Special Coverage from Marketplace: Selling America

Summary

Marketplace Morning Report: Special Coverage – "Selling America"

Release Date: April 20, 2025

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Introduction

In the special podcast episode titled "Selling America," hosted by Kai Rysdal of Marketplace, the focus centers on the seismic shifts in global trade dynamics initiated by President Trump's trade policies since April 2. The episode delves into the implications of new tariffs, their ripple effects across various sectors of the American economy, and the broader impact on the United States' standing in the global marketplace. Through expert analysis, firsthand business accounts, and economic insights, the episode paints a comprehensive picture of the challenges and uncertainties facing the U.S. economy.

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1. The Genesis of "Selling America"

Kai Rysdal opens the discussion by highlighting the voluntary nature of the global economy, emphasizing how intertwined nations are through massive daily trade transactions. He asserts that President Trump's abrupt introduction of tariffs is disrupting this established system, leading to significant economic and geopolitical consequences.

• Notable Quote:

  "Selling America is what's happening. People are selling the dollar, they're selling their stocks in American companies...they're buying fewer American goods."
  — Kai Rysdal [00:01]

2. Expert Analysis: The Brookings Perspective

Wendy Edelberg, a senior fellow at the Brookings Institution, provides a nuanced analysis of the current trade environment. She distinguishes between two primary concerns:

• Uncertainty for Investors: Trump's unpredictable trade policies create an unstable environment, deterring investment.
• Destruction of Institutions: Tariffs are disrupting established economic institutions, potentially leading to higher short-term inflation and undermining the Federal Reserve's credibility.

Edelberg warns that weakened confidence in the Federal Reserve could lead to long-term economic repercussions, including altered mortgage rates and diminished economic stability.

• Notable Quote:

  "Trump's efforts are going to buy him higher interest rates, not lower."
  — Wendy Edelberg [05:01]

3. Business on the Front Lines: Small Businesses Under Strain

The episode features firsthand accounts from small business owners grappling with the immediate effects of tariffs:

• Wesley Rule (Knoxville Fine Violins): Experiences halted shipments from China, forcing decisions on inventory purchases amidst rising costs.

  "We're trying to decide whether... to purchase the inventory that's already here or hope that trade relations kind of even out."
  — Wesley Rule [12:16]

• Kalina Bruce (Noir Luxe Candle Bar, Seattle): Faces uncertainty in supply chains, with concerns about sustaining large orders due to fluctuating tariff implications.

  "There's so much uncertainty... we just really don't know what it's going to look like."
  — Kalina Bruce [36:52]

4. The Labor Market: Signs of Trouble Ahead

Katherine Ann Edwards, a labor economist, discusses the lagging indicators in the labor market that may signal an impending recession. She points to diminishing consumer sentiment and stalled hiring processes as red flags, suggesting that layoffs could follow if economic conditions worsen.

• Notable Quote:

  "Consumer sentiment has been dipping... many people are starting to hear from their employers that something bad is coming."
  — Katherine Ann Edwards [30:36]

5. Supply Chain Chaos: Navigating New Complexities

Gretchen Blough, customs brokerage manager at Logistics Plus in Erie, Pennsylvania, illustrates the real-time disruptions caused by sudden tariff implementations. She describes the challenges businesses face in categorizing goods, sourcing materials, and complying with new tariff rates, all amidst a landscape of uncertainty.

• Notable Quote:

  "There's so much uncertainty. No one's... knows how to plan."
  — Gretchen Blough [18:42]

6. Global Economic Realignments: Beyond the U.S.

The podcast explores how other nations are responding to America's trade isolation:

• Richard Weiner (Sidley Austin): Highlights the European Union's extensive free trade agreements and China's strategic trade partnerships, suggesting that the global economy continues to integrate without U.S. leadership.

  "Other countries are negotiating deals between each other while the US is making things more expensive for itself."
  — Richard Weiner [22:31]

• Emily Blanchard (Dartmouth's Tuck School of Business): Emphasizes the U.S.'s inward economic orientation as costly and counterproductive, undermining its competitive edge.

  "An economy insulated from global competition is an economy that starts to lose its edge."
  — Emily Blanchard [22:55]

7. The Repercussions for Manufacturing and Reshoring

Matt Notawodigdo, an economics professor at the University of Chicago's Booth School of Business, assesses the efficacy of tariffs in bringing manufacturing jobs back to the U.S. He references historical precedents, noting minimal job retention despite significant tariff impositions, and warns of broader job losses across interconnected industries.

• Notable Quote:

  "Tariffs are only protecting jobs in specific industries, but causing cost increases elsewhere... you end up losing even more jobs than you save."
  — Matt Notawodigdo [44:06]

8. The Clothing Industry: A Case Study in Tariff Impact

The apparel sector serves as a microcosm of the tariff-induced upheaval:

• Andrew Chen (316 Menswear): Highlights the challenges of maintaining production costs amidst tariffs, leading to inevitable price hikes for consumers.

  "We wouldn't know where to begin or how to do it... we'll have to keep importing from Japan, and inevitably the price of our jeans will have to go up."
  — Andrew Chen [43:15]

• Phyllis Savachko (Stateless): Discusses the shift of apparel manufacturing from China to countries like Vietnam and India, increased costs, and the slow transition to domestic production due to high capital requirements and policy uncertainty.

  "Bringing production back to the U.S. would cost companies and consumers a lot more."
  — Phyllis Savachko [42:31]

9. Forecasting the Economic Future: Recession Risks

Economic forecasts tie together the themes of uncertainty and trade disruptions:

• Jay Bryson (Wells Fargo): Utilizes sophisticated models to predict a 55% chance of a recession within the year, factoring in unpredictable elements like interest rates and government spending.

  "We have a 55% chance of a recession."
  — Jay Bryson [34:37]

• David Kelly (JP Morgan Asset Management): Despite high recession probabilities, asserts that employment growth and business investment will likely slow down regardless of recession outcomes.

  "Employment growth, imports and exports, and business investment will slow down this year."
  — David Kelly [35:55]

10. The American Dollar: Shifting Reserve Status

The episode addresses concerns about the U.S. dollar's declining strength and its role as the world's reserve currency:

• Keith Merx (Norman, Oklahoma): Asked about the sustainability of the dollar's reserve status and its implications if diminished.

  "The selling America thing is real, and among the things that are being sold is the US Dollar, which means it's getting weaker."
  — Keith Merx [08:23]

• Kai Rysdal explains the complexities surrounding the dollar's reserve status, noting the entrenched global infrastructure favoring the dollar and the lack of viable alternatives despite its weakening value.

11. Consumer and Market Sentiment: The Psychological Toll

The interplay between consumer confidence and economic indicators is scrutinized:

• Katherine Ann Edwards emphasizes that declining consumer sentiment may precede tangible economic downturns, serving as an early warning sign of broader issues within the economy.

  "Consumer sentiment has been dipping... it's really worrying that many people are starting to hear from their employers that something bad is coming."
  — Katherine Ann Edwards [30:36]

12. The Long-Term Economic Trajectory: Adaptation and Resilience

Despite the immediate turmoil, experts discuss the potential for economic adaptation and recovery:

• Wendy Edelberg posits that while the U.S. has weathered numerous recessions, the current structural changes may lead to a prolonged period of adjustment, necessitating innovative policy and institutional reforms.

  "We do bounce back and grow. It is a gift to know that our economy will grow again."
  — Wendy Edelberg [31:49]

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Conclusion

"Selling America" encapsulates a critical juncture in U.S. economic policy, highlighting the profound and multifaceted impacts of President Trump's tariffs on global trade relations, domestic businesses, labor markets, and the nation's economic standing. The episode underscores the pervasive uncertainty permeating various sectors, the strategic realignments of global trade partners, and the looming risks of recession. Experts collectively signal that while resilience and adaptability are inherent to the American economy, the current trajectory demands cautious navigation and thoughtful policy interventions to mitigate adverse outcomes and restore stability.

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Notable Quotes Summary

1. Kai Rysdal [00:01]:
   "Selling America is what's happening. People are selling the dollar, they're selling their stocks in American companies...they're buying fewer American goods."

2. Wendy Edelberg [03:32]:
   "Trump's efforts are going to buy him higher interest rates, not lower."

3. Wesley Rule [12:16]:
   "We're trying to decide whether... to purchase the inventory that's already here or hope that trade relations kind of even out."

4. Wendy Edelberg [07:35]:
   "I want to say that the reason that I think we're in for a recession is because of uncertainty."

5. Gretchen Blough [17:10]:
   "There's so much uncertainty. No one's... knows how to plan."

6. Wendy Edelberg [22:31]:
   "Other countries are negotiating deals between each other while the US is making things more expensive for itself."

7. Matt Notawodigdo [44:06]:
   "Tariffs are only protecting jobs in specific industries, but causing cost increases elsewhere... you end up losing even more jobs than you save."

8. Andrew Chen [43:15]:
   "We wouldn't know where to begin or how to do it... we'll have to keep importing from Japan, and inevitably the price of our jeans will have to go up."

9. Jay Bryson [34:37]:
   "We have a 55% chance of a recession."

10. David Kelly [35:55]:
    "Employment growth, imports and exports, and business investment will slow down this year."

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Key Takeaways

• Economic Uncertainty: Sudden tariff implementations have created a volatile environment, deterring investment and complicating business operations.

• Institutional Impact: Tariffs are undermining the credibility of economic institutions like the Federal Reserve, with potential long-term inflationary effects.

• Global Trade Realignment: Other nations are strengthening their own trade agreements, reducing reliance on the U.S. and diminishing its global economic influence.

• Business Struggles: Small and medium-sized enterprises are grappling with increased costs, disrupted supply chains, and strategic uncertainties.

• Labor Market Indicators: Declining consumer sentiment and stalled hiring processes may presage broader economic downturns.

• Reserve Currency Concerns: The weakening of the U.S. dollar raises questions about its future as the world's primary reserve currency.

• Recession Risks: Economists predict a heightened likelihood of recession, fueled by trade policies and economic uncertainties.

• Long-Term Resilience: While the U.S. economy has historically rebounded from recessions, the current structural changes present unique challenges that require innovative policy responses.

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This comprehensive summary encapsulates the critical discussions from the "Selling America" episode, providing listeners with a clear understanding of the complex interplay between trade policies, economic indicators, and their multifaceted impacts on the American economy.

Transcript

[Kai Rysdal]

The global economy is, by definition, global. Companies and people and countries buy and sell to and from each other to the tune of trillions of dollars a day. And until April 2, that all happened with as little friction as possible. But the other thing about the global economy is that it's voluntary. Countries don't have to buy and sell with other countries if they don't want to. And since April 2, with his tariffs and his other trade policies, President Trump has been closing America off from the rest of the world. I'm Kai Rysdal, and this is a Marketplace special podcast, Selling America. You can't take apart a system of global trade that's been built up over the past 80 years. You can't take it apart in just a matter of weeks and not have some blowback. We're going to take an hour now and as best we can because the changes are still happening. Try to figure out what it's all going to mean. Because what's been happening in and to the American economy the past two and a half weeks is confusing. It's a little bit scary. It's going to take years to fully play out, and it's going to change America's place in the world. We didn't pick that title out of nowhere, you know, Selling America. We picked it because that's what's happening. Look at whatever indicator you like. People are selling the dollar, they're selling their stocks in American companies, they're selling U.S. treasury bonds, they're not coming here on vacation, and they're buying fewer American goods. Those are choices, the same way President Trump has made choices with his trade policies. But you can't take apart a system of global trade that's been built up over the past 80 years. You can't take it apart in just a matter of weeks and not have some blowback. I'm Kai Rysdal, and from Marketplace in Los Angeles. This is Selling America. We're going to take an hour now and as best we can because the changes are still happening. We're going to try to figure out what it's all going to mean. We're going to talk to some experts, we're going to hear from small businesses around the country, and we're going to answer some of your questions because what's been happening in and to the American economy in the past two and a half weeks is confusing. It's a little bit scary. It's going to take years to fully play out, and it's going to change America's place in the world. If you're going to take an hour and take a swing at the global economy. You'd best set the scene first. What's been happening already and what is yet to come, what selling America is really going to mean. So we've gotten Wendy Edelberg on the phone, friend of the program, also a senior fellow at the Brookings Institution. Wendy, it's good to have you back.

[Wendy Edelberg]

Happy to be here.

[Kai Rysdal]

What do you make of this moment? I guess, first of all, there are.

[Wendy Edelberg]

Two reasons that I'm worried and people conflate them, but I think they're different. There's all the uncertainty that Trump is creating that's just making this an impossible environment for anyone to invest in. And then there's the destruction of institutions. And those are both really bad, but actually bad for different reasons.

[Kai Rysdal]

Well, keep going. Tell me why.

[Wendy Edelberg]

All right, so let's take the destruction of institutions. And of course, the one that I'm most worried about is the Fed tariffs are going to push prices to a higher level. I mean, we can argue about how much that's going to happen, but it's going to happen. And that means temporarily higher inflation as prices rise to that new level. But once prices get there, theoretically, inflation goes back to some lower level. So in that world, a mortgage lender hopefully doesn't raise mortgage rates because they don't expect higher inflation over the next 10 years or whatever. They know that this is a short term thing. So the hope is that Powell doesn't feel like he has to raise interest rates just to convince everybody that the Fed is independent and credible and committed to low and stable inflation so he doesn't have to worry about mortgage lenders baking in higher expected inflation in the long run. And the sad irony is that that best case scenario depends on a credible Fed. It depends on households and businesses and lenders being totally confident that the Fed is independent. That is the very thing that Trump seems to be committed to destroying. And so paradoxically, Trump's efforts are going to buy him higher interest rates, not.

[Kai Rysdal]

Lower interest rates long term, Wendy, what's at risk for the United States here?

[Wendy Edelberg]

I mean it. Now we have to go beyond just the Fed as Trump goes institution by institution, the infrastructure of the federal government, our courts, Congress is doing a good job of destroying itself. These are institutions where it's going to take decades first. We have to get the desire up to reinvent these institutions. And, you know, we're clearly not there yet as a country. But, but even once we get there, it's, it's going to take decades to, to rebuild this infrastructure. And that's even ignoring the recession that I think is coming.

[Kai Rysdal]

This whole idea of. Of selling America is that the world is realizing, discovering, coming to understand that. That maybe it doesn't need us as the essential nation anymore. Right. And we should be clear that being the essential nation has come with some costs. Right?

[Wendy Edelberg]

Yeah. It's also come with huge benefits. We've been able to, you know, buy lots and lots and lots of stuff from overseas businesses in return for dollars that never find their way back into the United States. We basically, you know, know, print some paper and get all sorts of valuable stuff in return. And that. That is in large part because of, you know, how. How incredibly central the US Economy has been to the, to the global system.

[Kai Rysdal]

When you're in a. In a group chat with friends of yours overseas, the, you know, UK or French or Japanese equivalent of Brookings, what are they. What are they saying about the last two weeks in America?

[Wendy Edelberg]

Yeah, they're pretty much in a full panic, as you would expect. And they are figuring out how to pivot away from the US and create stronger coalitions so that they don't have to rely on the US Whether it's stronger coalitions among Europe, stronger coalitions in East Asia. I mean, that probably doesn't surprise anybody when I say that out loud.

[Kai Rysdal]

No, probably not. Let me. We have a minute left, and maybe that's too much time. Based on what I sort of intuit here is your mood, but where do you see signs of hope? What gives?

[Wendy Edelberg]

You.

[Kai Rysdal]

Take all the time you need. What makes you not despair right now?

[Wendy Edelberg]

Oh, God. All right. I refuse to answer that question and said, I'm going to talk about despair. So I want to say that.

[Kai Rysdal]

Answer the question you want, not the question that's asked. Right. You got 30 seconds.

[Wendy Edelberg]

I want to say that the reason that I think we're in for a recession is because of uncertainty. It is because no one can invest in this environment. And we are seeing all the survey evidence flash red. And so, you know, it is. It is uncertainty that is. That is going to make this economy fall off a cliff. Okay? So that's given me time to think about reason for optimism.

[Kai Rysdal]

Now you've got five seconds. That's probably enough. Right?

[Wendy Edelberg]

You got to reach bottom before you start, you know, going up.

[Kai Rysdal]

Wendy Edelberg at Brookings. Thank you, Wendy.

[Wendy Edelberg]

Thank you.

[Kai Rysdal]

See you. I said up at the top of the hour that it's scary out there and confusing, and it is even for those of us who've been doing this for a while. You heard Wendy Edelberg just now. So we're going to take a couple of minutes and also later in the program and answer some questions that we got on the socials. And the first one comes from Keith Merx. He's in Norman, Oklahoma. And here's what he says. Realistically, how long can we expect the US Dollar to remain the world's reserve currency? And the more complicated question for those of us here in the U.S. what then? So, look, the selling America thing is real, and among the things that are being sold is the US Dollar, which means it's getting weaker. On Inauguration Day, you could get €1 for $1.04. This week it cost you $1.14. That traditional safe haven asset is being seen as a little bit less safe. Now, that's not the same thing as not being the reserve currency, but it's related to, because right now the rest of the world needs dollars, like literally dollars. Oil, just for instance, is denominated in dollars. You need them to trade that most global of global commodities. And the infrastructure that's been built up around a safe and reliable dollar is huge, and it is deeply embedded. And right now there's not a viable alternative. The Chinese yuan, the euro, the Japanese yen, they've all got their own drawbacks. Now, what happens to us if and when the dollar's not the thing? And Wendy kind of talked about this as just one example to get back to where we started. Since everybody needs dollars, demand for them is high, so the dollar is strong. We can buy more stuff from overseas for cheaper. Of course, that does make our exports more expensive for overseas buyers. If our dollar's strong, right? And if we're not the reserve currency, that flips on its head. So there are goods and there are bads. Question number two. I'll try to be quicker on this one. Daniel Diffin, Westerly, R.I. what happens if China retaliates to the tariffs? I imagine he means here by refusing to buy US Treasuries. Well, a couple of things. China has lots and lots of dollars. It's that reserve currency thing I was just talking about. And it needs stuff to spend those American dollars on, like American Treasuries. So there's that. But also, this is a really complicated economic dance. If China starts dumping its treasuries, weakening the dollar, that lowers the value of all of their other dollar assets and so will hurt their own economy as well. Like I said, it's complicated. We are sorry. Just checking here. 16 minutes or so into this special, but I'm hoping it's already clear that President Trump's tariffs and the blowback from them are going to touch every single corporation corner of this economy. So we made some calls this week to Marketplace regulars to hear what it's like on the ground. And we start in Knoxville, Tennessee, with Wesley Rule, who owns Knoxville Fine Violins with his wife, Lauren.

[Wendy Edelberg]

The tariffs are actually currently causing a little bit of chaos in the industry. I've had several phone calls from distributors who have told me that shipments from China that relate to violins and cases have stopped. There's still some inventory left in the country, evidently, and we are trying to decide whether or not we should try to pull a small business loan and purchase the inventory that's already here or hope that trade relations kind of even out. We're kind of having to make decisions in lifetime. So my wife is actually here a bit more so that we can, as things happen, we can kind of make decisions. For instance, just today, we're trying to figure out bow hair because most of the bow hair comes from Mongolia through China. That's one of those little tiny things that violin players and cello players are getting re hairs all the time. And they don't think about the cost of the hair because it seems like such a small thing. But I'm probably looking at a hank of hair probably doubling in price. And so we'll have to figure out price prices for that so that we don't lose money on rehairs. So, yeah, it's just every day there's something.

[Kai Rysdal]

Every day there is indeed. Wesley Rule there at Knoxville Fine Violins, you name it, farmers are thinking it.

[Wendy Edelberg]

What isn't on our minds these days?

[Kai Rysdal]

That's next on Selling America a Marketplace Special. I'm Kai Rysdal, and this is Selling America a Marketplace Special. What is happening to this economy and what's it going to mean? All right, another couple of quick questions here. First one is from Joanne Santiago in Balerica, Massachusetts. What happens to the funds generated by US Tariffs? She wants to know, is there a law specifying how those funds be spent? So, first of all, all the tariff payments collected by Customs and Border Protection are deposited into the Treasury Department's general fund, the main bank account. And once they're there, they can be used for pretty much anything, or to be really clear, anything Congress decides they should be spent on, because that's the answer to the second question she had. Congress, of course, has the power of the purse. That's in the Constitution. Related from Skip Desjardins in Avon, Connecticut. Trump says billions have already come in. Will the public ever see a real accounting? In point of fact, Skip, great timing on this question because we got an update this week. Customs and Border Protection says the president's tariffs since April 2 have brought in $500 million. Two things you need to know about that. As Skip said, President Trump has said more than once, we are collecting $2 billion a day. That is not true. And also, and this is true, tariffs are a tax on, on American consumers. That's where the money's coming from. Last one, we've gotten it from a couple of people, basically. Are we in a recession? Has the recession started yet? The short answer is no to both of those. The longer answer is that there is actually a group that decides when recessions start and end. It's always done retroactively, by the way, once the recession is over. It's the Business Cycle Dating Committee of the National Bureau of Economic Research. The their criteria, should you be curious, a significant decline, they say, in economic activity that has spread across the economy and lasts more than a few months. There is the big picture on tariffs, of course, what it's going to mean that President Trump's making it harder for the United States to be a key part of the global economy. But there is the very specific micro to what it all means for people on the ground interpreting trade rules in real time. People like Gretchen Blough, customs brokerage manager at Logistics plus in Erie, Pennsylvania, thankfully, always willing to answer our calls and our questions. Hi, Gretchen.

[Wendy Edelberg]

Hi.

[Kai Rysdal]

So, first things first, and this is actually a listener question. Where do you get your information?

[Wendy Edelberg]

So we get our information from a couple of different sources. We get it from the executive orders that are initially issued. We get it from the Federal Register once that's more interpreted. And then Customs and Border Protection will usually send out CSMS messages to further clarify things as to, you know, how, how the tariffs are implemented.

[Kai Rysdal]

I'm going to assume CSMS is some very specific customs thing. But, but so let me ask you real life, for instance, we had for 24 hours enormous tariffs on most of the world. And then they kind of went away. They were put into place and then they went away. What happened in that 24 hours for you and your clients?

[Wendy Edelberg]

Well, I told them one thing in the morning and then by this, by the time the afternoon rolled around, everything I said was totally, completely false. So there is that. So then they, then they should start scrambling and what should we do and what's going to happen in these 90 days? And we still don't know. And what's going to happen after the 90 days? We don't know that either. What's my best course of action? You know, we've been telling everyone to pretty much get things here as quickly as possible, and, you know, they're scrambling to find ways to do things. Can we keep them in Canada? Will that help us out? We don't know. Wow.

[Kai Rysdal]

That's kind of no way to run a business.

[Wendy Edelberg]

No. No, it's not. There's so much uncertainty. No one's. No one knows how to plan. Everyone's kind of looking to, what can we do to mitigate what happens? Where's the best place to source? And since anything can happen in those 90 days, the retaliatory tariffs for each country could change by the time the 90 days is out. So.

[Kai Rysdal]

Yeah. So a giant shrugging emoji. Are you seeing supply chains change in real time yet?

[Wendy Edelberg]

A bit, yes. What's happening is because there's the steel and the aluminum tariffs, a lot of people are letting you know, having their shipments sit until they figure out, well, what portion of my product here is steel or aluminum? Because that portion, that steel or aluminum, and this is something we've rarely ever seen before, will have a 25% tariff where the rest of it. The rest of the goods will have the 10% retaliatory tariff.

[Kai Rysdal]

So sorry, to be clear here, you have to kind of subdivid line item of whatever the thing is with.

[Wendy Edelberg]

With certain commodities. Yes.

[Kai Rysdal]

Wow.

[Wendy Edelberg]

We're doing that. Yeah. And we have to know the. The weight of the steel or the aluminum. We have to know the country of smelt and the country of poor.

[Kai Rysdal]

I'm so. I'm sorry. The country of smelt.

[Wendy Edelberg]

Yes. Where that was melted at. Really? Yes.

[Kai Rysdal]

Wow.

[Wendy Edelberg]

In the country of poor.

[Kai Rysdal]

I'm sorry, the country of smelt and the country of poor.

[Wendy Edelberg]

Yes.

[Kai Rysdal]

Wow.

[Wendy Edelberg]

And you ask people that and they're like, are you kidding me?

[Kai Rysdal]

Right. Well, like me. Right.

[Wendy Edelberg]

Like you. Yeah, exactly. That's the same reaction we get from customers. So they have to go back to their suppliers and see if that information is available.

[Kai Rysdal]

Right. And of course, these suppliers are saying. I'm probably paraphrasing here. And we got 30 seconds. The suppliers are probably saying, you Americans are crazy, right?

[Wendy Edelberg]

Pretty much, yes.

[Kai Rysdal]

Wow.

[Wendy Edelberg]

I believe so.

[Kai Rysdal]

You ever seen anything like this, Gretchen?

[Wendy Edelberg]

No, not at all. This is making the COVID epidemic look.

[Kai Rysdal]

Oh, man.

[Wendy Edelberg]

Easy.

[Kai Rysdal]

That is a horrible comparison. No joke. Gretchen Blau, Logistics plus in Erie, Pennsylvania. Gretchen, thank you so much.

[Wendy Edelberg]

Thank you. Always A pleasure.

[Kai Rysdal]

President Trump and members of his Cabinet are pretty clear what they want to do with these tariffs. Get other countries to knuckle under and negotiate. And the White House is having some success. The president says he spoke with Mexico's president and Italy's prime minister this week. Talks apparently continue with Japan. But let's us play the long game here. Beyond the chaos of this moment, what kind of global economy are we looking at and what's that going to mean for US Marketplace spree? Benishore is on that one.

[Wendy Edelberg]

While the US has been building new.

[Kai Rysdal]

Barriers to trade, other countries are tearing them down between each other. The world is going to keep spinning.

[Wendy Edelberg]

On its axis, with or without the United States. Richard Weiner is senior counsel at law firm Sidley Austin. The EU has a very extensive array of free trade agreements with many countries and regions in the world, and it's already working. More deals to come. He says China is also moving aggressively. It is the top trading partner for 120 countries.

[Kai Rysdal]

The US can perhaps decouple itself from.

[Wendy Edelberg]

China, but it can't readily decouple China.

[Kai Rysdal]

From the rest of the world.

[Wendy Edelberg]

So what this means is other countries are negotiating discounts on trade between each other while the US Is making things more expensive for itself. That is what tariffs do. It's true. A lot of countries have said they want to negotiate U.S. tariffs down. I don't think we're likely to get many bilateral trade deals. Emily Blanchard is an economics professor at Dartmouth's Tuck School of Business. I think the United States just crafts its economy to be more insular, which will be expensive for the United States. Expensive indirect ways. Canadians don't want U.S. wine anymore. China's choking off U.S. beef exports. Ditching American soybeans for Brazilian ones. And expensive in indirect ways. 92% of the money earned from tariffs on China in the first Trump administration was spent compensating US Farmers for their losses. But the biggest loss to the US Economy would be slower and deeper.

[Kai Rysdal]

Trade is an enormous driver of productivity growth.

[Wendy Edelberg]

Nick Bloom is professor of economics at Stanford.

[Kai Rysdal]

Partly it generates new ideas, and partly it generates competition.

[Wendy Edelberg]

An economy insulated from global competition is an economy that starts to lose its edge.

[Kai Rysdal]

Bloom estimates new trade barriers would cut.

[Wendy Edelberg]

U.S. productivity growth in half. Simon Ivanet is a professor of geopolitics.

[Kai Rysdal]

And strategy at IMD Business School in Switzerland.

[Wendy Edelberg]

Firms facing less competitive pressure slowdown in cost, discipline and innovation. We probably won't notice immediately it's accumulating over time and you don't feel like you've jumped off a cliff and there's a massive drop in living standards. But he says over time it will become clear.

[Kai Rysdal]

The irony is that productivity and prosperity.

[Wendy Edelberg]

Are the most existential costs of isolation, but also the ones we'll notice last.

[Kai Rysdal]

In New York, I'm Sabri Benishour for Marketplace. The thing about having regulars is that you get to know them and they get to know you. Here is our friendliest of marketplace farmers.

[Wendy Edelberg]

I'm April Hemmes. I'm from Hampton, Iowa, north central Iowa, and I farm soybeans and corn. What isn't on our minds these days? Well, I have to tell you, before I got on to talk to you guys, I went, well, has anything changed since I've been in the tractor this morning? Because it's kind of like we're changing the tires as we're going down the road sometimes. And farmers are used to swings in the market. We're used to supply and demand swings, but when you throw the tariffs in there, we really can't prepare for that. Inputs last year were very high and the prices have come down. So it's, you know, we are planting crops right now. Many farmers are without a chance to make money where the markets are. So, but our inputs are higher than what we could get if we sold the crops. So I worry about the younger farmers really trying to start. I started and it wasn't real great. It was the middle of the 80s, the farm crisis. But the younger farmers now are starting with very high inputs and lower prices.

[Kai Rysdal]

April Hemis, corn and soybeans in Hampton, Iowa. We've heard from some businesses so far this hour. We're going to hear from a couple of three more. But you can't talk about what tariffs are going to mean for those businesses without talking about workers, workers who not only help businesses succeed, but who as consumers are also driving this economy. Katherine Ann Edwards is a labor economist and a policy consultant. It's good to talk to you again.

[Wendy Edelberg]

Thank you for having me back.

[Kai Rysdal]

Could we just do a little ground truth here? State of the labor market, say, oh, April 2nd. I picked that date out of nowhere.

[Wendy Edelberg]

Of course, the labor market was showing continued signs of strength, adding more jobs than expected in March and hopefully seeing some posted nominal wage gains to continue to get over the inflation hump.

[Kai Rysdal]

So the reason we have you on is because we were literally, we were spitballing the other day and we're like, you know, this is going to start showing up. There might be some price increases from all this tariff stuff, and that's eventually going to happen, but the labor market is going to show real economy slowing. And my question is what are you watching with the acknowledgement that labor indicators lag? What are you going to be keeping an eye on to know things are really starting to bite?

[Wendy Edelberg]

Well, looking over the beige book from March, I was struck by the themes of uncertainty and tariffs. I mean if it's a 50 page report, they say tariffs 50 times and uncertainty just as many. And if you go through and look at what the banks are reporting, it's pause on hiring, slow on hiring. You can see the phrase wait and see show up all over the report. And I think that that really gives you a clue as to what employers are feeling that they are not standing on stable ground. And that was before that.

[Kai Rysdal]

Random April 2, the yes, the random date, the beige book of course, for new listeners and hopefully we've got a zillion of them on this special. It's, it's the Fed's eight time a year regional look at the economy region by region. I appreciate the, the complexity of this seemingly simple question, but how long is it going to be before starts stuff starts showing up in actual data?

[Wendy Edelberg]

It's a great question made more complicated by the fact that we don't have any type of policy certainty of what is even going to happen with tariffs. I mean if we humans are having a hard time understanding, imagine how employers feel like they don't want to hire people they'll have to fire right away. But your question was when do we think this will show up?

[Kai Rysdal]

Keep going with that thread. They don't want to hire people, they're going to have to fire right away. That's really significant.

[Wendy Edelberg]

Hiring is not free. It's an investment for them to spend the time to find and recruit and train people to join. And they don't want to do that just to have to fire them because their bottom line has been so affected by tariffs. And so it feels like we've been in wait and see for so long now. The reason for waiting and what we're looking to see has changed and it's gone from waiting to make sure that we're not going to have an inflation induced recession and seeing signs of growth that we have moved past inflation and the labor market is still strong to now it's well, let's wait to see what our trade policy is tomorrow and see what effect that has on my production input, cost. And so this problem is the same as it has been for the past two years, but the source of the uncertainty has changed and I think by all rights, has gotten much worse.

[Kai Rysdal]

Right, right, right. So if I'm a regular worker in this economy trying to get by, what should my general state of adjective be?

[Wendy Edelberg]

You know, what I am worried about is that consumer sentiment has been dipping and consumer sentiment, economists think that it's one part vibes, but the other thing that it can reflect is news that hasn't been translated to data yet. We haven't seen layoffs, but maybe my boss told me, look, if we can't get sales up for the next three months, we're going to have to do layoffs in summer. And that hasn't shown up in a single data set except for the one where I tell you I don't feel as good about the economy as I did before. So consumer sentiment tanking as much as it is is really worrying that many people are starting to hear from their employers that something bad is coming. When we see layoffs, we'll see a dip in sentiment first.

[Kai Rysdal]

Right? Right. This has been a very right now the problems in front of our face conversation. And I guess I want to ask, you know, in the long run, this economy grows, it innovates and people prosper. How big a hiccup is this in that long term trend, do you think?

[Wendy Edelberg]

The US economy has been through 13 recessions since the end of World War II and they all have some horrific honorific to lay claim to. Worse job loss, highest unemployment, biggest hit to gdp. And yet we've evolved and recovered and often have short memories of the pain. So I think as scared or worried as people may be about their jobs, we have always bounced back. Sometimes it's taken a minute, maybe longer than economists would have advocated for. But we do bounce back and grow. And that is a gift to know that our economy will grow again.

[Kai Rysdal]

Labor economist Kathryn Ann Edwards. Dr. Edwards, thanks for your time, ma'am. I appreciate it.

[Wendy Edelberg]

Thank you so much for having me.

[Kai Rysdal]

What came first, tariffs or supply chains?

[Wendy Edelberg]

They have all of those processed steps nailed down.

[Kai Rysdal]

That's coming up on Selling America, a marketplace special. I'm Kai Rysdal, and this is a marketplace special, Selling America. What's happening to this economy and what is it gonna mean if I could get all Rumsfeldian on you here for a minute? What we have right now, macroeconomically speaking, is a whole lot of unknown unknowns. It's been, as Jay Powell pointed out the other day, 95 years since there have been tariffs this high. Smoot Hawley, anyone? Anyone? And that makes trying to figure out what's going to happen really hard. We are not, as I said earlier, in a recession at this moment. But big Wall street banks have raised their estimates on whether it's going to happen this year again, thanks entirely to the president's tariffs. Goldman Sachs says there's a 45% chance. JPMorgan Chase 60% marketplace Justin Ho looked into how economists put those forecasts together.

[Wendy Edelberg]

Predicting the likelihood of a recession requires more than just crunching numbers. There's a science to forecasting, and then.

[Kai Rysdal]

There'S an art to forecasting.

[Wendy Edelberg]

That's Jay Bryson, chief economist at Wells Fargo. He says the science involves sophisticated modeling software. He'll start by entering a bunch of variables that could affect the economy, like new tariff rates, interest rates, changes to government spending. And the program will tell him how those variables will play out.

[Kai Rysdal]

So it spit out real GDP growth.

[Wendy Edelberg]

Spit out the cpi, inflation rate, real.

[Kai Rysdal]

Business investments, export growth, import growth.

[Wendy Edelberg]

And that's where the art comes in, judgment calls. Bryson says we don't really know what's going to happen with interest rates or government spending, and we definitely don't know where the president's tariffs will end up. So what we did was we said.

[Kai Rysdal]

Okay, probably not all these tariffs are.

[Wendy Edelberg]

Going to go into effect. He'll probably end up making some deals with some countries, but. So Bryson and his team made that judgment call. They decided that this year there's a 55% chance of a recession.

[Kai Rysdal]

I want to say, you know, to.

[Wendy Edelberg]

People that we think that it's more likely than not, but six months from.

[Kai Rysdal]

Now, nine months from now, if we.

[Wendy Edelberg]

Don'T go into recession, I wouldn't be.

[Kai Rysdal]

Terribly surprised about that.

[Wendy Edelberg]

Not everyone's comfortable making judgment calls. Over the last few weeks, several companies, including Delta Airlines and the electronics company Logitech, made the unusual movement to avoid any predictions or guidance about future profits in their quarterly earnings reports. John Bai is a finance professor at Northeastern University.

[Kai Rysdal]

The last thing a company wants is to issue guidance that's either too vague, too ambiguous, or the worst would be you issue something that's completely wrong.

[Wendy Edelberg]

But one thing that's clear is that the tariffs will change the economy regardless of whether a recession happens, says David Kelly, chief global strategist at JP Morgan Asset Management.

[Kai Rysdal]

It's kind of like one of those days in the winter where the temperature is 34 degrees. Is it going to snow or is it just going to sleet? It's pretty close, but it's not going to be a nice day anyway.

[Wendy Edelberg]

Even though JP Morgan is predicting a 60% chance of a recession, Kelly is all but certain that employment growth, imports and exports, and business investment will slow down this year. I'm Justin Ho for Marketplace.

[Kai Rysdal]

The thing about tariffs is that even businesses that don't import from overseas directly are going to suffer downstream effects.

[Wendy Edelberg]

My name is Kalina Bruce. I am the CEO and founder of Noir Luxe Candle Bar in Seattle, Washington. I think just in general, there's a lot of uncertainty, especially when it comes to small businesses, because we know that there's going to be an effect on us. We just really don't know what that looks like. We have a client that we've done a big order for in the past, and they're interested in doing a bigger order than what they've done in the past, but they're concerned about the tariffs. So they want to know more information about where our supplies and materials are coming from and if, realistically, we can sustain through whatever may happen with the tariffs. So, so that means I have to go to my suppliers and say, hey, you know, there's a potential that I may get this really big order. You know, are you going to be able to guarantee that you can give me the vessels that I need? Or, you know, am I going to be able to have access to however many boxes of wax that I need? So those are the sorts of conversations that I'm currently having, because, again, there's so much uncertainty that we just really don't know what it's, what it's going to look like.

[Kai Rysdal]

Kalina Bruce, CEO and founder of Noir Luxe Candle Bar up in Seattle There might be a narrow slice of one particular industry or another that's not going to be touched by President Trump's tariffs. Honestly, trying to keep track, as Gretchen Blau is telling us, is a lot. But the fact is that virtually every industry that sells goods in this economy is going to be hit and the tariffs are going to have an outsized impact on apparel. Something like 98% of all the clothing sold in the United States is imported. That's from the United States Fashion Industry association and the top supplier. Yeah, the country that President Trump has put 145% taxes on on its imports to us. But even companies that can find workarounds to their Chinese supply chain. And even if they actually make their clothes here, a lot of times fabrics and buttons are still coming from overseas. Marketplace's Kristen Schwab has more.

[Wendy Edelberg]

Andrew Chen's signature product is jeans. Specialty pairs for denim nerds. And one thing that makes them special is that they're put together in the US early on in the brand. When we were still learning how to make jeans, there was a lot of value that came with being able to visit the factory to understand how and really get acquainted with that process. Chen co owns the menswear brand 316. His CS100X jeans retail for $250, and he says his company pays a premium to have the garment assembled in San Francisco. Note the word choice here. Assemble. Because the actual denim fabric is made in Japan, we specified everything about it from the number of dips of indigo that the yarn gets to the hand feel that we want to the way that it's supposed to look two or three years down the line after you've been wearing it faithfully. Japan is known for selvedge denim made on old school looms that give the fabric a finished edge. The process is tedious and labor intensive. There's a long and storied over a century's worth of history of, you know, textile development of denim, development of indigo dyeing. It's a part of their culture. It is not a part of ours. In the US at least not anymore. Most denim, whether it's specialty or mass made, is produced abroad. In fact, most textiles are made overseas, mostly in Asia, which is a big reason why a lot of clothing is also manufactured there, says Phyllis Savachko at apparel consulting agency Stateless. They're very good at what they do in apparel manufacturing. It's skilled labor. They have all of those process steps nailed down. Chinese manufacturers are especially skilled at something called vertical integration. Basically factories that do it all fabrics, buttons, trim in house. There's no calling one supplier over here to check on a shipment or calling another over there to make sure the thread will match. Savachko says this saves companies a lot of time and money, but tariffs are changing the equation. I've been working on costing for clients, and I've seen it double and triple. So some apparel makers are looking to leave China and move production to Vietnam or India or South Korea. They are unlikely to come to the US anytime soon. For one, that's going to cost companies and in turn, consumers a lot more, mostly because of labor. Sonja Lipinski runs the fashion retail practice at Alex Partners. You know, we've been trained that we can get goods at such affordable prices. It's going to be really hard for consumers to kind of swallow what it would take to afford locally produced products. Even if consumers are willing to pay higher prices, it would take years to move production to the U.S. brands have to buy equipment, train workers, and open up factories specializing in fabric, zippers, buttons and sequins. That takes a lot of capital. And to get there, companies would need trade policy certainty. And when there's this much uncertainty, retailers are are unlikely to make a significant capital investment until they are more sure about how things are going to sort out. For Chen, at 316, there's no way his small menswear company could afford to run its own fabric factory. He has just 15 employees. He says they're expert designers, not experts at turning cotton into denim fabric. To open up our own manufacturing facility, that is its own skill set. We wouldn't know where to begin or how to do it. So he says he'll keep importing from Japan, and inevitably the price of his jeans will have to go up. I'm Kristen Schwab for Marketplace.

[Kai Rysdal]

The Trump administration claims its tariff regime is going to bring manufacturing jobs back home. Not explained is how exactly taxing imports is going to do that at scale. Because this economy and the jobs in it have changed a lot in the three or four decades since the heyday of American manufacturing. We got Matt Notawodigdo on the phone to talk about the reality of reshoring. He's a professor of economics at the University of Chicago's Booth School of Business. Matt, it's good to talk to you again.

[Wendy Edelberg]

Thanks for having me.

[Kai Rysdal]

So the Trump administration says, as we all know, that what his tariffs are going to do is bring manufacturing jobs back to the United States. And we've gotten more than one listener question that says, has that ever worked? Did tariffs actually get us manufacturing jobs back? And since you're the guy, has that ever worked?

[Wendy Edelberg]

Yeah, I can go not too far back in time. President Bush imposed steel tariffs in 2002. President Obama imposed tariffs on tires in 2009. In both cases, the economics research I've seen suggests that it did save some jobs, maybe a couple thousand. So it's a bit of a drop in the bucket when we're talking about 13 million manufacturing workers. But at least in those industries that were most protected, it does look like it kept people employed.

[Kai Rysdal]

Keep going on the whole scale thing.

[Wendy Edelberg]

Right?

[Kai Rysdal]

There's 168ish million people in the American labor force. What President Trump says he's trying to do is reshape that manufacturing labor force a couple of thousand, ain't it? Right?

[Wendy Edelberg]

Yeah, it's ambitious, that's for sure. I think when you think about what tariffs are doing to the economy, it's protecting these jobs, as I just described. But it's only in the industries that are getting protected. And one of the consequences of these tariffs that economists are often concerned about is there's a bunch of other industries that could be negatively affected. Just take steel, for example. You impose steel tariffs. That's good for people manufacturing steel. There's a bunch of other manufacturing industries that use steel, and then they get negatively affected. And a lot of the research I've seen suggests that you end up losing even more jobs than you save, which makes tariffs seem pretty counterproductive.

[Kai Rysdal]

Can you talk about the kinds of manufacturing jobs we have in this economy now versus the kind that I think President Trump and his cabinet are thinking about bringing back? Of course, Howard Lutnick, the Secretary of Commerce, said, we're going to have millions of people screwing tiny little screws into iPhones. And, you know, to quote somebody else, we want to use iPhones in this country. We don't want to make them.

[Wendy Edelberg]

Well, you know, I think that it's. It is important to note that manufacturing used to be a lot more physically demanding. And today, when you look either in the US or outside the country, manufacturing looks a lot different. There's a lot of industrial robots. There's workers that focus mostly on operating and using machines. So it's. It's not quite the same physically demanding work that it used to be. It looks something almost closer to engineering, and so requires a different type of training, different set of skills. If President Trump succeeds, and we do end up with a lot more manufacturing in the country, it's not clear that it's going to be a lot more jobs, because manufacturing, even in China, is just not as labor intensive as it used to be.

[Kai Rysdal]

What about training people to do these kinds of jobs? As you said, it's almost engineering, high tech. Ish.

[Wendy Edelberg]

I think there's potential here in the sense that if you develop training programs that train workers to work in particular sectors. I mean, today in the US we're trying to do this in healthcare and information technology. I think those training programs can be successful. But, you know, to re industrialize the United States, you'd need to create those same kinds of training programs for the manufacturing jobs. We were just talking about people that would, you know, have to operate and supervise industrial robots. I mean, in principle, you could create training programs so that people could do those jobs. But my sense is that we don't have a lot of that going on right now.

[Kai Rysdal]

Talk to me for a second about the American labor force today and what people want out of. I mean, I suppose this is a really fundamental question. What people want out of their jobs, do they want necessarily manufacturing jobs?

[Wendy Edelberg]

It's hard to say. The data I look at is how long it takes to fill a job vacancy across different sectors. And manufacturing doesn't look particularly good on this dimension. Every time there's a manufacturing vacancy that opens up, it takes a lot longer to fill than in other sectors like in healthcare or technology. I think another important statistic is that the average age of manufacturing workers has been steadily going up over time. Basically the reason we still have 13 million manufacturing workers is because a lot of older people are holding out and this is what they know how to do. But it doesn't look like the younger generation sees nearly as much of a future in manufacturing. And so they're planning to try to do something else. They're making education choices and college decisions that suggest that they might want to do something else in the future.

[Kai Rysdal]

So if you were gonna. If the president called you and said how would you re industrialize the American economy? What would you say? How would you do it?

[Wendy Edelberg]

I would try to talk him out of it.

[Kai Rysdal]

Honestly.

[Wendy Edelberg]

I think I would try to explain to him that every successful high income economy in the world right now, now is continuing to move away from manufacturing. And if you want to focus on how to support the economy, you want to try to focus on getting workers the training for jobs that are still going to be part of the work of the future. And it's honestly still a bit puzzling to me why the administration thinks that manufacturing jobs are an important part of the work of the future. I'd really like to see the focus more on technology jobs and healthcare jobs. I'm part health economist, as I think you know, and I'm pretty convinced that healthcare is the work of the future. So let's try to make sure we're training those workers as well.

[Kai Rysdal]

Matt Nota wdigdo at the Booth School at the University of Chicago. Matt, thanks a lot. I appreciate your time. Thank you. It's one thing to deal with tariffs and trade policy as you're trying to run your business. Imagine if consulting on tariff and trade policy is your business.

[Wendy Edelberg]

My name is Dr. Sarita Jackson and I am the founder and CEO of the Global Research Institute of International Trade based in Los Angeles, California. On April 9th, I literally was at my computer putting the final touches on a presentation for business executives. I just happened to have the news going on in the background and I see breaking news, 90 day pause on these tariffs. So then it was like, okay, well I will have to let them know. But at the End of the day, the US Is a large market and where the consumers have purchasing power. So there still is that focus on the US Market. The question becomes again, which way are the winds blowing today? Personally, I've had to just set parameters during the day when I because I have to literally stay on top of news so that I know what's happening and I can provide as up to date information for my clients. But then there are times where I just have to kind of shut it off. I do this exercise boot camp and that really helps me to get through the day, quite frankly.

[Kai Rysdal]

Whatever it takes to get you through it these days, right? Serita Jackson Trade consultant here in Los Angeles I said an hour ago that we were going to try to figure out what's happening to this economy, selling America and what that's going to mean. We heard from businesses that are bewildered about what's going to happen and what they should do, experts who were worried and keeping a close eye on things. The problem is that it's so early. We're only three months from Inauguration Day, two and a half weeks from the tariffs of April 2nd. And the fact is that in that relative blink of an eye, we've been living through the biggest structural change in this economy in a century. An economy that for 80 years has been the biggest and most important in the world. It used to be that what you did was buy America. You bought dollars and treasury bonds and American stocks and the whole American economy. What we offered was something you couldn't get anywhere else. The way it stands now, the rest of the world seems to be betting that they can get it somewhere else. Our special was produced by Andy Corbin, Nicholas Guillaume, Maria Hollenhorst, Iru Ekbnobi, Sarah Leeson, Sean McHenry and Sophia Terenzi, John Gordon and Amanda Peacher edited Jake Cherry Engineered Nancy Fargali is the executive producer of Marketplace. Donna Tan is the executive editor. Neil Scarborough is the vice president and general manager. And I'm Kai Rysdoff. This is apm.