Who pays when tariffs make things more expensive?

Summary

Marketplace Morning Report – “Who Pays When Tariffs Make Things More Expensive?” Release Date: April 25, 2025

In this episode of the Marketplace Morning Report, host David Brancaccio delves into the economic ramifications of President Trump's tariff policies, examines California's standing in the global economy, and explores the administration's attempts to influence independent regulatory bodies. Expert insights from Nancy Marshall Genzer and Elizabeth Wilkins provide a comprehensive analysis of these critical issues.

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Tariffs and Their Impact on Consumers

Speaker: Nancy Marshall Genzer

The episode opens with a discussion on the Trump administration's implementation of tariffs aimed at bolstering American manufacturing and job creation. Nancy Marshall Genzer from the Institute on Taxation and Economic Policy (ITEP) provides an in-depth analysis of how these tariffs affect different income groups.

• Economic Redistribution: Genzer explains, “President Trump's tariffs are meant to boost manufacturing and create jobs in the U.S., but economists say importers will pass the cost of import tariffs taxes on to consumers.” (00:22)

• Impact on Low-Income Families: The ITEP report highlights that Americans earning less than $29,000 annually would see their expenses increase by approximately 6% of their income due to higher prices. Middle-income consumers would face a 5% increase, while the wealthiest Americans would only experience a 1.7% rise. This disparity is attributed to the higher proportion of income that low-income households spend on necessities.

• Overall Consumer Burden: Genzer emphasizes, “This is because low income consumers spend a higher proportion of their paychecks on necessities than wealthy families do.” (00:22)

California’s Economic Position in the Global Arena

Speaker: Nova Safo

David Brancaccio transitions to a discussion about California’s economy, featuring insights from Marketplace’s Nova Safo.

• Economic Ranking: Safo confirms that California's GDP stood at $4.1 trillion in 2024, slightly surpassing Japan's $4 trillion, making it potentially the fourth largest economy globally. However, she notes that "these totals don't account for inflation, so take them with a grain of salt." (01:47)

• Governor Newsom’s Claims: Governor Gavin Newsom touts California as a powerhouse in agriculture, technology, and entertainment, reinforcing the state's significant economic footprint.

• Shifting Rankings: Safo points out that "according to the same measure California used to calculate its 4th place global ranking, it's possible the state has already slipped back to fifth place as Japan's latest economic projections are looking a bit stronger." (01:47) This fluctuation underscores the competitive nature of global economies and the importance of accurate economic metrics.

Federal Reserve Independence and Administrative Interference

Speakers: David Brancaccio and Elizabeth Wilkins

The conversation shifts to the independence of the Federal Reserve and recent attempts by President Trump to influence key regulatory bodies.

• Threats to the Federal Reserve: Brancaccio raises concerns about President Trump's suggestions to oust Federal Reserve Chair Jerome Powell, noting Powell’s assertion that such an action "would be illegal." (03:03) The president's desire to lower interest rates is seen as a move to stimulate the economy, though it risks triggering inflation if mismanaged.

• National Labor Relations Board (NLRB) Controversy: The administration’s recent firing of two high-ranking NLRB officials has left the board without a quorum to make decisions. Elizabeth Wilkins, President and CEO of the Roosevelt Institute, provides a critical perspective on these actions.

  • Legal Precedent: Wilkins explains, “There is a 90 year old legal precedent called Humphreys Executor that says no, the President may not fire one of these commissioners for any reason that they want. They have to have cause.” (04:06) She criticizes the administration for “testing that precedent.” (04:06)

  • Contradiction of Pro-Labor Image: Despite President Trump’s pro-labor rhetoric, Wilkins argues that his administration’s actions towards the NLRB reveal a different stance. “We are watching in real time the administration walk back on its promises.” (04:33)

• Federal Trade Commission (FTC) and SEC Issues: Wilkins highlights similar tactics used against the FTC, where the administration illegally fired two Democratic commissioners. She warns that these actions not only undermine worker protections but also threaten the independence of other regulatory bodies like the SEC and the Federal Reserve. “If we watch the Supreme Court side with the administration in the NLRB case or the Federal Trade Commission case, I think we will really see the independence of the Federal Reserve questioned as well, and that's a really scary prospect.” (06:00 – 06:26)

Conclusion

The episode underscores the broader implications of the Trump administration's policies on tariffs and regulatory bodies. While aiming to strengthen domestic industries, the tariffs disproportionately affect lower-income consumers. Additionally, the administration's actions against independent agencies like the NLRB and FTC pose significant threats to the checks and balances designed to maintain economic stability and protect consumer and worker rights.

Elizabeth Wilkins provides a stark warning about the potential erosion of independent regulatory bodies, cautioning against the long-term impacts on the Federal Reserve’s autonomy. The episode serves as a critical examination of the intersection between political power and economic policy, highlighting the delicate balance required to foster a fair and robust economy.

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Notable Quotes:

• “President Trump's tariffs are meant to boost manufacturing and create jobs in the U.S., but economists say importers will pass the cost of import tariffs taxes on to consumers.” – Nancy Marshall Genzer (00:22)

• “This is because low income consumers spend a higher proportion of their paychecks on necessities than wealthy families do.” – Nancy Marshall Genzer (00:22)

• “There is a 90 year old legal precedent called Humphreys Executor that says no, the President may not fire one of these commissioners for any reason that they want. They have to have cause.” – Elizabeth Wilkins (04:06)

• “We are watching in real time the administration walk back on its promises.” – Elizabeth Wilkins (04:33)

• “If we watch the Supreme Court side with the administration in the NLRB case or the Federal Trade Commission case, I think we will really see the independence of the Federal Reserve questioned as well, and that's a really scary prospect.” – Elizabeth Wilkins (06:00 – 06:26)

This comprehensive summary encapsulates the key discussions and expert insights presented in the episode, providing listeners with a clear understanding of the economic and political dynamics at play.

Transcript

[David Brancaccio]

Who pays when tariffs make things more expensive to buy? I'm David Brancaccio in Los Angeles. The Trump administration hopes tariffs encourage Made in America. Tariffs might also raise money for the US treasury to help offset planned tax cuts. Among the costs people pay more for things, some more than others. Marketplace's Nancy Marshall Genzer reports.

[Nancy Marshall Genzer]

President Trump's tariffs are meant to boost manufacturing and create jobs in the U.S. but economists say importers will pass the cost of import tariffs taxes on to consumers. The Institute on Taxation and Economic Policy, a progressive think tank, looked at what would happen next year if current tariffs were still in effect. That is an across the board tax of 10% on products from most countries, a 25% tariff on specific goods from many countries, and a 145% tax on most imports from China. The report found the poorest Americans with incomes of less than $29,000 a year would have to spend around 6% their incomes because of higher prices from the tariffs. Middle income consumers would pay out 5% more, but the richest Americans would only spend 1.7% more. This is because low income consumers spend a higher proportion of their paychecks on necessities than wealthy families do. I'm Nancy Marshall Genser for Marketplace.

[David Brancaccio]

By one analysis now, the economy of the state of California is the fourth largest, largest in the world, bigger than the country of Japan. California's Governor Gavin Newsom is touting this biggest state for agriculture, California biggest state for tech, entertainment. But overall, California, is it really fourth or is it fifth? And does that matter? Here's Marketplace's Nova Safo.

[Nova Safo]

When it comes to global economies, there are two powerhouses. The US economy is worth nearly $30 trillion, China around 19 trillion. And then there's everyone else. And in that context, yes, California did edge out Japan for all of 2024 with a gross domestic product of $4.1 trillion, slightly above Japan's 4 trillion. Those totals don't account for inflation, so take them with a grain of salt. Nevertheless, the point California's governor is making is that the state is a giant economy. And it's a point he made last week, which when the state sued the Trump administration over tariffs, arguing they hurt all sorts of industries within its borders, from manufacturing to agricultural products it exports overseas. By the way, according to the same measure California used to calculate its 4th place global ranking, it's possible the state has already slipped back to fifth place as Japan's latest economic projections are looking a bit stronger. I'm Nova Safo for Marketplace.

[David Brancaccio]

America's central bank. The Federal Reserve is set up to be independent from politicians. But last week and early this week, President Trump suggested he wanted to oust Fed Chair Jerome Powell, something Powell says would be illegal. The President wants interest rates lower, which can stimulate the economy but can also spark inflation if done wrong. When financial markets recoiled, Trump said he would not fire Powell, but has kept at him. Other parts of the government are also thought to have some insulation from the White House. The Supreme Court has allowed for now Trump's firing of two high ranking people from the National Labor Relations Board. The firings mean there's not a quorum to make decisions. For more about executive power, starting with that labor board, let's turn to Elizabeth Wilkins, President CEO of the Roosevelt Institute, a liberal leaning think tank. Welcome.

[Elizabeth Wilkins]

Pleasure to be here.

[David Brancaccio]

So this is not a slam dunk for the administration. I mean typically they can appoint and de appoint in many cases parts of the executive branch. NLRB is different. It's independent in a sense.

[Elizabeth Wilkins]

That's right. There is a 90 year old legal precedent called Humphreys Executor that says no, the President may not fire one of these commissioners for any reason that they want. They have to have cause. The administration is very focused on testing that precedent.

[David Brancaccio]

Now, President Trump got a lot of support from members of labor unions and styles himself as pro labor. But as you view the administration's stance toward the nlrb, you would see it differently.

[Elizabeth Wilkins]

That is absolutely correct. I think one of the things we have to think about is whether we are seeing those promises being kept or broken. And here we have the administration both stripping the commission of some of its most enthusiastic enforcers on the commission and also entertaining arguments. We just saw a coalition of employers filing a petition with Attorney General Pam Bondi to roll back 16 decisions that protect workers rights unionized. So I think we are watching in real time the administration walk back on its promises.

[David Brancaccio]

And it's not just those four letters, nlrb. There's a lot of other letters where you're seeing the administration try to test the boundaries of how much control they can exert.

[Elizabeth Wilkins]

That's exactly right. We saw the same playbook with the Federal Trade Commission. A few weeks ago. The administration illegally fired the two Democratic commissioners, Commissioner Bedoya and Commissioner Slaughter. Same move. The Federal Trade Commission protects workers, small businesses and consumers when they can't protect themselves from concentrated corporate power. And here we are again watching the administration make sure that they can exercise unwielding power over the Federal Trade Commission and the way that it regulates the economy.

[David Brancaccio]

Another three are SEC securities and Exchange Commission certainly very focused on the great titans of industry working on Wall Street. But also there is a consumer element to the SEC's work.

[Elizabeth Wilkins]

That's exactly right. I would say we are watching a very concerted effort to deregulate core pieces of the economy. I just want to point out one other entity that would be affected by a decision, the Federal Reserve. If we watch the Supreme Court side with the administration in the NLRB case or the Federal Trade Commission case, I think we will really see the independence of the Federal Reserve questioned as well, and that's a really scary prospect.

[David Brancaccio]

Elizabeth Wilkins is president and CEO of the Roosevelt Institute. It's a nonpartisan nonprofit that focuses on the economy and democracy. Ms. Wilkins, thank you so much.

[Elizabeth Wilkins]

Thank you.

[David Brancaccio]

And in Los Angeles, I'm David Brankachev. This is the Marketplace Morning Report.

[Elizabeth Wilkins]

From.

[David Brancaccio]

Apm, American Public Media.

[Janeli 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, Janeli 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.