Economists have been predicting that retailers in the U.S. are likely to face pressure in the case of higher tariffs on China, as it is likely to “empty shelves” with a falling inventory-to-sales ratio.
What Happened: According to Torsten Slok, the chief economist at Apollo Academy, the inventory-to-sales ratio for retailers has fallen below the pre-pandemic level, sparking concerns about lower inventory as compared to the sales made by these retailers.
“The inventory-to-sales ratio for retailers was 1.5 before the pandemic, and now it is 1.3, see chart below,” the Apollo note stated.
Slok explained, “In other words, retailers will more quickly have empty shelves when goods no longer come in from China.”
This sentiment was also echoed by senior economist Mohamed El Erian in an X post. According to him, the ongoing high-level talks between China and the U.S. in Geneva, Switzerland, are likely to provide clarity on many concerns.
He highlights China’s “appetite for pain” and America’s fear of “empty shelves” as the primary matters that …