U.S. businesses and CEOs are stockpiling inventories, and some consumers are making panic purchases of high-priced goods due to potential tariffs under President Donald Trump. Austan Goolsbee, President of the Federal Reserve Bank of Chicago, warns that this rush could lead to artificially inflated economic activity.
Goolsbee highlights that precautionary purchasing is more evident in the business sector, with companies building inventories that might last 60 to 90 days amid uncertainty. This behavior could artificially boost economic activity in the short term but may lead to a slowdown in the following months.
Industries affected by Trump's tariffs, particularly the automotive sector, are likely to stockpile to mitigate the impact of potential tariff increases on imports. Many auto parts, electronic components, and other high-priced goods are manufactured in China and currently face a total tariff rate of 145% when imported to the U.S.
Trump's tariffs on many countries are currently in a 90-day suspension, replaced by a 10% baseline tariff on all imports. This suspension ends on July 9, after which tariff rates may be reassessed, adding to the uncertainty faced by businesses.
