Tariffs and economic growth, both globally and at the checkout line

Summary

Marketplace Morning Report: Tariffs and Economic Growth, Both Globally and at the Checkout Line

Release Date: June 3, 2025

In this episode of Marketplace Morning Report, host David Brancaccio delves into the intricate relationship between tariffs and economic growth, both on a global scale and within the American consumer marketplace. The discussion highlights recent findings from the OECD, explores the tangible effects of steel and aluminum tariffs on everyday grocery prices, and examines the broader implications for retailers and consumers alike.

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1. OECD's Assessment of Global Economic Growth

Timestamp: [01:20]

David Brancaccio opens the episode by presenting the OECD’s stark outlook on the global economy. According to Nancy Marshall Genser, the organization warns of a significant slowdown in economic growth due to ongoing tariff uncertainties.

• US Economic Growth: The OECD projects that the United States will experience a modest economic growth rate of 1.6% for the year. This subdued performance is attributed to substantial trade barriers, waning business confidence, and heightened uncertainty in the trade environment.

  "Economic growth in the US this year will be a paltry 1.6%," Nancy Marshall Genser reports. (01:39)

• Global Impact: On a global scale, the OECD anticipates that economic growth will dip below 3% for the year, with the most pronounced slowdowns expected in the U.S., Canada, Mexico, and China.

  "Global economic growth will fall below 3% this year," explains Genser. (01:39)

• Inflation Concerns: The resurgence of inflation is another critical issue highlighted by the OECD. Tariffs are exacerbating price increases, and there is concern that escalating trade wars could further drive up inflation while simultaneously stalling economic growth.

  "Tariffs pushing up prices, adding that things could get worse if the trade war intensifies," notes Genser. (01:39)

• Policy Recommendations: The OECD advises global policymakers to collaborate in preventing further tariff escalations and to encourage manufacturers to diversify their supply chains to mitigate these economic pressures.

  "Collaborate to keep tariffs from ratcheting up even more and encourage manufacturers to diversify their supply chains," Genser suggests. (01:39)

2. The Ripple Effect of Steel and Aluminum Tariffs on Grocery Prices

Timestamp: [02:34] - [05:24]

Shifting focus to the United States, Brancaccio introduces the segment on how tariffs on steel and aluminum are impacting the prices consumers see at the checkout. Samantha Fields and John Clear provide an in-depth analysis of this issue.

• Connection Between Tariffs and Groceries:

  Samantha Fields initially questions the direct link between tariffs on heavy metals and grocery prices, a connection that might not be immediately apparent to consumers.

  "What's the first thing you thought about when you heard Trump was doubling tariffs on steel and aluminum, the price of groceries? Yeah, no, me neither," Fields remarks. (02:49)

  John Clear clarifies that tariffs on inputs like steel and aluminum significantly impact packaging costs, which in turn affect the prices of a wide array of grocery items.

  "Tariffs on inputs like steel and aluminum may not seem that connected to food, but they are critical for packaging," Clear explains. (02:56)

• Impact on Packaging and Consumer Goods:

  David Ortega from Michigan State University emphasizes that many canned goods—such as tuna, soda, beer, and pet food—rely on steel and aluminum for packaging. The majority of this packaging material is imported, making these products susceptible to price hikes due to tariffs.

  "Think about all those canned goods you buy, canned tuna, soda, beer, pet food even," Fields notes. (03:05)

  Usha Haley of Wichita State University adds that nearly 70% of the tin plate steel used for cans is imported, highlighting the significant reliance on foreign materials.

  "The United States just does not produce enough steel, and the US imports nearly 70% of tin plate steel that manufacturers use," Genser states. (03:22)

• Downstream Price Increases:

  The imposition of tariffs is likely to lead to increased prices not only for canned goods but also for other products reliant on steel and aluminum packaging. Companies may substitute materials (e.g., switching from aluminum to plastic), potentially driving up the costs of these alternatives as well.

  "If companies...start using more plastic instead, that could cause plastic and anything packaged in it to get more expensive too," Fields explains. (03:37)

  Additionally, indirect costs such as transportation and logistics are also rising due to increased material costs, further contributing to higher retail prices.

  "All of which also get more expensive as steel and aluminum do. And that can trickle down into the prices we pay for pretty much everything at the store," Fields concludes. (04:00)

3. Challenges for Retailers and Impact on Consumers

Timestamp: [04:16] - [05:24]

The discussion moves to the challenges retailers face in absorbing these increased costs and the subsequent impact on consumers, particularly those reliant on SNAP benefits.

• Retailers’ Dilemma:

  John Clear outlines the precarious position retailers are in. Consumers are acutely aware of price increases, leading to diminished trust, while retailers have limited flexibility to further increase prices due to already thin profit margins.

  "Retailers are in a tough spot because consumers are super conscious of all the price increases, so they know they're losing trust, but also they don't have a lot more room in their margins to continue," Clear explains. (04:16)

• Impact on SNAP Beneficiaries:

  As prices rise, especially for staple items like canned vegetables, consumers on SNAP benefits may find their limited budgets stretched even thinner. An increase of just a few cents per item can translate to a significant percentage hike relative to the original price.

  "If a company...passes along the increased cost...that might only be an extra 2 to 5 cents," Fields mentions. (04:45)

  "But a can of sweet corn at Walmart is like 42 to 45 cents. So an extra 5 cents would make it cost about 10% more," Clear adds. (04:50)

  This price sensitivity means that over time, consumers may reduce their purchases, leading to decreased sales volumes for retailers.

  "If you're a big company like Walmart and thousands of customers start buying one less can of corn at thousands of stores, it adds up," Fields notes. (05:11)

4. Broader Economic Implications and Future Outlook

Timestamp: [05:24] - [09:31]

Brancaccio touches upon additional economic factors influenced by tariffs, including job openings and market dynamics, while also briefly covering unrelated segments like the NBA Finals and the "This Old House Radio Hour."

• Tariffs and Employment:

  The conversation highlights that while tariffs aim to protect domestic industries, they also contribute to economic uncertainty, which can dampen job growth. Forecasters predict around 100,000 fewer job openings, marking a 1.4% decline.

• NBA Finals and Market Dynamics:

  A segment discusses how the NBA Finals featuring teams from smaller media markets reflects the league's salary cap policies, promoting competitive balance but potentially limiting ticket revenue in smaller cities.

• This Old House Radio Hour:

  The episode also mentions the expansion of "This Old House Radio Hour" into a podcast format, offering insights into home improvement and rebuilding efforts, particularly in regions affected by wildfires.

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Conclusion

The Marketplace Morning Report episode effectively underscores the complex interplay between international trade policies and everyday consumer experiences. Tariffs on essential materials like steel and aluminum not only dampen economic growth globally but also manifest in increased prices at the grocery store checkout. This ripple effect poses significant challenges for both retailers and consumers, particularly those with constrained budgets. As policymakers navigate these turbulent economic waters, the insights provided by economists and industry experts offer valuable perspectives on mitigating adverse impacts and fostering a more resilient economic landscape.

Notable Quotes:

• "Economic growth in the US this year will be a paltry 1.6%." — Nancy Marshall Genser (01:39)

• "Tariffs pushing up prices, adding that things could get worse if the trade war intensifies." — Nancy Marshall Genser (01:39)

• "Tariffs on inputs like steel and aluminum may not seem that connected to food, but they are critical for packaging." — John Clear (02:56)

• "If companies...start using more plastic instead, that could cause plastic and anything packaged in it to get more expensive too." — Samantha Fields (03:37)

• "Retailers are in a tough spot because consumers are super conscious of all the price increases, so they know they're losing trust, but also they don't have a lot more room in their margins to continue." — John Clear (04:16)

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This summary captures the key discussions and insights from the June 3, 2025 episode of Marketplace Morning Report, providing a comprehensive overview for those who haven't listened to the full podcast.

Transcript

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[Podcast Host]

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[David Brancaccio]

Tariffs and Economic Growth Both globally and at the checkout David I'm David Brancaccio in Los Angeles. The world will see lower economic growth due to tariffs and tariff uncertainty. This is the conclusion of economists working for the club of rich nations known as the oecd.

[Nancy Marshall Genser]

The Organization for Economic Cooperation and Development now says economic growth in the US this year will be a paltry 1.6%. The OECD blames substantial barriers to trade Canada diminishing confidence and heightened uncertainty. It says global economic growth will fall below 3% this year. The slowdown is expected to be most concentrated in the U.S. canada, Mexico and China. The OECD warns that inflation is also resurfacing with tariffs pushing up prices, adding that things could get worse if the trade war intensifies with higher trade taxes pushing inflation up even more while tamping down growth. The OECD has some advice for global policymakers. Collaborate to keep tariffs from ratcheting up even more and encourage manufacturers to diversify their supply chains. I'm Nancy Marshall Genser for Marketplace.

[David Brancaccio]

Now to the economics of heavy metal and not so heavy metal, steel and aluminum. Taxes on imports set to go into effect tomorrow. They're meant to prop up U.S. jobs but can also prop up prices in even at the supermarket. Here's Marketplace's Samantha Fields.

[Samantha Fields]

What's the first thing you thought about when you heard Trump was doubling tariffs on steel and aluminum, the price of groceries? Yeah, no, me neither.

[John Clear]

Tariffs on inputs like steel and aluminum may not seem that connected to food, but they are critical for packaging.

[Samantha Fields]

David Ortega at Michigan State University says, think about all those canned goods you.

[John Clear]

Buy, canned tuna, soda, beer, pet food even.

[Samantha Fields]

All of them are packaged in steel or aluminum. And Usha Haley at Wichita State University says most of it is imported.

[Nancy Marshall Genser]

The United States just does not produce enough steel, and the US imports nearly 70% of tin plate steel that manufacturers use for cans of fruits, vegetables, essential foods and pet foods.

[Samantha Fields]

If these tariffs remain in effect, she says, we're likely to start seeing all sorts of prices go up at the grocery store and not just on can canned goods. For instance, if companies that currently use aluminum to package certain products like soda start using more plastic instead, that could cause plastic and anything packaged in it to get more expensive too. Because supply and demand, there are also.

[Nancy Marshall Genser]

Indirect costs, the costs of transportation, the costs of fixing up trucks, etc.

[Samantha Fields]

All of which also get more expensive as steel and aluminum do. And that can trickle down into the prices we pay for pretty much everything at the store. John Clear at Alex Partners says retailers.

[John Clear]

Are in a tough spot because consumers are super conscious of all the price increases, so they know they're losing trust, but also they don't have a lot more room in their margins to continue.

[Samantha Fields]

To swallow costs, especially after pandemic supply chain issues and the inflation that followed. So say a company that sells canned vegetables does decide to pass along the increased cost of a steel can to customers. Clear says that might only be an extra 2 to 5 cents, which doesn't seem a lot.

[John Clear]

But a can of sweet corn at Walmart is like 42 to 45 cents.

[Samantha Fields]

So an extra 5 cents would make it cost about 10% more. And clear says a lot of people buying canned fruits and vegetables are on SNAP benefits, which already don't go very far.

[John Clear]

So if you think that's replicated across a number of items within their basket every week, suddenly that actually becomes quite impactful and will ultimately mean that they probably buy one less unit, which again.

[Samantha Fields]

Might not seem like a lot, he says. But if you're a big company like Walmart and thousands of customers start buying one less can of corn at thousands of stores, it adds up. I'm Samantha Fields for Marketplace.

[David Brancaccio]

Now the tariffs on steel and aluminum are separate from the April 2 tariffs on goods from countries worldwide, which are under a legal challenge, but still in effect at least through June 9th. Later this morning, we'll get a national tally for help wanted job openings. This will be for April a bit early to see full effects of the April 2 global tariff announcement. Forecasters are expected there to be about 100,000 fewer openings, 1.4% lower.

[Henry Epp]

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[David Brancaccio]

Wherever you get your podcasts the NBA Finals start on Thursday. The Oklahoma City Thunder take on the Indiana Pacers. While maybe the TV gods would have wanted teams from the biggest of markets, there are upsides for the league marketplaces. Henry Epp has that the fact that.

[Alicia Jessup]

Teams from two of the smaller media markets in the 30 team NBA made it to the Finals is largely thanks to the league's salary cap. Andrew Zimbalist is a professor emeritus at Smith College.

[Podcast Host]

The salary cap puts a limit on the amount teams can pay their players. It also puts a floor on the bottom that teams can pay, which he.

[Alicia Jessup]

Says means that teams in big cities with wealthier fan bases can't just buy their way to a championship.

[Podcast Host]

There's the reassertion of very strong competitive balance and I think that's uplifting for fans around the league, especially those who are not in the largest markets.

[Alicia Jessup]

Plus, it doesn't matter all that much to the NBA which teams make it to the Finals because the league has contracts locked in with TV networks and streaming services for the next 11 years. Alicia Jessup is a professor at Pepperdine University.

[Samantha Fields]

So regardless of which teams we're going to take off in this matchup, the the amount of money that would be generated from media rights was already designated.

[Alicia Jessup]

The downside, Jessup says, is the teams and league might not make as much ticket revenue compared to selling seats in, say, New York or la. And if ratings are low, companies might not want to shell out as much for future sponsorship deals. I'm Henry App for Marketplace.

[David Brancaccio]

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[Samantha Fields]

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[Alicia Jessup]

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[Samantha Fields]

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