Chicago Fed: Tariff-Related Panic Buying Could Precede Economic Slump

“Panic buying” in the U.S. could create an “artificially high” level of economic activity.

That’s according to Federal Reserve Bank of Chicago President Austan Goolsbee, who discussed the uptick in purchasing by businesses and consumers in response to new tariffs Sunday (April 20) in an interview with “Face the Nation” on CBS.

“That kind of preemptive purchasing is probably even more pronounced on the business side,” Goolsbee said. “We heard a lot about preemptive building-up of inventories that could last 60 days, 90 days, if there [was] going to be more uncertainty.”

This activity, whether it means businesses building up inventory or consumers buying costly electronics earlier than planned, could inflate U.S. economic activity in April and lead to a slowdown in the months ahead, Goolsbee argued.

“Activity might look artificially high in the initial, and then by the summer, might fall off — because people have bought it all,” he said.

Some industries impacted by the tariffs, such as the automotive sector, are most likely to build up big stockpiles of inventories in advance of higher levies on products from other countries.

President Donald Trump has paused the tariffs on a host of other countries at a baseline 10%, with that freeze set to expire July 9.

“We don’t know, 90 days from now, when they’ve revisited the tariffs, we don’t know how big they’re going to be,” Goolsbee said.

For now, at least, the American consumer appears to still be on solid footing, according to PYMNTS coverage last week of the first-quarter earnings results of three of the nation’s largest financial institutions.

The situation remains a bit more complicated for small and medium-sized businesses (SMBs), Tom Priore, president of Priority, told PYMNTS CEO Karen Webster in a recent interview.

Among the key signs to look out for when gauging the health of small businesses include whether they are retaining employees or laying them off, and tracking the levels of card delinquencies, which indicate a stretched consumer who might cut back drastically.

The philosophy of what Priore termed “American optimism” will prevail, and that optimism is a fixture of the business landscape.

“The uncertainty today will be reconciled and cleaned up,” he told Webster, adding that “our mission is to provide that flexible financial tool set … it doesn’t matter what environment you’re in. Accelerating cash flow and optimizing working capital are always good things.”