Marketplace: Footwear Will Likely Still Be “Made in China”

Release Date: April 7, 2025
Host: Kai Ryssdal
Podcast: Marketplace

1. Economic Uncertainty Amid Trade Turbulence

In this episode, Kai Ryssdal opens with a discussion on the significant economic upheaval triggered by the current administration's aggressive tariff policies. He highlights the President's misconception of trade deficits as "losses," leading to drastic shifts in the global economic landscape. Ryssdal notes the volatile reactions in stock markets and the widespread uncertainty among consumers and businesses alike.

"A president who believes, wrongly, that trade deficits are losses... has decided, in the space of something less than a week, to entirely upend the global economic order."
— Kai Ryssdal [00:57]

2. Fed Policy and the Two-Year Treasury Note

Economist Harry Mamaesky from Columbia Business School explains the Federal Reserve's dilemma in the face of rising tariffs. Tariffs are increasing inflation while simultaneously slowing economic output and employment. This dual pressure forces the Fed to choose between raising interest rates to combat inflation or lowering them to stimulate growth.

"Tariffs also equal economic slowdown. The Federal Reserve can't fight both of those at the same time."
— Harry Mamaesky [02:47]

Mamaesky further discusses investor expectations, noting a significant drop in two-year bond yields, suggesting that the bond market anticipates more aggressive rate cuts due to an economic slowdown.

"Investors think the Fed will have to cut interest rates more than expected because the economy is going to be worse than expected."
— Harry Mamaesky [03:07]

3. Labor Market Stagnation and Consumer Uncertainty

Elizabeth Crawford, a senior economist with Lightcast, delves into the current labor market dynamics. She describes a "frozen labor market" with stagnant job openings and steady layoffs, contributing to widespread economic uncertainty. This uncertainty hampers consumer confidence, affecting household spending and financial stability.

"There are hirings that have stalled out quits and layoffs are relatively steady... what this means for your household budget and your financial situation."
— Elizabeth Crawford [05:38]

Crawford emphasizes the pervasive impact of uncertainty, noting how consumers are cutting back on expenses due to fears about their job security and income stability.

"We're actually going to hunker down and start saving a little bit more because we don't know what's going to happen to our jobs."
— Elizabeth Crawford [06:14]

4. Global Trade and the Footwear Industry’s Reliance on China

The episode shifts focus to the footwear industry, illustrating how tariffs have failed to drive manufacturers out of China. James Gao, CEO of Schubot, and Laina Phoenix of Zero Shoe Brand discuss the challenges of relocating production. Specialized footwear requires a skilled workforce and established industrial clusters, which China continues to provide efficiently.

"Shoe manufacturing is labor intensive... Every lacing is manual. There's no robot."
— James Gao [10:38]

Phoenix explains that attempts to move production to Vietnam were thwarted by newly imposed tariffs, reinforcing China's position as the primary hub for shoe manufacturing.

"It would take hundreds of millions of dollars of factory investment, training of a workforce that does not exist. It would take an enormous amount of time."
— Laina Phoenix [13:34]

Despite increased tariffs, companies like Schubot remain optimistic, leveraging their agility to adapt in an uncertain economic climate.

"As an entrepreneur, I'm excited because the tough economic climate and uncertainty means large players don't hold all the advantages."
— James Gao [14:16]

5. European Automakers Navigate US Tariffs

European car manufacturers, including Audi and Jaguar Land Rover, grapple with US tariffs that have significantly increased the cost of their vehicles. Henry Epp explains that while companies have existing inventories, sustained tariffs force them to consider shifting production to the US or redirecting sales to other markets.

"Selling internal combustion engine cars to the US had been a steady source of revenue... but now they can't really sell even their internal combustion cars because of the tariffs."
— Carl Brauer [19:33]

Marianne Madeira of Lehigh University suggests that European firms might turn to other global markets, although this strategy faces internal challenges within the diverse EU member states.

"Balancing all the competing interests and politics across the 27 member states in the EU is really tricky."
— Marianne Madeira [20:09]

6. Copper Prices Signal Economic Trends

Philip Striebel, Chief Market Strategist at Blue Line Futures, discusses the unexpected decline in copper prices. Typically a barometer for economic health due to its widespread use in construction and technology, the recent drop suggests weakening demand and potential global economic slowdown, especially in China.

"Demand for copper... usually portends healthy economic growth. But the recent run on the 29th element doesn't quite fit that pattern."
— Philip Striebel [21:42]

Striebel points out that the absence of a specific tariff on copper might have led to preemptive buying, artificially inflating prices temporarily. However, the subsequent decline reflects broader economic concerns.

"Slowing demand for copper could foreshadow a broader slowdown around the world, especially in China."
— Philip Striebel [22:53]

7. The Closure of Ivanpah Solar Plant Highlights Renewable Challenges

The episode features the imminent shutdown of the Ivanpah Solar Electric Generating System, a concentrated solar power plant in the Mojave Desert. Ed Smeloff explains that Ivanpah's technology, once innovative, is now outcompeted by the dramatically cheaper photovoltaic (PV) solar panels.

"Over the last 15 years... the cost of photovoltaic, or PV, solar power... has fallen about 70%, to the point that it's significantly cheaper than the energy that Ivanpah generates."
— Ed Smeloff [24:20]

Despite its early success and ability to provide energy around the clock using molten salts, Ivanpah's economics became untenable as PV solar technology advanced. Former Department of Energy Director Jigger Shaw acknowledges the project's partial success but notes it failed to catalyze substantial further investment.

"It was clearly successful in that we gave them money and they commercialized the technology here in the United States."
— Harry Mamaesky [25:52]

Smeloff counters by highlighting ongoing interest in concentrated solar power, suggesting technological improvements and niche applications may still hold promise.

"Concentrated solar power won't die when Ivanpah shuts down. There are still people and companies who think the plant has value."
— Ed Smeloff [26:14]

8. Rising Hardship Withdrawals from Retirement Accounts

Concluding the episode, Kai Ryssdal presents troubling data from Empower, indicating that hardship withdrawals from 401(k) accounts are currently 15-20% above historical norms. This surge suggests increased financial strain among Americans, with many tapping into retirement savings to navigate economic hardships.

"Hardship withdrawals from 401ks are running about 15 to 20% above the historical norm. Those early withdrawals, of course, are taxed and if you're under 59 and a half come with a 10% penalty."
— Kai Ryssdal [27:49]

Ryssdal emphasizes that this trend is a concerning indicator of the broader economic struggles individuals are facing amidst uncertainty and market volatility.

Notable Quotes

• "Consumers and businesses are increasingly the same, and nobody knows what is going to happen next."
  — Kai Ryssdal [00:57]

• "The Fed keeps interest rates higher to fight inflation. It keeps rates lower to fight an economic slowdown."
  — Harry Mamaesky [02:47]

• "We have such a wide range of styles requiring different technical capabilities, we use a number of different factories."
  — Laina Phoenix [11:48]

• "It was clearly successful... it wasn't successful in catalyzing a trillion dollars worth of investment."
  — Harry Mamaesky [25:52]

Conclusion

This episode of Marketplace provides a comprehensive analysis of the current economic climate shaped by aggressive tariff policies, labor market stagnation, and global trade tensions. Through expert insights and real-world examples, it underscores the persistent dominance of China in manufacturing, the struggles of European automakers against US tariffs, and the broader indicators signaling potential economic slowdowns. Additionally, the closure of significant renewable energy projects like Ivanpah highlights the challenges within the clean energy sector amidst rapidly evolving technologies. The rising trend of hardship withdrawals from retirement accounts serves as a stark reminder of the personal financial impacts of these macroeconomic shifts.

Produced by:
Andy Corbin, Nicholas Guillon, Maria Hollenhorst, Iru Ekpenobi, Sarah Leeson, Sean McHenry, Sofia Terenzio
Podcast Team: Marketplace