A wave of panic buying—from businesses stockpiling inventory to consumers rushing big purchases—could create a short-lived economic sugar high followed by a summer slump, warns Chicago Fed President Austan Goolsbee.
In an interview with CBS’ Face the Nation, Goolsbee revealed that fears of escalating Trump-era tariffs are distorting spending patterns, potentially setting the stage for a rollercoaster year:
The Tariff-Induced Buying Spree
Businesses are hoarding electronics, auto parts, and other imports—especially from China (now facing 145% tariffs)—to avoid future price hikes. Some have 60-90 days’ worth of inventory prepped.
Consumers are accelerating purchases (think iPhones now vs. fall) to dodge potential sticker shock.
Result: A temporary GDP bump in Q2, but “by summer, activity might fall off because people have already bought everything,” Goolsbee cautioned.
Industries on Edge
The auto sector is particularly vulnerable, with manufacturers scrambling to secure parts before tariffs potentially spike post-July 9, when Trump’s 90-day tariff pause expires.
Small businesses are already feeling the pinch:
Matt Rollens, CEO of Dragon Glassware, told CNBC he’s storing products in China indefinitely—a 145% tariff would force 50% price hikes, killing demand.
“We’re gambling that tariffs get rolled back by June,” said Rollens, whose U.S. inventory will dry up by mid-summer.
The Fed’s Balancing Act
While Goolsbee acknowledged short-term “uncertainty and financial pain,” he struck a cautiously optimistic note:
Strong fundamentals: Unemployment remains low, inflation is cooling.
Key fear: Avoiding a return to 2021-22’s runaway inflation.
Wildcard: Trump’s tariff negotiations—still a “black box,” Goolsbee admitted.
Why This Matters
This isn’t just about tariffs—it’s about market psychology. Preemptive buying could:
✔️ Artificially inflate Q2 growth (creating misleading economic signals).
✔️ Trigger a midyear demand cliff (hurting retailers and supply chains).
✔️ Complicate Fed policy (if inflation rebounds unexpectedly).
Bottom Line: The economy might be borrowing growth from the future. As Goolsbee put it: “The hangover could arrive just in time for summer.”
(Sources: CBS, CNBC, Federal Reserve analysis)