What history shows us about tariffs and the economy

Summary

Marketplace Morning Report: What History Shows Us About Tariffs and the Economy

Release Date: April 10, 2025
Host: David Brancaccio
Reporter: Savannah Peters

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Market Volatility Amid Tariff News

David Brancaccio opens the episode with a discussion on recent stock market fluctuations influenced by tariff news.

• [00:01] David Brancaccio: Reports that stock prices experienced significant volatility following a historic jump by Wall Street, with the Dow initially rising nearly 3,000 points (7.9%) before receding by 720 points (2%) in early trading. The S&P and Nasdaq also saw declines of over 2% and 2.6%, respectively.

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Tariffs and Their Economic Impact

David Brancaccio engages with Diane Swonk, Chief Economist at KPMG, to delve into the ramifications of recent tariff adjustments.

• [00:35] Diane Swonk: Advises caution against headlines suggesting the tariff issue has been resolved due to the president's U-turn. She clarifies, “The new tariff rate as of today is now higher than it was on April 2nd. It is actually above 30% effective tariff rate” ([00:42]). Swonk emphasizes that the substantial tariffs on China, combined with a 10% across-the-board tariff on other countries, have elevated the U.S. effective tariff rate to a record high.

• [01:07] David Brancaccio: Asks Swonk about the historical perspective on tariffs and their economic effects.

• [01:18] Diane Swonk: States, “Tariffs of this kind of magnitude always do more damage than good” ([01:18]). She references the 2018-2019 trade war, noting that while certain industries were protected, the broader economy suffered from higher costs for consumers and businesses, leading to job losses that outweighed any gains.

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Business Perspectives: Navigating Uncertainty

Insights from business leaders highlight the real-world challenges posed by fluctuating tariffs.

• Andrew Koenig, CEO of Citi Furniture: Discusses the uncertainty faced by manufacturers, stating, “A lot of the manufacturers that I talk to, they don't know what to do because there's no certainty” ([02:06]). He likens the current situation to the unpredictability experienced during the COVID-19 pandemic, emphasizing the need for stability and predictability in government policies.

• Dominic Palmieri, Carnival Manager: Shares his approach to managing imports amidst tariff changes, mentioning, “It's all about planning. I'm only as good as the planning that I want to execute in 30, 60, 90 days down the line” ([02:49]). Palmieri indicates that while current freight costs are manageable, the uncertainty around future tariffs necessitates meticulous short-term planning.

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Economic Indicators: Inflation and Bond Markets

The episode touches on broader economic trends impacting the market and consumer behavior.

• David Brancaccio: Highlights several key points:
  • Consumer Inflation: The annual rate of consumer inflation decreased from 2.8% to 2.4% in March, with notably lower gas prices.
  • Bond Market: Reports that the 10-year interest rate fell to 4.29%, indicating a more favorable bond market.
  • Childcare Costs: Introduces a segment on the rising cost of childcare compared to public university expenses, referencing findings from the Economic Policy Institute.

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Childcare Costs and Public Policy: A New Model in New Mexico

Reporter Savannah Peters explores how New Mexico's expanded childcare subsidies have transformed families' economic stability and quality of life.

• [04:19] Savannah Peters: Narrates the story of Vanessa Vicuna from Clovis, New Mexico, highlighting the challenges faced before the expansion of childcare assistance.

  • [04:36] Vanessa Vicuna: Explains, “So it was just like, okay, I'm just working to pay daycare, which doesn't make sense to me” ([04:36]). Due to income limitations, Vicuna and her husband couldn't qualify for sufficient childcare assistance, forcing her to reduce her working hours and step back from her career.

• [05:01] Vanessa Vicuna: Describes the positive changes post-subsidy, stating, “We have enrolled them in every sport that we could” ([05:32]), and highlights the ability to afford quality care without financial strain.

• [05:49] Hailey Hines, Cradle to Career Policy Institute: Details the broader impact of the subsidy expansion, noting improvements in housing and transportation for families thanks to reduced childcare costs.

• [06:00] Elise Gould, Economic Policy Institute: Comments on the economic benefits, suggesting that the state could see significant returns on its investment by enabling more parents to remain in the workforce.

• [06:19] Hailey Hines: Summarizes the economic advantages, “That's more tax dollars” ([06:19]).

• [06:21] David Brancaccio: Adds, “That's a larger economy” ([06:21]).

• [06:34] Meg Peralta Silva: Shares her personal experience, stating that the subsidy allows her to maintain stable employment while ensuring her children receive quality daycare without cost.

• [06:40] Savannah Peters: Concludes with the positive choices families can make, emphasizing quality care over mere affordability.

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Conclusion

David Brancaccio wraps up the episode by connecting economic policies to personal and national financial well-being.

• [06:51] David Brancaccio: Emphasizes the importance of making informed choices that benefit both families and the broader economy, “We can make a choice that's good for our family, but also that isn't just about, like, the numbers” ([06:40]).

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This episode of Marketplace Morning Report provides a comprehensive analysis of the current tariff landscape, its historical context, and tangible impacts on businesses and families. Through expert insights and personal stories, it underscores the complex interplay between government policies and everyday economic realities.

Transcript

[David Brancaccio]

Stock prices are lower on the day after the big trade. U turn. I'm David Brancaccio in Los Angeles. After Wall street posted its third highest jump in a single day since the Second World War. With the Dow up nearly 3,000 points, 7.9% this morning, some of that gain has melted away. The dow is down 720 points, nearly 2% in early trading. The S and P is down more than 2%. The Nasdaq is down 2.6%. Diane Swonk is chief economist of the audit tech and advisory firm kpmg. Morning.

[Diane Swonk]

Good morning.

[David Brancaccio]

Let's be careful of headlines that say the tariff issue has gone away because the president did a U turn. What's your calculation?

[Diane Swonk]

The new tariff rate as of today is now higher than it was on April 2nd. It is actually above 30% effective tariff rate. Given the outsized tariffs on China and the across the board tariffs of 10% on all other countries with the other tariffs that we already had in the pipeline, that puts the effective tariff rate in the United States at a record high.

[David Brancaccio]

Some listening to this may favor tariffs in the interests of perhaps reshoring jobs. Others may not like tariffs. What does history show you, an economist about tariffs and the economy?

[Diane Swonk]

Tariffs of this kind of magnitude always do more damage than good. And although they may protect some industries, we know Even from the 2018, 2019 trade war that the industries they protected didn't make up for the industries that had to pay higher costs or the consumers that had to pay higher costs, and that job losses outweighed job gains. And that's why we're so concerned about the economic consequences of this.

[David Brancaccio]

Diane Swong, chief economist at kpmg. Thank you.

[Diane Swonk]

Thank you.

[David Brancaccio]

Now two quick takes from businesses navigating this especially tricky time at borders. In 2023, America imported about $69 billion worth of furniture with China being the main source. Andrew Koenig is CEO of Citi Furniture with 25 stores in Florida.

[Andrew Koenig]

A lot of the manufacturers that I talk to, they don't know what to do because there's no certainty. Should we make all these massive decisions, we need stability, we need predictability in our government with all these others to figure that out and get to there as quickly as possible. This is a daily management thing until we get there. This reminds me of COVID That's echoed.

[David Brancaccio]

By a person on the ground in the food service industry. Dominic Palmieri is a carny managing big carnivals and festivals. It's produce, meat, but sometimes imported textiles and equipment. At the moment, he says he's getting what he needs for his midway vendors, but he's doing a lot of just in case planning right now.

[Dominic Palmieri]

We know that at least that freight costs are not out of control, but we're waiting to see what's going to happen with any of those tariffs. It's all about planning. I'm only as good as the planning that I want to execute in 30, 60, 90 days down the line.

[David Brancaccio]

Voice from the Carnival of Economics and President Trump said a key reason for his change of heart yesterday was that folks, presumably market players, were getting quote, yippee and afraid. We'd reported on worrisome strains in the bond market this week. Beyond the tariff turnaround, there's news the annual rate of consumer inflation fell from 2.8 to 2.4% in March, with gas prices much lower. So the bond market is up. The 10 year interest rate down 4.29. Sending a child to daycare in much of the country costs more than sending her to a public university. That's a new calculation from the Economic Policy institute. Daycare averages seven grand a year in Mississippi, 28,000 in D.C. but in New Mexico, most families pay nothing at all. Since 2021, that state has been using revenue from its oil and gas hold to pay for daycare for low income and many middle class families. Here's Marketplace's Savannah Peters.

[Savannah Peters]

After Vanessa Vicuna's first child was born, she had the working mom thing figured out. She enrolled her son in daycare so she could build her career as a pharmacy tech in Clovis, New Mexico. But when her second child came along in 2021, things got harder to balance.

[Vanessa Vicuna]

So it was just like, okay, I'm just working to pay daycare, which doesn't make sense to me.

[Savannah Peters]

At the time, childcare assistance in New Mexico was capped at about $53,000 a year for a family of four. Vicuna and her husband, who works as a truck driver, made too much to qualify.

[Vanessa Vicuna]

So I ended up going part time.

[Savannah Peters]

Making a lot less money and stepping back from a management role she'd worked hard for.

[Vanessa Vicuna]

And then the child care assistants came along and it changed my life.

[Savannah Peters]

Childcare assistance that New Mexico expanded in July of 2021. Families making up to 400% of the federal poverty line qualify today. That's about $124,000 a year for a family of four. Now Vicuna works nearly full time at the pharmacy. She sends her 4 and 8 year old to day and after school care at no cost. And there's a little extra room in her family budget.

[Vanessa Vicuna]

We have enrolled them in every sport that we could.

[Hailey Hines]

Yeah, I tell everyone I know with children to move here.

[Savannah Peters]

Hailey Hines is with the University of New Mexico's Cradle to Career Policy Institute. She's been talking to families about how free childcare changes their budget.

[Hailey Hines]

So people told us a lot of things, like we were able to move into a better apartment and now we're in a safer, better place, or we were able to buy a reliable car.

[Savannah Peters]

New Mexico spends about $150 million a year on its early childhood programs, the bulk of which pays for this expanded subsidy. Elise Gould with the Economic Policy Institute says the state could see a big return on that investment, especially if it helps more parents stay in the workforce.

[Hailey Hines]

That's more tax dollars.

[David Brancaccio]

That's a larger economy.

[Savannah Peters]

Meg Peralta Silva is a mom of two with another baby on the way in Albuquerque. And the subsidy covers 100% of her family's daycare costs, which means she can stay at a job she likes at a local nonprofit.

[David Brancaccio]

We can make a choice that's good for our family, but also that isn't just about, like, the numbers.

[Savannah Peters]

And Peralta Silva says her family can choose what they consider to be good quality care, not just what they can afford. I'm Savannah Peters for Marketplace, and in.

[David Brancaccio]

Los Angeles, I'm David Brancaccio with the Marketplace Morning Report.

[Diane Swonk]

Foreign.

[David Brancaccio]

Public Media.

[Jannelli Espinal]

If there's one thing we know about social media, it's that misinformation is everywhere, especially when it comes to personal finance. Financially Inclined from Marketplace is a podcast you can trust to help you get serious about your money so you can build a life you've always dreamed of. I'm the host, Jannelli Espinal, and each week I ask experts important money questions, like how to negotiate job offers, how to choose a college that you can afford, and how to talk about money with friends and family. Listen to Financially Inclined wherever you get your podcasts.