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

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."

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.