Barbies and Pencils

 People who are paying attention are worried about the effects on the U.S. of the Trump tariffs on China. Just today the White House floated the idea of reducing them from the present 145% to 80%. That level would still be crippling to trade. Administration officials have made public statements about children not needing so many dolls or pencils, but that’s beside the point.

If you want, you can see the effect for yourself. Here’s a link to an international ship tracking site, with the focus on the Port of Los Angeles.   Each arrow is a ship. This port should be swarmed with container ships from China, but it is a maritime ghost town. Compare to the Port of Shanghai. 

There’s roughly a 30 day transit time between the Chinese coast and the U.S. west coast, so given the timing of the tariffs, this makes sense. For a standard container ship it’s another two weeks to the Port of Houston and another ten days beyond that to New York City. The final run of normal shipments from China should end around the beginning of June.

As the title says, it’s not just Barbies and pencils. China produces a large percentage of the world’s Active Pharmaceutical Ingredients (API). Those are the chemical compounds that do the actual work in a prescription or over the counter drug; the ibuprofen or hydrocortisone or penicillin itself. From Drug Patent Watch:

“For the United States, China supplies approximately 17% of API imports but only around 6% of overall pharmaceutical imports15. However, these aggregate statistics mask important variations across product categories. For certain essential medications, particularly older generics with thin profit margins, dependency on Chinese APIs may approach near-totality.”

For some OTC drugs, China has essentially a monopoly.

 

(Credit: Apollo Academy )

Even a 17% drop in API supply would create critical shortages. China also is a major source of medical instruments and supplies such as syringes and sterile coverings for diagnostic instruments. They sold us about $15 billion of that equipment annually as of 2024. They sell us the majority of our supply of nitrile gloves.

There is the issue of circuit boards. These are sheets of insulating material with patterns of electrically conductive material printed on them and various electronic components soldered to them. They are in everything from your coffee maker to your car, as well as agricultural equipment, industrial controls, and consumer electronics. China has 43% of the world market. I am thinking about the complex nature of modern ag equipment such as combines for harvesting wheat and corn. What happens to a farmer in the Midwest when a circuit board in a combine fails during harvesting and there are no replacements? It’s hard to analyze what devices have Chinese circuit boards and which of these is an annoyance versus a crisis. Even industries with a robust presence in the U.S. have digital controls running on Chinese made circuit boards.

While I’m on the subject of agricultural equipment, John Deere has a lot of production facilities in China.

And then there is manganese, a mineral absolutely necessary to steel production. It is also an element of modern battery chemistries. There is no domestic production of manganese in North America. The U.S. and Canada mined out all the good ore by 1970. 70% of our supply comes from China. That will be hard to replace. Likewise the obscure mineral scandium, used in high strength aluminum alloys for aerospace. We get 68% of our imported scandium from China, with no domestic production. I will stop here on the rare earth minerals, but they are coming mostly from China and they are essential to a number of industries.

I don’t have any precise conclusions about which portions of our economy are the most vulnerable to a cutoff of trade with China. It seems as if vital bits of almost every sector are reliant on Chinese imports. For example, we get about 7% of our fasteners (nuts and bolts, rivets, screws, etc.) from China. Not a majority of our supply by a long shot, but a sudden 7% deficit will disrupt the market.

As I noted above, the flow will stop in the beginning of June. Modern economics is about financial efficiency rather than resilience, so there is generally the least possible inventory of finished goods, parts and materials. We’ll feel the effects within the month. I’ll bet there will be sudden backtracking on tariffs. Even so, the travel time across the Pacific is still there. Even if the Trump administration reverses itself by the end of June, and the Chinese decide to play nice, *and* the Chinese manufacturers jump right on the shipping again, it will be early August before a container ship reaches the Port of Los Angeles. And that would be with a one or two month backlog to be made up. It would be September before ships started arriving on the east coast. That’s an absolute best case scenario.

I don’t know what to tell you to do because I don’t know exactly what will be affected and by how much. Some of everything. Do what you can to prepare for a recession. Prepare for shortages of pharmaceuticals, especially over-the-counter and generic. Expect high prices for a lot of ordinary consumer goods. Expect a lot of Trump voters to say “I didn’t vote for this!” Prepare to say, “Yes. yes, you did. You absolutely did.”