What will we get for the holidays? Empty shelves

Remember late 2021, when COVID-snarled supply chains left Americans scrambling for everything from dolls to decorations?

If the tariff turmoil continues, we could be there again this holiday season — if not before.

When Walmart Inc. and Target Corp. last week warned President Donald Trump that shelves could be empty for their peak trading period, they weren’t exaggerating.

Of course, the reasons for the scarcity are different this time around. In 2021, factory shutdowns and port congestion collided with soaring demand. The new shortages will be precipitated by Trump’s trade war and by retailers themselves, who are likely to decide that a 145% levy on Chinese goods will make many products too expensive to bother carrying.

First the good news: Food, some of which is already caught up in nontariff related shortages and price spikes, will be less affected than most other major categories. That said, some staples could become harder to find; for instance, the majority of the world’s dried garlic comes from China. And prices for others, such as fresh produce from Mexico, could rise.

The biggest impact, though, will be the types of categories that carry retailers through their major sales periods: Back-to-School, Halloween, Black Friday and the winter holidays.

While many manufacturers spent the last 15 years or so years moving production out of China and into countries such as Vietnam, Bangladesh and Cambodia, there still some critical areas where Chinese factories excel and dominate. The most significant for the upcoming seasons is toy production. About 80% of American supply comes from China, according to the Toy Association, which represents the U.S. industry.

In order to reach stores in time for the holidays, toys are manufactured in April, May and June, says Frederique Tutt, global toy industry analyst at research group Circana. But around 80% of midsize toy companies say they are delaying or canceling orders, according to a survey by the Toy Association. That means that even if the tariffs were to be dropped tomorrow, Santa won’t be bringing some items.

And the shortages could extend far beyond toys. Some clothing retailers are also putting orders on hold. While much production, particularly of lower-priced garments, has moved to Bangladesh, China is still the dominant player when it comes to items including coats, jackets and knitwear in the mid-market, such as at department stores. That could hurt back-to-school shoppers and those looking to freshen up their wardrobes when cooler weather returns.

In fact, back-to-school will likely be the first major shopping period to feel the squeeze. Cargo shipments from China to the U.S. have already plummeted, perhaps as much as 60%, according to Bloomberg News. This reflects not only paused ordering, but also some retailers holding stock in China in the hope that tariffs will eventually be revoked or reduced.

Then come the fall and winter holidays, with those giant plastic skeletons, jack o’lantern trick-or-treat buckets, Thanksgiving table decorations, Christmas tree trims and other seasonal decor.

Electronics are exempt at the moment, but if that changes — and it could — then you can forget those Black Friday doorbusters. Retailers have already given a broad indication of how many TVs and gaming systems they intend to buy, but orders will need to be firmed up in the next three months.

To navigate the chaos, expect retailers to dust off their COVID-era playbooks and begin narrowing their product assortment, concentrating on items they can sell at a reasonable price and decent margin. The best case scenario is less choice. The worst, empty shelves.

There may be other contingency plans. For many items, it’s probably too late to switch the entire production process from China to other Asian countries or the U.S. in time for the holidays, but this will undoubtedly be on the agenda in the future if the current regime continues. More products could be finished and packed in the U.S.; tariffs are charged on the wholesale price when an article enters the country, so importing them earlier in the process could reduce the levy. It’s not clear whether this will be permissible, but it’s worth exploring.

Stores will also be scouring stockrooms and warehouses for any unsold Halloween and holiday items from previous years. Usually, holding on to old stock is unhelpful as it bloats costs and typically requires discounting to move. The fact that it could be an advantage this year is a sign of just how unusual a situation retailers are facing.

Ultimately, even if the trade war is soon resolved, retailers could face another COVID-era headache: a tsunami of late-arriving product.

Restarting production in the not-too-distant future should be manageable for some holiday items. But it’s more of a risk for categories like fashion; imagine those heavier winter jackets rolling in just as temperatures rise.

This is exactly what happened in spring 2022, when delayed holiday pajamas and bikes left retailers with a mountain of inventory that had to be heavily discounted. At the time, the tardy arrivals coincided with soaring inflation. Today, the hitch could be demand; consumers are already starting to behave as if the economy is in recession.

Either way, retailers are facing a blast from the past. While they might like to dig into their archives for vintage toy or fashion designs, this is one retro trend they would rather skip.

This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry. Previously, she was a reporter for the Financial Times.