Retailers At Risk As Inventory Ratios Dip—Apollo Economist Warns Of Faster Stockouts Without Chinese Goods

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 need to be solved via the ongoing talks.

“The outcome of this weekend’s China-US tariff talks in Switzerland will be assessed in terms of what it reveals about China’s appetite for pain, America’s fear of ’empty shelves,’ and the way each country prioritizes the long-term objectives of trade policy. It will also be significant for many other countries, where there is already concern about the diversion of Chinese exports to their markets,” he said.