Tariffs spark slowdown as US firms, consumers brace for economic pain

SACRAMENTO, the United States -- A new research published on Saturday warned that sweeping US tariffs are triggering a sharp economic slowdown, with both businesses and households feeling the pinch as prices rise and confidence falls.

Apollo Global Management, one of the world's largest investment firms, said in the report that the United States is facing a self-inflicted economic downturn because of new import tariffs, especially for goods from China.

The tariffs were designed to protect American industries, but business leaders and economists warned that the costs are being passed on to consumers and causing companies to cut back, according to the report, led by Apollo's chief economist Torsten Slok.

"Executives in transportation, food service, and consumer goods are all reporting recessionary conditions and heightened consumer caution," Slok wrote in the report, citing comments from leaders at Southwest Airlines, Chipotle and PepsiCo, who all said they saw signs of a slowdown.

Firms across the country are reacting quickly to the changing environment. Many have lowered their earnings forecasts, with Apollo noting that the downward revisions are the sharpest since 2020. Companies are also slashing their investment plans and reducing orders for new equipment, as they prepare for a period of weaker demand.

One sign of trouble is the surge in inventories.

Businesses rushed to import goods before the tariffs took effect, leading to warehouses filled with unsold products, but with consumer demand now slowing, those inventories are piling up. Truck sales had dropped, and the Logistics Managers' Index, which tracks the health of the shipping industry, was also falling, Apollo said.

Trade between the United States and China was slowing dramatically as the number of shipping containers leaving China for US ports had dropped, raising concerns about empty store shelves and shortages of everyday items, Apollo said, adding that container freight rates were also falling, a sign that demand for shipping was down.

Furthermore, Apollo found that consumer confidence had dropped to record lows across all income groups as Americans were worried about the future, with many expecting business conditions to get worse and unemployment to rise.

Some households tried to beat the tariffs by making big purchases before prices went up, but spending had since slowed, especially on non-essential items like travel and dining out. "A record-high share of consumers expect business conditions to worsen and fear rising unemployment," Slok wrote.

International tourism to the United States was also falling, especially from Europe, further hurting industries like hotels and restaurants. Las Vegas, in Nevada, which relied heavily on both domestic and international visitors, was already seeing fewer tourists and lower hotel occupancy rates, according to Apollo's data.

Apollo found that financial stress rose for many families as well, saying more people made only minimum payments on their credit cards currently, and late payments were increasing. Cash purchases of homes are also down, suggesting that even wealthier buyers are becoming more cautious.

Apollo's analysis warned that the United States faced what economists call "stagflation" -- a mix of slow economic growth and rising prices. Stagflation is always a difficult problem for policymakers because it limits the Federal Reserve's ability to lower interest rates to boost the economy without making inflation worse.

"The risk of a US recession has risen sharply, with Apollo's leadership estimating the probability at 50 percent or higher," the report said. The firm's economists explained that the tariffs were not only affecting trade with China, but also straining relations with Europe and other partners.

If the situation continues, Americans could soon see empty store shelves and higher prices for many products, the report warned.