Marketplace Morning Report: An End to Globalization as We Know It?

Release Date: April 3, 2025
Host: David Brancaccio
Source: Marketplace, APM American Public Media

1. Economic Overview and Market Trends

In the opening segment, David Brancaccio sets a concerning tone by highlighting significant downturns in major stock indices. As of the episode's release:

• Dow Jones Industrial Average: Down 1,173 points (2 1/3%)
• S&P 500: Down 3.3%
• NASDAQ: Down 4.6%
• VIX Index (Market Volatility): Up 27%

Additionally, the bond market is experiencing a sharp rise, with the 10-year interest rate dropping to 4.03%, signaling heightened fears of a potential recession. Brancaccio notes, “Wall Street's fear gauge, the VIX index of stock market volatility [is] up 27% at the moment” (00:01).

2. Impact of Increased Tariffs on the US Economy

The core discussion revolves around the escalating tariffs and their profound impact on the US economy. Brancaccio introduces Diane Swonk, Chief Economist at KPMG, to delve deeper into this issue.

Interview with Diane Swonk:

• Recession Risks: Swonk emphasizes that sustained tariffs are likely to escalate trade tensions, adversely affecting US exports and pushing the economy toward a recession. She states, “We are now expecting the US Economy will slip into a recession” (00:56).

• Stagflation Concerns: The combination of rising tariffs and persistent inflation presents a stagflation scenario, where the economy faces stagnant growth coupled with high inflation. Swonk explains, “the risk of recession just went up dramatically with inflation as well” (00:56).

• Federal Reserve Dilemma: Balancing inflation control with dampened demand places the Federal Reserve in a challenging position. Swonk remarks, “it’s very hard for the Fed to tease out what part of tariffs are boosting inflation” (00:56).

When asked about the immediacy of the recession risk, Swonk confidently predicts, “It could easily come this year” (01:44), attributing it to disruptions in production, supply chains, and consumer demand.

3. Consumer Costs and Tariffs

The conversation shifts to how tariffs affect consumers directly, particularly through price increases on imported goods.

Discussion with Nancy Marshall Genzer:

• Tariff Pass-Through to Consumers: Genzer explains that companies absorbing tariffs, such as Walmart and Target, are likely to pass on costs to consumers. “They’re expected to pass at least some of the cost on to consumers” (02:13).

• Impact on Clothing Prices: Utilizing the Yale Budget Lab's estimates, Genzer highlights a 17% rise in clothing prices due to President Trump’s tariffs (02:13).

• Food Prices Volatility: Brendan Duke from the Center on Budget and Policy Priorities anticipates that fruit and vegetable prices will experience significant volatility first, as retailers grapple with stockpiling perishables (02:40).

• Magnitude of Current Tariffs: Duke contrasts the current tariffs with those from Trump's first term, noting a substantial increase from 1-2% to around 20%. He provides an illustrative analogy: “Maybe you could debate whether it's a good idea to have a shot of tequila and drive. I don't think it's a good idea to have 20 shots of tequila and drive” (03:06).

• Impact on Low-Income Consumers: Genzer points out that low-income households will bear the brunt, as they allocate a larger portion of their income to essentials (03:20).

4. Perspectives on Tariffs as Policy Strategy

Offering a contrasting viewpoint, Mark D'Placido from American Compass, a conservative-leaning economic think tank, discusses the strategic objectives behind the increased tariffs.

Interview with Mark D'Placido:

• Reshoring and Trade Balance: D'Placido explains that President Trump is reorienting trade policies to achieve a balanced trade deficit, particularly in industries like automotive. “The President is shifting our overall trade posture to want a balance” (04:12). He underscores the historical rise in the trade deficit from $30 billion in the early '90s to nearly a trillion dollars in the auto industry today.

• Industrial Base and Economic Security: Emphasizing the importance of domestic manufacturing, D'Placido notes, “We have [reduced] production in the United States to about 75% of the content being made overseas” (04:12). The goal is to reshore industries to ensure long-term economic security.

• Tariffs as Negotiation Tools: When queried about whether the tariffs serve as a negotiating strategy, D'Placido expresses skepticism about their temporary efficacy. “I would not expect those 10% baseline tariffs across the board to be going anywhere anytime soon” (05:25). He suggests that higher tariffs will persist longer than initial rates imposed on countries like Mexico and Canada.

• Balancing Economic Interests: Addressing concerns about potential negative impacts on workers and businesses, D'Placido asserts that the administration aims to maintain a level playing field across industries to facilitate the reshoring of supply chains. “The president is interested in keeping them, I think, as broad as possible” (06:18).

5. Conclusion and Takeaways

David Brancaccio wraps up the episode by synthesizing the discussed viewpoints, highlighting the tug-of-war between immediate economic challenges and long-term strategic goals. The significant rise in tariffs has ignited fears of a recession and increased consumer costs, particularly affecting low-income populations. Conversely, policymakers like Mark D'Placido view these measures as essential for rebalancing trade deficits and ensuring industrial resilience.

Listeners are left with a nuanced understanding of how globalization is being redefined amidst economic pressures and strategic realignments, painting a complex picture of the future of international trade and the US economy.

Notable Quotes:

• Diane Swonk on recession risk: “We are now expecting the US Economy will slip into a recession” (00:56).
• Brendan Duke on tariff magnitude: “Maybe you could debate whether it's a good idea to have a shot of tequila and drive. I don't think it's a good idea to have 20 shots of tequila and drive” (03:06).
• Mark D'Placido on trade balance: “The President is shifting our overall trade posture to want a balance” (04:12).

This summary is based on the transcript provided for the Marketplace Morning Report episode titled "An End to Globalization as We Know It?" released on April 3, 2025.