Greetings from Copenhagen.

The tariff test awaits this week, with both ISM Manufacturing and NFP on the line Wednesday and Friday, which are expected to show the first signs of tariff-implied weakness in economic data.

We’ve been all over how the effective pause in trade between China and the US has unfolded in official container shipping data, and we’ve returned—within a matter of 2–3 weeks—back to pre-frontloading levels. From a rate-of-change perspective, this looks a lot like previous trade lockdowns (read: the pandemic).

We’re starting to see early hints of US wholesalers and retailers attempting to resume trade, with Walmart, Target, and the like reaching out to Chinese suppliers to restart shipping—pledging to pay the full tariff themselves, but likely with the condition that the tariff is billed when the shipment reaches the US. That would leave a period of 40–50 days where they can still negotiate a lower tariff rate.

Given the uncertainty around how long it takes before US domestic shipping activity (truck deliveries etc.) is hurt by the slump in shipments from China, there’s both 1) a time lag between when shipments leave China and arrive in the US, and 2) a domestic time lag between when shipments are received at ports and delivered to end destinations. It’s hard to pinpoint exactly when the weakness will show in official data—but based on what we’re seeing in regional soft data, it’s coming soon.

Chart 1: Container Volumes from China to the US