Retailers brace for empty shelves as U.S. imports decline

Business leaders are feeling the impact as high housing costs have curbed labor mobility, return-to-office plans and the ability for employers to recruit in places like Silicon Valley. One CEO recently told me that he held off on asking employees to come in every day because he knows how far some have to commute and how hard it would be for many to give up stable low-cost mortgages to buy a home closer to headquarters. 

Michael Lefenfeld, CEO of Hexion, which makes advanced materials used in construction, among other things, told me last week that he thinks “we’re talking too much about mortgage and housing costs, and not enough about permitting and the applications to build a house. That really is constraining builder sentiment … the regulatory challenges, whether it’s state or federal, to get permits to build at a meaningful rate.”

I’m surprised Donald Trump hasn’t embraced housing policies to win public support—or put public pressure on cities as he has done with immigration. Instead, the Administration’s new tariffs on building materials could add costs of about $10,900 per home, according to a new NAHB/Wells Fargo Housing Market Index survey. And the immigration crackdown could make it harder to find workers to build new units. But housing policies are local, of course. It’s telling that Austin, which has issued about 10 times more permits per capita than San Francisco in recent years, has also outpaced its California rival in the growth of high-tech jobs.

More news below.

Contact CEO Daily via Diane Brady at diane.brady@fortune.com

Top news

America braces for empty shelves as imports fall. The Port of Los Angeles expects arrivals to be one-third lower in May. Container bookings are 45% down, according to the tracking service Vizion. Ryan Peterson, CEO of Flexport, a supply chain logistics company, says “In the 3 weeks since the tariffs took effect, ocean container bookings from China to the United States are down over 60% industry wide.”

Imports are expected to decline 20% in the second half of the year, the NRF predicts. The CEOs of Walmart, Target, and Home Depot privately warned President Trunmp last week that shortages and price rises are coming.

China closes factories serving U.S. businesses. “I know several factories that have told half of their employees to go home for a few weeks and stopped most of their production,” said Cameron Johnson of consulting firm Tidalwave Solutions.

Why Apple can’t make an iPhone in the U.S.: It takes 187 suppliers in 28 countries to make the 2,700 different parts of an iPhone, according to the FT.

Apollo warns of recession. A new report from Apollo Global Management suggests that tariffs announced by the Trump Administration could suppress incoming shipping far enough to trigger a recession by the summer of this year. Chief Economist Torsten Slok also noted over the weekend that a record portion of households in the U.S. are only making minimum payments on their credit cards. 

Hedge fund co-CIOs also raise recession possibility. That sentiment was reiterated by the co-chief investment officers at Bridgewater Associates, who wrote that “we expect a policy-induced slowdown, with the rising probability of a recession” in the hedge fund’s most recent newsletter. The three co-CIOs also stated that current economic policy “threatens the existing world order and monetary systems.”

U.S. deports children who are American citizens. The three children, aged 2, 4, and 7, were removed from the country with their mother who was an illegal immigrant. White House officials defended the practice on Sunday TV shows.

White House officials are considering other ways to deport citizens. Those who are convicted of crimes and people with political opinions that could be reclassified as “aiding and abetting criminals and terrorists” could also be removed, according to senior director for counterterrorism Seb Gorka. "Homegrowns are next," Trump also said last week.

Trump also called for Democrats to be removed from local town hall meetings. “Have them immediately ejected from the room - They are disruptors and troublemakers,” he said on Truth Social.

Trump criticizes Putin, again. He’s growing impatient with Russia’s continuing airstrikes on Ukraine. The president threatened further sanctions on Russia if Putin doesn’t cooperate with Trump’s peace plan. Meanwhile, Russia is beefing up its military resources along multiple European borders. Secretary of State Marco Rubio said the White House will decide this week whether to drop their peace plan completely.

Trump weighs in on millionaire’s tax. Meanwhile, Trump said he would “love” a tax on millionaires but thinks it would lose him an election. “I think it would be very disruptive, because a lot of the millionaires would leave the country,” Trump also told reporters.

The markets

• The S&P 500 closed up 0.74% on Friday but remains down 6% YTD. Tesla was up 9.8% on the day and up a further 2.2% this morning in aftermarket trading. Futures contracts based on the S&P priced in a 0.28% decline this morning, pre-opening bell. The three main China indexes—the CSI 300, the SSE and the Hang Seng—were down this morning but everyone else was up: Japan’s Nikkei 225 rose 0.38%. The momentum continued in Europe, where the Stoxx Europe 600 popped 0.47% in early trading. 

From the analysts 

• Apollo on the China trade collapse: “Daily data for container traffic from China to the US is collapsing [see chart here]. The consequence will be empty shelves in US stores in a few weeks and Covid-like shortages for consumers and for firms using Chinese products as intermediate goods,” Per Torsten Sløk.
• JPMorgan on “Trump exhaustion”: “Facts continue to change — there is indication that the ‘detox period’ may be over and the latest messaging from the Trump Administration seems to be shifting from tariffs to tax cuts and deregulation. However, the damage to the business cycle still remains unclear. … Based on many recent investor discussions, the sentiment is very bearish, especially within the macro community. Most are disregarding the latest trade developments, in part due to ‘Trump exhaustion,’” per Dubravko Lakos-Bujas and his team.
• Goldman Sachs on the “flight of foreign investors out of US assets”: “We estimate foreign investors have sold roughly $60 billion of US stocks since the start of March. High frequency fund flow data suggest European investors have driven the selling, while other regions have generally continued to buy US stocks,” per Daniel Chavez and team.
• UBS on Trump: “China said it was not negotiating with the US over trade. US President Trump avowed that the US was talking with someone (who they are talking to is a secret, apparently). Things like this might possibly be contributing to the economically damaging levels of uncertainty,” per Paul Donovan.

Around the watercooler

Don’t expect SEC enforcement to just disappear under new chairman Paul Atkins, warn 3 former general counsels by Amanda Gerut

DOGE’s mass federal workforce cuts may cost taxpayers $135 billion this fiscal year alone by Sasha Rogelberg

Build-A-Bear’s CEO started her career working at a McDonald’s drive-thru. Now she leads a $486 million toy empire by Imani Racine

Investment bankers have ‘work-from-beach’ dreams crushed after Citi shutters its Málaga office by Greg McKenna

Banks are getting the upper hand on card fraud but social scams getting worse, Mastercard says by Jeff John Roberts

CEO Daily is compiled and edited by Joey Abrams and Jim Edwards.