US Hit by Tariff Boomerang, Layoffs and Trade Deficit Increase

Source
Korea Economic Daily

Summary

  • UPS announced plans to lay off 20,000 employees and close 73 logistics facilities due to the impact of high tariffs, indicating that employment reduction is becoming more pronounced.
  • The US's March trade deficit surged by 9.6% from the previous month, reaching a record high, indicating clear signs of an economic slowdown.
  • Apollo predicts that layoffs will spread across the logistics, manufacturing, and retail industries due to the tariff shock.

Trump Promised More Jobs...


'Economic Barometer' UPS "20,000 Layoffs

73 Logistics Facilities to Close in the US"

Largest Trade Deficit in March After Tariff Announcement

Shockwaves from Logistics to Manufacturing and Retail

Contrary to the Trump administration's policy of prioritizing job creation in the US, American companies are engaging in large-scale layoffs. UPS, known as an 'economic barometer' due to its ability to reflect economic trends first, has announced plans to lay off 20,000 employees, indicating that the impact of high tariffs on employment is becoming more pronounced. Additionally, despite the Trump administration's goal to reduce the trade deficit, March saw the largest trade deficit on record.

On the 29th (local time), UPS announced it would cut 20,000 jobs, equivalent to 4% of its global workforce, and close 73 logistics facilities in the US by June. This is due to the uncertainty caused by tariffs, prompting a rigorous restructuring. UPS has set a goal to reduce costs by $3.5 billion annually, concerned about weakening demand on the profitable US-China route. Since the US government imposed a 145% high tariff on Chinese products, the number of container bookings from China to the US has sharply decreased. Consequently, UPS's stock price has plummeted by 23% this year up to this day.

UPS is reducing low-profit logistics transactions first. The reduction in transactions with its largest customer, Amazon, is a direct reason for the layoffs. UPS announced it would halve the volume of orders from Amazon by June next year. UPS CEO Carol Tomé explained, "Amazon's volume is low-profit and does not fit with the UPS network." She added, "The world has never faced such a massive potential impact in the past 100 years," emphasizing that "cost reduction is an urgent task now that tariffs have emerged as a major uncertainty factor." UPS has decided not to provide a performance outlook (guidance) this year, reflecting the uncertainty.

Due to UPS's layoff measures, US asset management firm Apollo predicts that the tariff shock scenario it recently presented will become a reality. Apollo forecasts that container ship operations from China to the US will cease from early to mid-May, and by the end of May, truck transport demand in the US will halt, leaving store shelves empty. Consequently, layoffs in the logistics and retail industries are expected to follow in early June. There are also signs that the shock is spreading from logistics to manufacturing and retail sectors.

Despite the Trump administration's strong tariff measures, the US's March goods trade deficit surged by 9.6% from the previous month to a record high of $162 billion. According to the US Department of Commerce, exports increased by 1.2% from the previous month to $180.8 billion, while imports rose by 5% during the same period to a record high of $342.7 billion. Imports of consumer goods surged by 27.5% during the same period. Analysts attribute the increase in the trade deficit mainly to companies securing inventory before the tariffs took effect.

Signs of an economic slowdown are becoming more evident across the US economy. According to the US Department of Labor, the number of job openings in March hit a six-month low of 7.192 million. Consumer sentiment has also significantly weakened.

Reporter Lim Dayeon allopen@hankyung.com

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Korea Economic Daily

hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
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