Buy, baby, buy! (Ahead of tariffs)

Summary

Marketplace Morning Report: "Buy, Baby, Buy! (Ahead of Tariffs)" – April 16, 2025

In this episode of the Marketplace Morning Report, host David Brancaccio delves into the intriguing dynamics of consumer behavior amidst economic uncertainties, the impending impact of tariffs on food prices, and the ongoing legal battle surrounding the U.S. African Development Foundation (USADF). Below is a detailed summary of the key discussions, insights, and conclusions drawn from the episode.

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1. The Retail Sales Paradox: Increased Spending Amid Economic Concerns

Overview: Despite widespread anxieties about the economic outlook, March's retail sales figures revealed an unexpected surge in consumer spending. This paradoxical behavior defies typical economic indicators where poor consumer sentiment usually correlates with reduced spending.

Key Insights:

• Susan Schmidt, Portfolio Manager at Exchange Capital Resources, explains that the high retail sales are likely driven by consumers stocking up in anticipation of upcoming tariffs.

  • “We had really high numbers for retail sales in March, up 1.4% month over month. And that just implies that people are really buying their goods ahead of those impending tariffs that they expect to happen.” (01:25)

• Economic Implications:

  • The surge in spending could lead to increased prices across various sectors as tariffs are expected to raise the cost of imported goods.
  • Concurrently, consumer sentiment is plummeting, with projections showing 44% of Americans anticipating higher unemployment within the next year, reaching levels reminiscent of the early pandemic era.
    • “These readings in consumer sentiment and expectations are some of the lowest that we've seen in several years.” (02:23)

Conclusion: Consumers are prioritizing immediate purchases to hedge against future price hikes due to tariffs, a behavior that contradicts traditional responses to economic pessimism. This preemptive buying could have long-term effects on market stability and pricing structures.

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2. Tariffs and Their Impact on Organic vs. Conventional Produce

Overview: With the looming threat of tariffs, the episode explores how these import taxes may differentially affect organic and conventional produce prices in the United States.

Key Insights:

• LendingTree Analysis: Organic fruits and vegetables already command a price premium—up to 50% more than their conventional counterparts. Tariffs are expected to exacerbate this gap, potentially reducing the affordability and popularity of organic options.

  • “Spending an extra 50% on lettuce or carrots or something like that may just be a bridge too far for a lot of people.” – Ricky Volpe (03:26)

• Ricky Volpe, an agribusiness professor at Cal Poly, provides a counterpoint, suggesting that tariffs may actually narrow the price gap between organic and conventional produce.

  • “The direct effect of the tariffs on organic produce prices in the US should be lower than the direct effect that they'll have on conventional produce prices.” (03:51)

• Market Predictions: Due to the short shelf life of food products, the immediate impact of tariffs is anticipated to manifest in food prices within one to two months.

  • “Tariffs are likely to hit food prices first as soon as one to two months from now.” – Kailey Wells (04:04)

Conclusion: While there is a concern that tariffs could make organic produce less accessible, experts like Ricky Volpe suggest that the overall effect might lead to a reduction in the price disparity between organic and conventional foods. The real-time impact on food prices is expected to be swift, underscoring the immediate economic adjustments consumers will face.

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3. The Struggle of the U.S. African Development Foundation (USADF)

Overview: The episode shifts focus to the USADF, an independent federal agency dedicated to supporting grassroots businesses and entrepreneurs in Africa. The Trump administration's efforts to dismantle the foundation have led to a significant legal confrontation.

Key Insights:

• Kim Ward, former Managing Director of USADF, highlights the foundation's critical role in fostering self-sufficiency among African communities.

  • “USADF invests directly in Africa, helping African farmers and other entrepreneurs scale up and become self-sufficient.” (04:47)

• Impact of Shutdown:

  • The Trump administration accused USADF of inefficiency, leading to the termination of approximately 70% of its programs, including $51 million in grants aimed at food production.
  • African countries and private donors are now questioning the allocation and usage of these funds, with significant repercussions for local economies and development projects.
    • “The money we gave you that was earmarked for our groups, you know, for the small, the villages and small enterprises in the country?” – Kim Ward (06:25)

• Legal Battle:

  • The fate of USADF is currently under scrutiny in the U.S. District Court in Washington. Legal experts like Erwin Chemerinsky, Dean and Professor at UC Berkeley School of Law, suggest that affected parties may need to pursue breach of contract or fund recovery lawsuits.
    • “Obviously the government can't take money from individuals to be spent for a particular purpose and then not expend it for that purpose.” – Erwin Chemerinsky (06:56)

• Humanitarian Concerns:

  • The termination of USADF's programs poses a direct threat to the livelihoods of those relying on its support, potentially reversing years of progress in food security and economic independence.
    • “The biggest concern is what happens to the people the agency was helping, since investments designed to prevent crises like famine are terminated.” – Kim Ward (07:09)

Conclusion: The dismantling of USADF represents a significant setback for U.S. foreign aid and African development initiatives. The ongoing legal proceedings will determine the agency's future and the continuation of its critical support to vulnerable communities across Africa.

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Notable Quotes:

• Susan Schmidt (01:25):
  “We had really high numbers for retail sales in March, up 1.4% month over month. And that just implies that people are really buying their goods ahead of those impending tariffs that they expect to happen.”

• Ricky Volpe (03:26):
  “Spending an extra 50% on lettuce or carrots or something like that may just be a bridge too far for a lot of people.”

• Erwin Chemerinsky (06:56):
  “Obviously the government can't take money from individuals to be spent for a particular purpose and then not expend it for that purpose.”

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Final Thoughts

This episode of the Marketplace Morning Report provides a comprehensive look into how consumer behavior is adapting to economic pressures, the nuanced effects of tariffs on different market segments, and the intricate challenges facing international development funding. Through expert analysis and firsthand accounts, listeners gain a deeper understanding of the interconnectedness of global economics and policy decisions.

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Timestamps:

• 01:01 – Retail Sales Paradox Introduction
• 01:25 – Susan Schmidt on Retail Sales
• 01:54 – Impact of Tariffs on Prices
• 02:23 – Consumer Sentiment Data
• 02:54 – Long-term Consumer Buying Behaviors
• 03:17 – Organic Produce and Tariffs
• 03:26 – Ricky Volpe on Grocery Prices
• 03:51 – Tariffs' Effect on Organic vs. Conventional Produce
• 04:04 – Timeline for Tariff Impact
• 04:23 – USADF Overview
• 04:47 – Kim Ward on USADF
• 05:11 – USADF's Grassroots Impact
• 05:22 – USADF's Investment Strategy
• 05:34 – USADF's Financial Operations
• 05:40 – Termination of USADF Grants
• 06:17 – African Countries' Response
• 06:25 – Trump's Administration on USADF
• 06:56 – Legal Perspectives by Erwin Chemerinsky
• 07:09 – Humanitarian Concerns

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This summary is intended to provide a comprehensive overview of the episode for those who have not had the opportunity to listen. For the full discussion and additional context, please tune into the Marketplace Morning Report.

Transcript

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[David Brancaccio]

The retail sales Paradox I'm David Brancaccio in Los Angeles. Shoppers in March were vigorously buying despite their expressed worries about the economic future. The retail sales figure was surprisingly high today. Shopping is therapy is probably not it? A better theory is stocking up before tariffs. Susan Schmidt is portfolio manager at Exchange Capital Resources.

[Susan Schmidt]

That's exactly right. And this is a very unusual combination. Normally when we see poor consumer sentiment, it means that consumers are buying less. They don't feel as good about what's happening in the economy. This time it's exactly the opposite. Consumers are buying more. We had really high numbers for retail sales in March, up 1.4% month over month. And that just implies that people are really buying their goods ahead of those impending tariffs that they expect to happen.

[David Brancaccio]

Which could indeed raise prices for all sorts of things, even if the long term goal of those tariffs is to increase employment. And you may have seen earlier this week Federal Reserve bank of New York had an important survey of consumers. It showed that people's expectations that they might lose jobs way up, up to 44% think that US unemployment will be higher a year from now. I mean that starts to get early pandemic levels.

[Susan Schmidt]

These readings in consumer sentiment and expectations are some of the lowest that we've seen in several years. So that really does show the concern that consumers are having this pre buy of goods. Also is consumers looking forward over not just a month or two, but several years thinking about buying a car, auto parts, building materials, things that they know they're going to need that could be as much as 25% or more higher than current prices.

[David Brancaccio]

Analyst Susan Schmidt, the chair of the Federal Reserve, will speak today, possibly touching on the effects of tariffs on the economy. Buying organic fruit and vegetables already costs half again more than conventional produce that may have touched more chemicals. This, according to a new analysis from LendingTree. And tariffs may shrink the organic gap, but not the price, marketplace's Kaylee Wells explains.

[Kailey Wells]

With tariff threats come uncertainty, and Matt Schultz with LendingTree, says just the fear of higher grocery prices might make organic less popular.

[Ricky Volpe]

Spending an extra 50% on lettuce or carrots or something like that may just be a bridge too far for a.

[Kailey Wells]

Lot of people, but tariffs could actually shrink the price gap, says Ricky Volpe, who teaches agribusiness at Cal poly. Because the US imports less than 5% of its organic produce but more than a third of its conventional vegetables and more than half of its conventional fruit.

[Ricky Volpe]

Therefore, the direct effect of the tariffs on organic produce prices in the US should be lower than the direct effect that they'll have on conventional produce prices, Volpe says.

[Kailey Wells]

Since the shelf life of food is so short, tariffs are likely to hit food prices first as soon as one to two months from now. I'm Kailey Wells for Marketplace.

[David Brancaccio]

The US African Development Foundation. USADF is a small, independent federal outfit that had been investing in grassroots businesses, farmers and entrepreneurs there. The foundation was effectively shut down by the Trump administration as part of its cost cutting campaign, but the agency's board is fighting this in court and there's a hearing set for today. Marketplaces Nancy Marshall Genser has been following this.

[Kim Ward]

USADF invests directly in Africa, helping African farmers and other entrepreneurs scale up and become self sufficient. It's an independent agency run by a board. Kim Ward was a managing director there for 27 years, he says. After the Rwandan genocide in 1994, the agency helped women who lost their husbands expand their basket weaving co op.

That cooperative grew to 4,000 members and earn substantial income for people who are now saying, well, I have to rely on myself. How do I do that?

Ward says. Typically, the countries USADF is helping match the agency's grants 50 50. So they're literally invested helping their people improve their lives so they don't need.

Welfare, they don't need food aid. They can produce the food themselves.

Ward says at any given time, the agency may have up to a million dollars of a host country's money sitting USADF bank account. The agency also gets money from private donors, including the Citibank foundation, the Trump administration's cost cutting commission. Doge has pretty much taken over usadf, firing staff and shutting down field operations on X. Last week, Doge said USADF has terminated $51 million worth of grants, including money for food production. And Ward says, now those African countries are asking, what did you do with.

The money we gave you that was earmarked for our groups, you know, for the small, the villages and small enterprises in the country?

A Trump administration official didn't answer this question when contacted by Marketplace, instead saying that roughly 70% of USADF programs were terminated to, quote, ensure foreign aid puts America First. USADF's fate is at the heart of the hearing in U S District Court in Washington. If the agency's donors, including African countries, want their back, they'll have to file their own lawsuits, says Erwin Chemerinsky, dean and professor at the University of California, Berkeley School of Law.

[Erwin Chemerinsky]

Something like a breach of contract suit or a suit to recover funds. But obviously the government can't take money from individuals to be spent for a particular purpose and then not expend it for that purpose.

[Kim Ward]

The former USADF managing director Kim Ward says his biggest concern is what happens to the people the agency was helping, since investments designed to prevent crises like famine are terminated. I'm Nancy Marshall Genser for Marketplace, and.

[David Brancaccio]

In Los Angeles, I'm David Brancaccio. It's the Marketplace Morning Report from APM American Public Media.

[Janelie 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, Janelie 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 podcasts.