due to lack of guidance on how tariffs will be collected starting May 2nd,” according to the company. “Without proper procedures in place, the risk of delays and lost packages is simply too high.”
I share these two examples to help you imagine the difficulties that thousands of SMBs across the country have been dealing with ever since the tariffs were announced. Large, public companies such as Amazon or Walmart have the financial resources to withstand a business disruption for 90 days. More modest-sized organizations will have to take more draconian steps to preserve cash, such as slashing marketing, raising prices and laying off workers.
This Sunday, I am less worried about financial calamity as I was in prior weeks. However, each week that goes by without a comprehensive trade deal with China, will only make the resurrection of the U.S. economy a more difficult miracle to achieve.
Here are some things to keep in mind for the week ahead:
Monday - 4/21: U.S. Leading Economic Indicators (March) from the Conference Board
Tuesday - 4/22: Tesla reports Q1 earnings - but we will NOT be covering it
Wednesday - 4/23: Purchasing Managers Index April (PMI report), along with new home sales (March)
Thursday - 4/24: Initial jobless claims (week ending April 19), and I’ll be following Alphabet (Google) and Comcast (CMSA) when they report Q1 earnings
Friday - 4/25: Michigan Consumer Sentiment Index for April
Good luck and be sure to check back here for more exclusive content!
-Accrued Interest