Reading tariff tea leaves in corporate earnings

Summary

Marketplace Morning Report: Reading Tariff Tea Leaves in Corporate Earnings

Release Date: April 14, 2025
Host: David Brancaccio
Guest: Economist Julia Coronado, Founder and President of Macropolicy Perspective

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Corporate Earnings Amid Tariff Uncertainties

The episode opens with David Brancaccio setting the stage for the current corporate earnings season, highlighting the significant role tariffs play in shaping business strategies. Brancaccio remarks, "It's the season when companies get more specific about how they'll navigate through these tariffed times" (00:01). He emphasizes the importance of quarterly results in providing insights not just into profitability but also into broader economic indicators such as layoffs, raises, and the impact of new import taxes.

Expert Insights: Navigating Trade War Chaos

Joining Brancaccio is Julia Coronado, an economist and founder of Macropolicy Perspective. Coronado delves into the complexities businesses face amid ongoing trade wars. She notes, "We're going to get to hear from companies about how they're navigating this and what they expect the impact of the trade war to be on their business" (00:40). Coronado outlines the direct effects of tariffs on consumer-facing companies like airlines and grocery stores, pointing out challenges such as reduced overseas travel demand and the necessity for intricate risk management strategies.

She further explains, "Do they expect to pass through higher prices from tariffs? Do they see already hints of cooling demand from consumers?" (01:19). Coronado underscores the value of these earnings reports as a source of real-time economic sentiment, contrasting them with traditionally lagging economic data.

Market Movements and Corporate Performance

Transitioning from analysis to current market performance, Brancaccio shares that Goldman Sachs exceeded profit expectations, leading to a stock increase of 9.9% (02:14). This uptick is partly attributed to temporary tariff exemptions for certain consumer electronics, raising speculation about further exemptions on the horizon. He reports broader market gains, with the S&P and NASDAQ each rising by 1%, and the Dow climbing by 280 points, or 0.71%.

Long-Term Economic Trends: The Retirement Debt Crisis

Shifting focus to longer-term economic challenges, the report introduces the "Buy Now, Pay Later" series, which explores how current financial behaviors are leading to increased debt among older Americans. Chris Farrell, Marketplace's senior economics contributor, narrates the historical context of social safety nets in the U.S., highlighting pivotal programs like Social Security and Medicare that transformed retirement from a period of high poverty risk to one of relative security.

Mark Miller, author of Retirement Reboot, provides insight into the erosion of these safety nets, stating, "Risk pooled solutions play a really important role as a buffer or a cushion to protect us from too much risk" (03:38). Deborah Thorne, a sociology professor at the University of Idaho, critiques the shift towards individual responsibility, asserting, "It's not working" (04:33). She argues that transferring risks such as pensions and health insurance from employers and the government to individuals has left many elderly Americans financially vulnerable.

Farrell elaborates on the systemic changes since the 1980s, referencing Yale University political scientist Jacob Hacker's concept of the "great risk shift." This shift, driven by global competition and technological advancements, has led companies to offload traditional safety net responsibilities onto workers, resulting in increased financial uncertainty for retirees.

Mark Miller further connects these trends to the high cost of living, citing issues like expensive housing, healthcare, and education. He warns that these financial pressures have left the retiring generation burdened with significant debt, undermining their economic stability in later life (05:25).

Farrell concludes by highlighting the fragility of household balance sheets, which are ill-equipped to handle such risks without accruing debt. Miller emphasizes the importance of social insurance programs as collective risk-sharing mechanisms, noting, "That's the essence of this concept" (06:14). Despite the clear need for renewed collective responsibility, Farrell observes a persistent decline in social insurance initiatives, contributing to the growing debt crisis among older Americans (06:29).

Conclusion

The episode wraps up by reinforcing the interconnectedness of corporate strategies amidst tariff impositions and the broader economic implications for society, particularly concerning retirement security. Brancaccio underscores the critical nature of understanding these dynamics as we navigate both immediate market fluctuations and long-term social challenges.

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Note: This episode is part of the "Buy Now, Pay Later" series, produced in partnership with Next Avenue and Twin Cities PBS, and is presented by American Public Media.

Transcript

[David Brancaccio]

It's the season when companies get more specific about how they'll navigate through these tariffed times. I'm David Brancaccio in Los Angeles. During four concentrated periods a year, public corporations tell the world how much money they made and give hints about the road ahead. And these quarterly results tell us indirectly about layoffs, who gets raises and this time around, who pays the new import taxes at the border, the tariffs. Economist Julia Coronado joins us now. She's founder and president of Macropolicy Perspective Perspectives. Morning.

[Julia Coronado]

Good morning.

[David Brancaccio]

This will be an interesting season to hear what these companies are saying, right?

[Julia Coronado]

Very interesting. We have been talking a lot about the uncertainties companies face with all of the chaos in the trade wars. And we're actually going to get to hear from companies about how they're navigating this and what they expect the impact of the trade war to be on their business.

[David Brancaccio]

Companies today include Wall street titan Goldman Sachs which seems a little rarefied for the lives of regular people. But M and T Bank, tomorrow, some other brands, United Airlines, we know what they do for a living. Albertsons, the grocery chain will get some hints about how companies are processing all this tariff stuff.

[Julia Coronado]

Yeah, the consumer facing companies like airlines and grocery stores, they are facing the tariffs directly. The airlines are facing reduced travel demand from overseas arrivals. And there's a number of ways which this environment is affecting their business and probably requiring some tricky risk management decisions. So company leaders are going to tell us exactly how they're navigating this. Do they expect to pass through higher prices from tariffs? Do they see already hints of cooling demand from consumers? You know this is going to be very valuable information, forward looking information, you know, the economic data we get with a lag. This will tell us a little bit in real time how companies see the landscape.

[David Brancaccio]

Economist Julia Coronado is also a professor at the University of Texas, Austin. Thank you.

[Julia Coronado]

My pleasure.

[David Brancaccio]

Goldman Sachs profits beat expectations this morning. The stock's up 9/10 of a percent. With some consumer electronics getting at least temporary reprieves from the highest tariffs. Market players are thinking there could be more exemptions to come. The S and P and The NASDAQ reach up 1%. The Dow is up 280 points. 710 of a percent. Lets go deeper now into a longer term trend that hurts people later in life. It's our series called Buy Now, Pay later when people owe a lot of money going into retirement. Today one reason changes over decades to America's social safety net. Marketplace's senior economics contributor Chris Farrell reports.

[Chris Farrell]

The risk of Living in poverty in old age was high for much of U.S. history. Yet social safety net innovations and collective risk sharing dramatically change the economics of old age. Social Security in 1935 and Medicare in 1965. Large organizations offering employees pensions. The mass of older Americans embraced a new lifestyle retirement. Mark Miller is author of Retirement Reboot.

[Mark Miller]

Risk pooled solutions play a really important role as a buffer or a cushion to protect us from too much risk.

[Chris Farrell]

Yet risk sharing by business, government and other major institutions started eroding in the 1980s. Deborah Thorne is professor of sociology at the University of Idaho.

[Deborah Thorne]

There was a big push towards individual responsibility. That means shifting the risk for so many things onto the individual, household and the individual.

[Chris Farrell]

The social transformation was labeled the great risk shift by Yale University political scientist Jacob Hacker. Although a complex story, heightened international competition and technological innovation pushed companies to unload much of the cost of pensions, job security and health insurance onto workers. Collective responsibility was out. Individualism ruled.

[Deborah Thorne]

Professor Thorne I am convinced Based on my 30 years in academics and everything I've read have been sacrificed for this very interesting social experiment to see what happens when we say you are on your own and let's see how that works for you. It's not working.

[Chris Farrell]

A classic example is the shift from defined benefit pension plans where employers absorb the financial risk of retirement income for employees, to define contribution plans like 401 s where the employee is responsible for saving for retirement. Other examples include workers paying more for health insurance and heightened job insecurity with employers embracing mass layoffs. Mark Miller adds the high cost of living to this story here.

[Mark Miller]

I'm referring to big ticket items. Housing, healthcare, the cost of college, inadequate income growth and income inequality, the lack of good career opportunities in too many parts of the country where the economies have been kind of hollowed out for a variety of reasons. If you apply this to kind of the generation that is now retiring or getting close to it, economic volatility during their working years has just played an enormous role that gets people to a position where they arrive at retirement carrying a lot of debt.

[Chris Farrell]

Most household balance sheets are too brittle to absorb risks like these without taking on debt. Risk sharing institutions include Social Security and Medicare. Miller says these social insurance programs are social because they bring us together.

[Mark Miller]

We call them insurance because these programs protect us from certain kinds of risks. So everyone who contributes is protected. And so together we pool our risks and our responsibilities. That's the essence of this concept.

[Chris Farrell]

There are few signs that the social insurance approach is regaining traction with employers and governments sharing less of the downside hazards of old age. Is it any wonder that more older people are in debt? I'm Chris Ferro for Marketplace.

[David Brancaccio]

Our Buy Now, Pay later project is in partnership with Next Avenue, a nonprofit news platform for older adults produced by Twin Cities PBS in Los Angeles. I'm David Brancaccio. It's the Marketplace Morning Report. We are from apm, American Public Media.

[Janelli 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, Janelli 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.