Tariffs may be lower, but they're still disrupting supply chains

Summary

Marketplace Morning Report Summary
Episode: Tariffs may be lower, but they're still disrupting supply chains
Release Date: May 21, 2025

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Introduction to Supply Chain Disruptions Due to Tariffs

In this episode of Marketplace Morning Report, host Sabree Benishore delves into the ongoing impact of tariffs on global supply chains, even as some tariff rates have been temporarily lowered. The discussion centers around the disruptions faced by businesses, particularly those importing goods from China to the United States.

Key Points:

• Port of Los Angeles Impact: The port reported a 20% cancellation rate of container shipments this month, a lingering effect from the tariffs initiated under President Trump. Despite a temporary reduction in tariffs, June is expected to see subdued shipping activity with potential surges following the current lull.

  Sabree Benishore (01:03): "The Port of Los Angeles says 20% of container shipments this month were canceled in the wake of President Trump's tariffs, even though those tariffs were temporarily lowered."

• Rebound in Demand: Judah Levine, head of research at Freightos, anticipates a strong rebound in demand for imports as businesses that had previously paused their orders from China look to resume their operations. This rebound might help mitigate shortages of certain goods, though the adjustment period remains confusing and disruptive for many U.S. businesses.

  Judah Levine (01:45): "The pause in ordering from China to the US that we saw since those higher tariffs were introduced in April is probably going to reverse."

Shifts in Global Supply Chains

Mitchell Hartman from Marketplace reports on a survey conducted by Allianz Trade, which highlights significant strategic shifts among exporting firms across the U.S., Europe, and Asia.

Key Insights:

• Rerouting from China: Over 60% of U.S. firms surveyed plan to reroute their supply chains away from China to avoid tariffs. The preferred alternatives include suppliers in Western Europe and Latin America.

  Mitchell Hartman (01:54): "More than six in 10 U.S. firms plan to reroute supply chains from China to avoid tariffs, shifting primarily to suppliers in Western Europe and Latin America."

• Price Adjustments: More than half of these firms intend to increase their prices to offset the costs imposed by tariffs.

• Reshoring Efforts: Senior economist Maxime Darme suggests that there may be reshoring of high-value sectors such as automaking, semiconductors, and pharmaceuticals to the U.S. However, low-value sectors like textiles are unlikely to return due to the high labor costs in the U.S..

  Maxime Darme (02:31): "There may be some reshoring to the US in high value added sectors like automaking, semiconductors and pharmaceuticals."

  Tim Stephan (02:31): "Making, textiles, there's no way they are going to restore to the US because..."

  Sabree Benishore (02:35): "The labor cost is too high in China."

• Exploration of New Markets: European manufacturers are seeking new markets outside the U.S. to boost their exports, potentially echoing the U.S. in imposing protectionist tariffs.

  Gernot Wagner (02:37): "[European manufacturers] are looking for new markets outside the US to sell more exports."

  Mitchell Hartman (02:57): "European manufacturers could end up pressing for protectionist tariffs, just like the US is imposing."

U.S. Tax Bill Negotiations and Their Implications

Transitioning from international trade, the report covers the latest developments in the U.S. tax bill negotiations within the House Republicans, focusing on the state and local tax deduction.

Highlights:

• State and Local Tax Deduction Increase: House Republicans have reached an agreement to increase the state and local tax (SALT) deduction from $10,000 to $40,000. This change is a significant win for many taxpayers, with the deadline for finalizing the bill set for Memorial Day.

  Sabree Benishore (03:05): "They're on board to increase the state and local tax deduction from $10,000 up to $40,000."

• Extension of 2017 Tax Cuts: The bill primarily focuses on extending existing tax cuts from 2017, preserving current tax rates, brackets, and several deduction policies.

  Tim Stephan (03:30): "Much of the bill is about extending existing tax cuts passed in 2017."

  Unknown Financial Expert (03:40): "It’s primarily keeping in place most of what was enacted in 2017 that, barring anything else, would have all expired or sunsetted at the end of this year."

• Proposed New Tax Cuts: The bill also introduces new provisions aimed at eliminating taxes on TIP income and overtime income for non-highly compensated individuals. While the Social Security benefits tax exemption remains more challenging to implement within this reconciliation process, there are efforts to increase the standard deduction for senior citizens.

  Unknown Financial Expert (04:20): "The big three that President Trump talked about during his campaign were eliminating the taxes on TIP income, overtime income, and Social Security benefits."

• Enhancements to Savings Accounts: The proposal includes significant expansions to Health Savings Accounts (HSAs) and 529 college savings plans. For HSAs, the contribution limits are set to double, eligibility is broadened, and account usage is expanded to include more expense types. Similarly, 529 plans will now cover additional educational expenses, including post-secondary accreditation and continuing education.

  Unknown Financial Expert (05:10): "This proposal would take that existing program and greatly expand it by, one, effectively doubling the amount of money that can go into those accounts..."

  Tim Stephan (05:00): "A lot of the folks listening to this right now will also have health savings accounts, college savings accounts. I understand there's language in the bill that has implications for those."

Other Business News Highlights

While the primary focus remained on tariffs and tax legislation, the episode also touched upon a few other noteworthy business stories:

• Fortnite Returns to Apple's App Store: After a prolonged legal battle, Fortnite is now available again on Apple's iOS platform in the U.S., following a federal court ruling that pressured Apple to allow greater competition in its App Store. This victory is seen as a significant win for Epic Games.

  Sabree Benishore (07:12): "Popular multiplayer shooter game Fortnite is available again on Apple's App Store in the US after a long legal battle with Apple."

  Saranjana Tiwari (07:53): "This is really being seen as a victory for Epic Games."

• Climate-Conscious Investing: The episode briefly introduced Amy Scott's podcast How We Survive, which investigates the trends in climate-conscious investing and its challenges amidst political and economic pressures.

  Amy Scott (08:50): "Can we invest our way out of the climate crisis? Five years ago it seemed like Wall street was working on it until a backlash upended everything."

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This episode of Marketplace Morning Report provides a comprehensive analysis of the lingering effects of tariffs on global supply chains, the strategic shifts businesses are undertaking to navigate these challenges, and the evolving landscape of U.S. tax legislation. Additionally, it touches upon significant developments in the tech and environmental investment sectors, offering listeners a nuanced understanding of the current economic climate.

Transcript

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[Sabree Benishore]

Be less high, but they're still disrupting supply chains From Marketplace, I'm Sabree Benishore, in for David Brancaccio. The Port of Los Angeles says 20% of container shipments this month were canceled in the wake of President Trump's tariffs, even though those tariffs were temporarily lowered. June is also looking to be a light month for shipping into that port, but after the lull, there may be a surge. Judah Levine is head of research at logistics company freightos. The pause in ordering from China to the US that we saw since those higher tariffs were introduced in April is probably going to reverse. Right now, we're going to see quite a strong rebound in demand for, you know, importers that had really paused imports to a large extent over the last month. Levine says this should help limit shortages of some goods, but it's all been very confusing and disruptive for a lot of US Businesses. Marketplaces. Mitchell Hartman has more on that.

[Mitchell Hartman]

The global credit insurer Allianz Trade recently surveyed 4,500 exporting firms in the U.S. europe and Asia. It found more than six in 10 U.S. firms plan to reroute supply chains from China to avoid tariffs, shifting primarily to suppliers in Western Europe and Latin America. More than half plan to increase prices to offset tariff costs. Senior economist Maxime Darme says there may be some reshoring to the US in high value added sectors like automaking, semiconductors and pharmaceuticals. But in low value added sectors toy.

[Tim Stephan]

Making, textiles, there's no way they are going to restore to the US because.

[Sabree Benishore]

The labor cost is too high China.

[Mitchell Hartman]

Meanwhile, is looking for new markets outside the US to sell more exports, says Columbia Business School economist Gernot Wagner.

[Sabree Benishore]

German car manufacturers are not going to like more cheaper Chinese vehicles going into Germany. Consumers presumably like it, he says.

[Mitchell Hartman]

European manufacturers could end up pressing for protectionist tariffs, just like the US Is imposing. I'm Mitchell Hartman for Marketplace.

[Sabree Benishore]

House Republicans have been negotiating all night over the GOP tax bill and have come to an agreement on one of the more thorny issues. They're on board to increase the state and local tax deduction from $10,000 up to $40,000. The deadline to wrap this up is Memorial Day behind my Marketplace colleague Nova Safo spoke with Tim Stephan, director of advanced planning at Baird Private Wealth Management, about what the bill would mean for the taxpayer's bottom line.

[Tim Stephan]

Much of the bill is about extending existing tax cuts passed in 2017. What does that mean in terms of what's retained and who benefits?

[Unknown Financial Expert]

So among the big things that are kept in place would be the existing tax rates and brackets that otherwise would all have gone up about 2 to 4 percentage points each. A number of the rules and policies regard deductions, so the larger standard deduction would remain in place. The elimination or narrowing of several of the itemized deductions would remain in place. A little bit of expansion on some of the estate tax provisions that are out there. So it's primarily keeping in place most of what was enacted in 2017 that, barring anything else, would have all expired or sunsetted at the end of this year.

[Tim Stephan]

And the new tax cuts being proposed, what are those?

[Unknown Financial Expert]

The big three that President Trump talked about during his campaign were eliminating the taxes on TIP income, overtime income, and Social Security benefits. This provision would address two of those directly by providing an exemption for tip income for those in employment or industries that are typically associated with TIP income, it would eliminate a portion of overtime income. Both of those would apply to non highly compensated individuals. So those with incomes below a certain threshold, the Social Security one, that would be a tougher one, do as part of this reconciliation process, they did try to increase the standard deduction for senior citizens just to help address that a little bit.

[Tim Stephan]

A lot of the folks listening to this right now will also have health savings accounts, college savings accounts. I understand there's language in the bill that has implications for those. Tell us about that.

[Unknown Financial Expert]

So the health savings accounts, frankly, that's one of the best savings vehicles we have available to us today. It offers benefits that really no other account does. This proposal would take that existing program and greatly expand it by one effectively doubling the amount of money that can go into those accounts. Now that increase would be phased out for people at higher levels of income. It would expand people who are eligible to contribute to them. So you know, currently if you're on some form of Medicare, you're precluded from contributing. And then there would be some simplification of them allowing spouses to combine accounts. There would be a little bit more expansion on how those accounts could be used. So what types of expenses would be considered allowed out of a health savings account? On the 529 side, they would basically expand again the opportunity to use those for additional expenses, but also expanding 529s to allow them to be used for post secondary school accreditation. So if you go to school to get a designation of some kind and you have to pay for the exam to take that to earn that designation, or continuing education classes once you've earned the designation, those would now be allowable expenses under a 529 plan.

[Tim Stephan]

This proposal Tim Stephan, Director of Advanced Planning at Baird Private Wealth Management thank you very much.

[Unknown Financial Expert]

Thanks for having me.

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[Sabree Benishore]

Popular multiplayer shooter game Fortnite is available again on Apple's App Store in the US after a long legal battle with Apple. The BBC's Saranjana Tiwari has the details.

[Saranjana Tiwari]

Fortnite's return to Apple's iOS systems in the US follows a ruling on April 30th by a federal judge in the US saying that Apple violated a court order that required the company to allow greater competition for things like app downloads and payment methods in its App Store. The ruling also said that Apple had fit to comply with the judge's prior injunction order and would be referred to federal prosecutors for a criminal contempt investigation. Epic had 116 million users just on Apple's platform. It's now back on that platform. So this is really being seen as a victory for Epic Games.

[Sabree Benishore]

Sureanjan Attwari there with BBC in New York. I'm Sabri Benishore with the Marketplace Morning report from APM American Public Media.

[Amy Scott]

Can we invest our way out of the climate crisis? Five years ago it seemed like Wall street was working on it until a backlash upended everything.

[Saranjana Tiwari]

So there's a lot of alignment between the dark money right and the oil industry on this effort.

[Amy Scott]

I'm Amy Scott, host of How We Survive, a podcast from Marketplace. In this season we investigate the rise, fall and reincarnation of climate conscious investing. Listen to How We Survive wherever you get your podcasts.