Publisher’s note: Buckle up. It’s about to get rough

Early on, this High Point Market seemed surprisingly upbeat. Our market kickoff party was a well-attended success. (Thank you again sponsors.) Conversations in showrooms felt pretty good. “Buyers don’t want to talk about tariffs. They’re here to see product. We’re all in this together. Traffic down, orders up.” Yada yada. So for a while there, I felt surprisingly upbeat. Domestic producers with limited tariff exposure were having a good market. Canadian companies that are USMCA compliant were having a great market.

Then as it dragged on, I began to sense a vibe shift. Maybe it was partly driven by sleep deprivation, but things got darker. The stories I began to hear were about companies in distress, and the more exposed to China, the greater the distress. It became clear that there were already zombies in our midst. Smaller companies that were still walking, but already dead. They can’t accept new inventory waiting at the port, because it doubled in price while it was on the water. They just can’t afford it. New orders have gone to zero. They’ll sell their pre-tariff inventory and they’re done.

Larger China-centric companies with a stronger cash position are playing a waiting game. They’re parking inventory at the ports so tariffs can be postponed. They’re pushing containers to Canada to warehouse and wait out the storm. They’re hoping this is all settled by the summer markets so they can get back to business. I’ve seldom seen wishful thinking posing as strategy result in a happy ending. Translation: zombie adjacent.

Then I stopped for a minute to catch up on the macroeconomic feeds I follow. I watched Mark Schumacher’s excellent interview with Cary Davis, CEO of American Association of Port Authorities. You can filter through Davis’ political speak and focus on three words: “Off a cliff.” Zoom out from there and you get the picture. Domestic port traffic is down 15%-50%, depending on location. Port traffic departing from Asia, China in particular, is down to Covid levels.

The ripple effect of the shutdown in the flow of goods is impending scarcity. Big-box stores are warning of empty shelves in the coming weeks. That’s when it hits home. As we witnessed during the Covid winter, the American consumer doesn’t handle scarcity particularly well. Even if tariffs go to zero today — which they won’t — there will be a lag of weeks, even months, before trade flows normalize. We now have a huge pig that has to work its way through the snake. So pretty soon Joe six-pack won’t be able to find what he’s looking for at Walmart, and what is there will be considerably more expensive. Translation: plummeting consumer confidence.

This scenario will only be compounded as the tariff war with China drags on. Back-to-school and Christmas ordering starts now. The childhood chant of “No more pencils. No more books. No more teachers’ dirty looks” could take on a markedly different tone. Eighty percent of toys sold here are made in China. How’s Christmas going to be when you can’t find the kid his GI Joe with the kung-fu grip? Couple these macro indicators with the individual company stories I’ve relayed, and you start to see why I’ve gone dark here.

I would love to be wrong about all of this. I hope I’m wrong. If this is some three-dimensional chess match and I’m just too stupid to grasp the nuance, well that’s just wonderful. Please feel free to stop me at the next market and offer me a plate of crow. I’ll eat it feathers and all. But I don’t think so.

Even now at the shoreline, the water is receding. The wave is coming.