The economy is already showing trade-related strains. What’s ahead?

In the early weeks of the new administration, President Donald Trump has already levied two rounds of 10% tariffs on China, plus 25% tariffs on all imported cars and certain auto parts including engines, transmissions, and electrical components that will start April 2. He’s also issued 25% tariffs on steel and aluminum imports, hitting America’s closest trading partners—and throwing into question the U.S.-Mexico-Canada trade pact he crafted in his first term.

Targeted countries have prepped retaliation plans, though many are trying to calibrate their response in hopes dealmaking can reduce the size or scope of tariffs.

In the back-and-forth nature of tariffs, with some being lifted or paused, and then reintroduced, investors and companies are left scrambling to create a game plan. The confusion is showing up in varied places—and raising concerns the uncertainty itself could hurt the economy.

Take imports of industrial supplies and consumer goods, which have spiked sharply in recent months as companies try to get ahead of tariffs. That type of hoarding will impact pricing and could hurt quarterly results if some companies have to write-down miscalculated inventories, said Wendy Edelberg, director of the Hamilton Project and senior fellow of economic studies at Brookings.

“For some of the import data for raw materials and industrial inputs, ]we had to redraw the charts as the spikes are bigger than what we even saw in 2020-2021 during the surge created by the pandemic recovery," Edelberg told Barron’s.

Even some reprieves aren’t offering much relief. The Trump administration decided to exclude tariffs on goods covered by the U.S.-Mexico-Canada-Agreement, such as textiles and apparel, for a month. But analysts say companies are facing trouble getting goods across the border amid confusion of what exactly is excluded and lack of documentation on that front.

The result: Goods are piling up at ports.

Even as countries employ a more calibrated approach to retaliation, consumers are taking matters in their own hands, with Canadians boycotting American products. Travel bookings for the summer season between Canada and the U.S. have plummeted by more than 70% in every month through to the end of September versus this point last year, according to global travel data provider OAG Aviation Worldwide..

In a quarterly survey done by the National Association of Manufacturers fielded in early February, 76% of manufacturers cited trade uncertainties as their top challenge—up 20 percentage points from the results in the trade group’s fourth-quarter survey and 40 percentage points from the third-quarter survey.

Tariff uncertainty is harming investment, production, and employment in the U. S.—the three areas the Trump team is hoping to bolster longer-term with its trade policy, said Will Denyer chief U.S. economist at Gavekal Research, adding that concerns about stagflation are rising.

Take the impact of steel and aluminum tariffs. For every one job in the steel industry, there are 80 in industries using steel, said Philip Luck, director of the CSIS Economics and an economist at the State Department in the Biden administration. Rising costs for a critical input jeopardizes those jobs.

“The U.S. economy is on a tightrope and doing a good job at balancing a narrow path forward. The question is if the shocks are big enough to suddenly discombulate it," said Bespoke Investment Partners’ George Pearkes. He’s keeping close tabs on how banks and lenders are doing to gauge whether consumers are pulling back on their spending.

Abroad, the outlook could also darken. The average U.S. tariff on Chinese goods has already climbed to 35% from 15%—higher than it was during Trump’s trade war with China in his firm term.

Another round of tariffs expected this week could be enough for even more pessimistic economists to reassess.

One way to mitigate the hit from tariffs would be for Beijing to weaken its currency—a move that could further escalate tensions with the U.S. since a weaker currency further hurts China’s exporting rivals, including the U.S.

Capital Economics’ Zichun Huang already has conservative expectations for China’s growth—4% this year and 3.5% next year—but those GDP forecasts could prove to be too rosy if the U.S. ratchets up tariffs further and it can’t absorb the hit with a weaker currency.

Write to Reshma Kapadia at reshma.kapadia@barrons.com