Navigating the Turbulent Trade Landscape

In the latest episode of "Marketplace," host Kai Ryssdal delves into the complexities of the ongoing trade tensions, highlighting the unpredictable nature of tariffs in the current economic climate. Released on March 7, 2025, the episode titled "This Isn’t the 2018 Trade War" contrasts the present trade dynamics with those of 2018, emphasizing the heightened volatility and uncertainty faced by traders and policymakers alike.

Ryssdal opens with a snapshot of the financial markets grappling with fluctuating tariffs. The recent decision to suspend tariffs on most imports from Canada and Mexico for a month has led to significant market tremors. “Tariffs are on, tariffs are off, tariffs are modified, tariffs are coming in a month,” Ryssdal remarks [00:02], encapsulating the relentless shifts that have left traders bewildered, resulting in a tumble of major stock indices despite the temporary reprieve.

Inflation: The Central Challenge for the Fed

A significant portion of the discussion centers on inflation, a stark contrast to the economic landscape of 2018. Economist Ann Owen of Hamilton College explains, “It's inflation, inflation, inflation” [01:38], underscoring how persistent inflation has reshaped economic strategies. Unlike in 2018, when inflation was manageable and tariffs were perceived as isolated shocks, the current environment sees inflation as a pervasive threat. Owen elaborates, “Higher inflation expectations can cause higher inflation. A self-fulfilling nightmare for the Fed” [02:45], highlighting the precarious position of the Federal Reserve.

Fed Chairman Jay Powell, who took the helm in 2018 during the initial trade skirmishes, now faces a far more fragile economy. With unemployment steady around 4%, Owen notes that recent payroll and GDP figures indicate a slowdown, further complicating the Fed's dual mandate of controlling inflation and maintaining full employment. Stephanie Aliaga from JPMorgan Asset Management adds, “This time around, tariffs are hitting an economy that's losing momentum” [02:57], emphasizing the compounded challenges Powell must navigate.

Labor Market Strains Amid Economic Shifts

The labor market presents another layer of complexity. Ryssdal reports on the first full monthly unemployment report of the second Trump administration, highlighting a rise in continuing unemployment claims reaching a three-year high [03:47]. This indicates that individuals are taking longer to secure new employment, a sentiment echoed in the Fed's Beige Book. Businesses outside traditionally understaffed sectors like healthcare and construction report ease in hiring, with one respondent noting, “resumes stacked to the ceiling” [05:05].

Megan McCarty Carino of "Marketplace" explores the prolonged job search period, averaging five and a half months for white-collar workers to find new positions [05:05]. Amanda Augustine of Career Minds points out the intensifying competition and rigorous hiring processes, stating, “Nobody wants to make a costly mistake and hire the wrong person” [05:05]. Allison Srivastava from Indeed Hiring Lab observes a "frozen" job market in certain sectors, with low quit rates indicating a lack of confidence among workers [06:00]. Julia Pollack of ZipRecruiter highlights that unemployment has disproportionately affected workers with some college education but no advanced degrees, particularly in fields like communications and IT [06:30].

Banking Sector Under Pressure from Rising Interest Rates

Interest rate hikes present significant challenges for the banking sector. Ryssdal references the collapse of Silicon Valley Bank two years prior, attributing it to the exposure of banks to undervalued long-term bonds amidst rising rates [09:00]. A new FDIC report reveals that many banks continue to hold substantial portfolios of long-term securities, exposing them to unrealized losses as interest rates remain high.

Chris Duncan, Chief Lending Officer at La Salle State Bank in Illinois, explains the predicament: “We have not seen our unrealized loss position in our securities portfolio reduce as much as maybe we would have anticipated a year ago” [10:07]. The bank faces potential losses if it needs to liquidate these securities, affecting profits and shareholder confidence. However, Julie Hill from the University of Wyoming College of Law notes that selling is only problematic if banks must liquidate under pressure, a scenario most banks are avoiding by holding onto their investments [10:29].

Quentin Lady, CFO of First National Bank Colorado, presents a more optimistic outlook, stating that his bank maintains ample capital and benefits from borrowers repaying loans reliably [11:12]. Strategies to mitigate losses include increasing loan issuance to capitalize on higher interest rates and reinvesting in new bonds with better yields, aiming for future unrealized gains as rates stabilize [11:55].

Tech Innovation and Workforce Dynamics in Crossville, Tennessee

Shifting focus, the episode features an in-depth segment on Whisper Aero, a high-tech aviation startup based in Crossville, Tennessee, led by CEO Mark Moore [14:30]. The company is pioneering quiet electric propulsion systems for drones and airplanes, vital for reducing noise pollution in urban areas. Moore discusses the unique challenges of operating a tech startup in a small town, including attracting and retaining skilled engineers. “Small town living is not for everyone,” Moore admits, highlighting the need to balance professional and personal lives by establishing a satellite office in Nashville to cater to employees seeking a more vibrant social environment [22:10].

Whisper Aero's partnership with Tennessee Tech University and investment in local infrastructure, such as a new sports complex, illustrate the broader economic impact of tech firms on rural communities. Ryssdal emphasizes the importance of integrating young, skilled workers like Ace Hawkins, a 20-year-old manufacturing technician, into the local economy to sustain growth and innovation [20:38].

Market Performance and Economic Indicators

Towards the episode's conclusion, Ryssdal provides a brief overview of the day's market performance. Major indices saw significant declines: Dow Industrials fell by 1%, Nasdaq plummeted by 2.6%, and the S&P 500 decreased by 1.8% [13:00]. Retail stocks exhibited mixed results, with Walmart dropping 1.4% and Dollar General rising 3.4%. Additionally, the yield on the 10-year Treasury note increased to 4.28%, reflecting ongoing volatility in bond markets [14:00].

Educational Insights and Final Notes

The episode wraps up with educational content defining key financial terms for listeners. Ryssdal clarifies that a "correction" occurs when a Wall Street index declines more than 10% from its recent high, a status currently applicable to the Nasdaq, which has fallen 10.4% since December [21:00]. He further explains that a "bear market" signifies a 20% decline, providing listeners with essential vocabulary to navigate financial discussions [22:30].

Conclusion

"This Isn’t the 2018 Trade War" offers a comprehensive analysis of the multifaceted economic challenges facing the United States today. From the intricate dance of tariffs and inflation to the strains in the labor market and banking sector, the episode provides listeners with a nuanced understanding of the current economic landscape. Additionally, the spotlight on Whisper Aero in Crossville exemplifies how technological innovation and workforce dynamics are shaping rural economies. Through expert insights and real-world examples, "Marketplace" equips its audience with the context needed to make sense of complex economic news.