An end to globalization as we know it?

Summary

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.

Transcript

[David Brancaccio]

Is April the month globalization ended for planet Earth. I'm David Brancaccio in Los Angeles. The Dow Jones Industrial average is down 1,173 points, 2 1/3% right now. The S&P down 3.3%. The NASDAQ really down 4.6%. Wall Street's fear gauge, the VIX index of stock market volatility up 27% at the moment. The bond market is up sharply with the higher risk of recession now pulling the 10 year interest rate down to 4.03%. Many market players say the tariffs are higher than they were banking on. Accordingly, economists and investors are now reconsidering recession. Diane Swonk is chief economist at the audit, tax and advisory firm kpmg. Hey, Diane, Good morning. Well, with these new import taxes, how does that affect the prognosis for the US Economy?

[Diane Swonk]

Well, if they stay in place, and we do expect they will be in place for some time, and they trigger an escalation in trade, which we also expect, which will hurt our exports as well, we are now expecting the US Economy will slip into a recession. The risk of recession just went up dramatically with inflation as well, and that is stagflation. This is still a very difficult situation for the Federal Reserve because it's very hard for the Fed to tease out what part of tariffs are boosting inflation when it still has yet to be derailed, at the same time dampening demand. And that is just a very tough position to be in at this stage of the game.

[David Brancaccio]

Higher risk of recession, do you think? In 2025, this year?

[Diane Swonk]

It could easily come this year because of the impact on production and the disruptions to supply chains and consumer demand. You put them all together and it makes the US Economy smaller, which is a recession.

[David Brancaccio]

Economist Diane Swonk, kpmg, thank you very much.

[Diane Swonk]

Thank you.

[David Brancaccio]

Consumers are expected to pay for a lot of the new import taxes with, for instance, tariffs on goods out of China up 34%. Now Marketplace's Nancy Marshall Genser has that.

[Nancy Marshall Genzer]

Tariffs are mostly paid by companies that import products think Walmart and Target. They're expected to pass at least some of the cost on to consumers. For example, the Yale Budget Lab estimates that all of President Trump's tariffs this year will raise clothing prices by 17%. Brendan Duke @ the center on Budget and Policy Priorities expects produce prices to rise first because retailers couldn't buy and stockpile perishables.

[Brendan Duke]

Food, those fruits and vegetables, that would be an obvious one because those fluctuate all of the time. So fruits and Vegetables could be one that we could see a lot of volatility with.

[Nancy Marshall Genzer]

Duke says these tariffs are much bigger than the ones Trump imposed during his first term. He says those raised the tax rate on imported goods from about 1% to 2%. But what Trump is doing now works out to around 20%. Duke says think of it this way.

[Brendan Duke]

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. The magnitude of how much larger of what he's doing really matters a lot.

[Nancy Marshall Genzer]

Duke says low income consumers will be hit hardest because they spend a bigger share of their income on essentials. I'm Nancy Marshall Genzer for Marketplace.

[David Brancaccio]

For more on this grand economic shift, I'm joined now by Mark Deplassado, a policy advisor at the conservative leaning economic think tank American Compass. He worked in the office of the US Trade Representative during President Trump's first term. Welcome to the program.

[Mark D'Placido]

Thank you. Thank you for having me.

[David Brancaccio]

At a time that it seems most economists and some business leaders and this morning the stock market are freaked out by the size of these tariffs, I think you have a more nuanced view. How might do you think these tariffs play out, let's say, in the car and truck business?

[Mark D'Placido]

The broad thing to understand is that the President is shifting our overall trade posture to want a balance. Over the last 30 years or so, we've seen the trade deficit in our country skyrocket from about $30 billion in the early 90s to nearly a trillion dollars now in the car industry. We've historically seen that play a major role in American industry and manufacturing in our country, dating back before and it really formed the basis of our larger industrial base. And over time, that's basically winnowed down production in the United states to about 75% of the content being made overseas. So certainly the auto sector is a major part of industry that the President wants to reshore, making sure we have economic security going forward.

[David Brancaccio]

Mark, to what extent do you see tariffs, these higher tariffs as a negotiating strategy? I mean, for those still betting the reciprocal customized by country tariffs might not stick. We don't know. There's that 10% across the board tariff on everything. There's some betting that would stick. Do you see a negotiating strategy or let's put this in place and see how it plays out over the medium and longer term.

[Mark D'Placido]

Just following the reaction as best I've been able to over the past 12 hours or so. It looks like at the very least, I would not expect those 10% baseline tariffs across the board to be going anywhere anytime soon. I think we'll see even some of the higher rates stick for maybe longer than some of the initial ones may have stuck back in February when they were placed on Mexico and Canada. And I think to back up that inclination, the president is consistently focused on the concept of balance, and we're not going to be able to achieve balance unless this baseline is set at such a level that's going to continue to incentivize that investment domestically.

[David Brancaccio]

But you must also be worried about workers and businesses that would lose under this, what is really quite revolutionary new way of thinking about the economy.

[Mark D'Placido]

I think the president is interested in keeping them, I think, as broad as possible to make sure the entire US Market is operating under the same framework and that all industries and all businesses are operating on the same playing field that we need to reshore our supply chains.

[David Brancaccio]

Mark D'Placido is a policy advisor at American Compass, a nonprofit that works to develop what it sees as a conservative economic agenda to supplant blind faith in free markets with a focus on workers, families, communities and the national interest. Mr. D'Placido, thank you so much.

[Mark D'Placido]

Thank you for having me.

[David Brancaccio]

And in Los Angeles, I'm David Brancaccio. This Marketplace morning report from APM American Public Media.

[Jannelli Espinal]

If there's one thing we know about social media, it's that misinformation is everywhere, especially when it comes to personal finance. Financially Inclined from Marketplace is a podcast you can trust to help you get serious about your money so you can build a life you've always dreamed of. I'm the host, Jannelli Espinal, and each week I ask experts important money questions, like how to negotiate job offers, how to choose a college that you can afford, and how to talk about money with friends and family. Listen to Financially Inclined wherever you get your podcast.