Who’s in the consumer-spending driver’s seat?

Summary

Marketplace Podcast Summary: "Who’s in the Consumer-Spending Driver’s Seat?"
Release Date: February 25, 2025
Host: Kai Ryssdal

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I. Overview

In the February 25, 2025 episode of "Marketplace," host Kai Ryssdal delves into the intricate dynamics of consumer spending in the United States, examining who the primary drivers are and how their spending habits influence the broader economy. The episode navigates through various topics, including income distribution, the burgeoning data center industry, the strategic use of economic sanctions by the U.S., the pivotal role of tech giants like Nvidia in the AI revolution, the complexities of North American supply chains, and the resilience of businesses in regions like Hawaii amidst ongoing challenges.

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II. Consumer Spending Drivers

Key Insight: A disproportionate amount of consumer spending is concentrated within the top 10% of income earners, significantly shaping the U.S. economy.

• High-Income Impact: Consumers in the top 10%—those earning $250,000 or more annually—are responsible for nearly half of all consumer spending, marking the highest share recorded by Moody's analysis for the Wall Street Journal (02:15).

• Economic Vulnerability: Economist Mark Zandi from Moody’s highlights that this concentration makes the economy more vulnerable, as high earners' spending is often fueled by stock ownership. Zandi states, “Maybe the only thing rising faster than the price of eggs the past couple of years has been in video shares” (03:34).

• Consumption Patterns: The widening spending gap, especially pronounced during leisure periods like summer and winter vacations, indicates that affluent households maintain robust spending despite inflation and a softening labor market. Michael Brown, Principal US Economist at Visa, notes the chasm began widening significantly in 2023 (02:15).

• Broader Implications: Josh Bivens from the Economic Policy Institute suggests that a more equitable distribution of income could diversify job creation, moving focus towards sectors like elder care and childcare. He emphasizes, “With a more even distribution of incomes, more people could actually afford care for their parents and children” (03:41).

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III. Data Centers and Energy Demand

Key Insight: The exponential growth of data centers, driven by advancements in artificial intelligence, is significantly increasing energy consumption, posing environmental and economic challenges.

• Expansion Plans: Apple announced a $500 billion investment over the next four years in a new manufacturing facility in Houston and expanded data centers in five other states to support its AI products (04:19).

• Energy Impact: Megan McCarty Carino from Marketplace explores how data centers are doubling or tripling their energy demands. Julie Bolthouse from the Piedmont Environmental Council remarks on the expansive footprint of these facilities in Loudoun County (05:48).

• Infrastructure Strain: A December report cited by Lauren Bridges of the University of Virginia projects that data center growth could nearly triple Virginia's electricity demand within 15 years (06:07).

• Environmental Costs: Logan Burke from the Alliance for Affordable Energy criticizes the reliance on natural gas and delayed coal plant closures, questioning the long-term environmental costs of data center expansion (06:43).

• Policy Response: Ike Brannan from the Jack Kemp Foundation highlights that policymakers are increasingly scrutinizing the energy implications of data centers, balancing economic benefits with sustainability concerns (07:18).

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IV. The Role of Economic Sanctions in U.S. Policy

Key Insight: The United States extensively utilizes economic sanctions as a tool of foreign policy, but their overuse may lead to diminished effectiveness and unintended geopolitical consequences.

• Economic Warfare: Michael Brown discusses in his book "Choke: American Power in the Age of Economic Warfare" how the U.S. has transformed economic chokepoints into tools for imposing sanctions with minimal prerequisites (08:35).

• Overuse Risks: Comparing sanctions to antibiotics, Brown warns that excessive or inappropriate use can lead to substantial backlash and encourage other nations to develop alternatives to U.S.-dominated systems like the dollar. He states, “Sanctions are like antibiotics. They work well when used correctly, but cause a host of problems when used excessively or inappropriately” (10:35).

• Geopolitical Shifts: Brown expresses concern that the Trump administration's aggressive stance on sanctions against both adversaries and allies could lead to a fragmented global economy, increasing the risk of great power conflicts (12:28).

• Historical Context: Reflecting on past sanctions against Russia, Brown illustrates how stagnation in sanction policies can lead to resistance and decreased effectiveness, as seen in the prolonged economic hardships faced by Russia (10:51).

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V. Nvidia and the AI Economy

Key Insight: Nvidia stands at the forefront of the artificial intelligence revolution, influencing both the stock market and the technological landscape, despite emerging competition from international players.

• Market Influence: Eric Gordon from the University of Michigan emphasizes that Nvidia's stock contributed to 22% of the S&P's total gain last year, underlining its significant market presence (16:43).

• AI Dominance: Nvidia's GPUs command approximately 90% of the AI hardware market, making it the "poster stock for AI." Peter Cohen from Babson College attributes this dominance to Nvidia's early investment in GPU technology for gaming and subsequent pivot to AI applications (17:07).

• Competition and Market Dynamics: The introduction of Deep Seek, a Chinese AI company, challenges Nvidia's supremacy by offering AI models that require fewer hardware resources. Matt Bryson from Wedbush Securities notes that while this has caused a 17% plunge in Nvidia's stock, it may ultimately drive greater demand for AI hardware (17:53).

• Future Prospects: Despite production challenges, the new generation of Nvidia's superchips is gaining traction, with expectations that increased affordability in AI technology could expand the market, potentially benefiting Nvidia in the long run (18:16).

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VI. North American Supply Chains and Trade Agreements

Key Insight: The intricate and deeply integrated supply chains between the United States, Canada, and Mexico, established under agreements like NAFTA and USMCA, are pivotal to the region's manufacturing success, particularly in the automotive sector.

• Automotive Superclusters: Edward Fishman highlights the Texas-Mexico Automotive Supercluster, where companies like Toyota, GM, Tesla, Kia, and BMW rely on a network of suppliers across borders to produce a diverse range of vehicles (21:52).

• Cross-Border Complexity: Tony Payan from Rice University illustrates the cyclical movement of automotive parts between the U.S. and Mexico, emphasizing the economic interdependence fostered by free trade agreements (20:31).

• Economic Anchors: Jenna Salceda Herrera from the Greater San Antonio Regional Economic Partnership notes that San Antonio has become a hub for advanced manufacturing, benefiting significantly from NAFTA and USMCA (21:35).

• Policy Uncertainty: With the USMCA agreement up for review, there is looming uncertainty about potential tariffs on auto parts from Mexico, which could disrupt established supply chains. Mike Wall from S&P Global Mobility suggests that while some companies may explore reshoring, the complexity and entrenched nature of current operations make rapid changes unlikely (23:13).

• Long-Term Planning: Fishman points out that automakers plan years ahead, and short-term political shifts have limited impact on their long-term business strategies, underscoring the robustness of the existing manufacturing ecosystem (23:34).

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VII. Business Resilience in Hawaii

Key Insight: Despite prolonged challenges brought on by the pandemic, businesses in Hawaii demonstrate resilience, though they continue to grapple with issues like staffing shortages and rising living costs.

• SeaQuest Hawaii's Struggles: Manu Powers, co-owner of SeaQuest Hawaii, details the enduring impact of the pandemic on tourism and operational challenges, including high cancellation rates and staffing shortages. She reflects on the broader economic difficulties, stating, “It doesn't help that we're understaffed as we continue to be and have been since the pandemic” (24:22).

• Cost of Living: Powers highlights the skyrocketing cost of living in Hawaii, particularly housing, which exacerbates business challenges by limiting the available workforce. She notes, “It's so expensive to rent a home here. If you don't have two jobs, you have two roommates” (24:22).

• Resilience and Optimism: Despite these hurdles, Powers remains optimistic about the future, drawing on Hawaii's history of overcoming various crises. She states, “We've never seen anything like this. It doesn't help... But we'll get back there again at some point” (24:22).

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VIII. Conclusion

The episode underscores the significant influence of high-income consumers on the U.S. economy, the environmental and infrastructural challenges posed by the rapid expansion of data centers, and the strategic yet contentious use of economic sanctions in global diplomacy. Additionally, it highlights the pivotal role of companies like Nvidia in advancing AI technologies and the complex interdependencies within North American supply chains. Lastly, the resilience of businesses in regions like Hawaii amidst ongoing economic and operational challenges serves as a testament to enduring entrepreneurial spirit. Collectively, these discussions paint a comprehensive picture of the multifaceted forces shaping consumer spending and economic trends in the contemporary landscape.

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Notable Quotes

• Josh Bivens:
  “With a more even distribution of incomes, more people could actually afford care for their parents and children.”
  03:41

• Mark Zandi:
  “Maybe the only thing rising faster than the price of eggs the past couple of years has been in video shares.”
  03:34

• Michael Brown:
  “Sanctions are like antibiotics. They work well when used correctly, but cause a host of problems when used excessively or inappropriately.”
  10:35

• Manu Powers:
  “We'll get back there again at some point.”
  24:22

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This summary provides an in-depth exploration of the key themes and discussions from the "Marketplace" podcast episode, offering valuable insights for listeners and non-listeners alike.

Transcript

[Kai Rysdal]

This podcast is supported by Odoo. Some say Odoo business management software is like fertilizer for businesses because the simple, efficient software promotes growth. Others say Odoo is like a magic beanstalk because it scales with you and is magically affordable. And some describe Odoo's programs for manufacturing, accounting and more as building blocks for creating a custom software suite. So Odoo is fertilizer Magic beanstalk building blocks for business Odoo exactly what small businesses need. Sign [e-mail] that's o d o o.com Listen up everybody.

[Matt Levin]

It's the first day of our March fundraising campaign and we've got a big chance to start strong. The Marketplace Investors Challenge Fund is going to match the first $30,000 in donations. So please don't wait. Give right now and double your impact thanks to this incredible match. Go to marketplace.org donate and your gift will go twice as far. Marketplace.org donate yes, consumers drive this economy. Which consumers though? From American Public Media, this is Marketplace in Los Angeles. I'm Kai Rysdal. It is Monday today, 24th February. Good as always to have you along, everybody. If you are even a semi regular listener to this program, you know that the American consumer is the beating heart of this economy. Repeat after me because you've heard me say it often. Spending by or on behalf of consumers accounts for almost 70% of U.S. gross domestic product. Turns out, though, that in the past couple of years that spending has increasingly been driven by a relatively small group of people. Moody's did some analysis for the Wal Street Journal that shows in the top 10% of incomes, those consumers making $250,000 or more every year, they account for nearly half of all consumer spending, the highest share since they've been collecting that kind of data. Marketplace's Matt Levin explains how those consumption patterns are shaping our economy now and might in the future.

[Kai Rysdal]

You know how there are certain words or turns of phrase that you only really associate with the top end of the income scale, like using a season as a verb, as in we typically summer in the south of France or last Christmas we wintered in Saint Barts. Apparently there's been more summering and wintering lately. When you look at the dynamics, I think there is certainly evidence to support that. Michael Brown is principal US Economist at Visa. Obviously there's always been a spending gap between rich and not as rich, but Brown says the chasm really started widening in 2023 and it's been the widest during summer and winter. If you're summering and you're in this affluent category. You're probably traveling abroad. If you're, say, lower income or maybe even lower middle income, maybe you're driving to some of those destinations, particularly given, you know, the costs of things going up. While inflation and a softening labor market have crimped lower income budgets, it hasn't really restrained high earners from splurging. That's partly because richer households tend to own stocks. And maybe the only thing rising faster than the price of eggs the past couple of years has been in video shares. Economist Mark Zandi at Moody says that makes the economy overall more vulnerable.

[Matt Levin]

I mean, if their spending is being driven by record stock prices, you know, I wouldn't count on that for sustaining long term economic growth.

[Kai Rysdal]

Some economists argue that richer households tend to spend more on labor intensive goods and services, which is good for the job market. But Josh Bivens at the Economic Policy Institute says a more equal distribution of incomes and consumption could reorient what jobs get created in the first place. Maybe we'd have fewer people working in really high end hotels and resorts and a lot more people working in sort of elder care and childcare because all of a sudden people had the ability to pay for those things. He says with a more even distribution of incomes, more people could actually afford care for their parents and children. I'm Matt Levin for Marketplace on Wall.

[Matt Levin]

Street today a little bumpy and then a slide into the close also, just because honestly, it's kind of amazing. Warren Buffett's holding company Berkshire Hathaway, up 4% today on a solid quarterly profit report over the weekend. Should you be contemplating buying? Berkshire closed today at $747,485.50 for one share. We'll have the details when we do the numbers. Apple said today it's going to spend $500 billion over the next four years to speed up work on a manufacturing facility in Houston that supports its artificial intelligence products. It's going to expand existing data centers in five other states as well. Setting aside for a second the political setting of Apple's announcement, the fact is that the boom in AI brings with it an explosion in demand for electrical power for those data centers. The Department of Energy predicts that in the next couple of years, data center growth is going to require double or triple the amount of energy those data centers do now. Marketplace's Megan McCartney Carino has more on that one.

[Megan McCarty Carino]

Northern Virginia is known as Data Center Alley. It's home to more than 250 facilities, the biggest concentration in the world.

[Kai Rysdal]

It's like walking through the inside of a computer.

[Megan McCarty Carino]

Julie Bolthouse is the director of land use with the nonprofit Piedmont Environmental Council. She says the hulking concrete campuses have taken over the landscape in Loudoun County.

[Kai Rysdal]

The impact really goes well beyond just the footprint of the data centers themselves.

[Megan McCarty Carino]

A December report commissioned by the Virginia state Legislature projected data center growth could nearly triple the state's electricity demand in the next 15 years. Lauren Bridges is a professor of media studies at the University of Virginia who researches the social and environmental costs of technology.

[Edward Fishman]

Essentially, more demand means the need to.

[Megan McCarty Carino]

Build more energy infrastructure, and all ratepayers could be stuck with the bill.

[Edward Fishman]

This might represent a form of cost shifting where residents are seen to subsidise.

[Manu Powers]

The cost of the data center industry.

[Megan McCarty Carino]

Those costs aren't just financial. Many tech companies are investing in nuclear and renewable energy, but demand is spurring growth in natural gas generation and delaying the closure of coal plants, says Logan Burke at the alliance for Affordable Energy. What is it costing us to continue to invest so much money in fossil gas? It's costing us an awful lot. Data centers are an economic boon in many regions, but policymakers are starting to pay closer attention to the energy issue, says Ike Brannan, senior fellow at the Jack Kemp Foundation.

[Matt Levin]

Politicians on both sides do not want to face the wrath of consumers if.

[Kai Rysdal]

They'Re told that their energy prices are.

[Matt Levin]

Going to go up by 30% or they start having occasional drown outs.

[Megan McCarty Carino]

From Virginia and California to Ohio and Texas, states are considering measures to increase data centers, transparency and accountability. I'm Megan McCarty Carino for Marketplace.

[Matt Levin]

The foreign policy of the United States isn't just military and political strategy. Economic sanctions are an essential part of how this country tries to get things to happen internationally. In point of fact, an analysis by the Washington Post shows the United States imposes three times as many economic sanctions as does any other country in the world. And as America's role in the world changes here in the second Trump administration, it's worth spending some time, I think, on our economic diplomacy. Edward Fishman's at Columbia University now. He's also a former official in the State and Treasury Departments doing sanctions work. And he's got a new book out. It's called Choke American Power in the Age of Economic Warfare. Welcome back to the program. Good to have you on.

[Michael Brown]

Thanks, Kai. Great to be here.

[Matt Levin]

Define for us, first of all, I suppose the idea, the modern idea of choke points.

[Michael Brown]

So, Kai, a choke point is an area of the global economy where one country has a dominant position, and there's very little redundancy. So, for instance, if you're cut off from the US Dollar, there's not a readily available substitute from the US Dollar. The same is true of the most advanced microchips and semiconductors. So that is what defines choke points today. Historically, they were geographic features like the Bosphorus. Today they are really these parts of the global economy that are almost invisible, but the US can weaponize.

[Matt Levin]

All right, so we're gonna get back to the dollar in a minute because that obviously has repercussions and manifestations, in fact, on what's playing out now in sort of global economic warfare. But the point that you make in this book is economic warfare has been a thing, and now it's even more critical that the way we use it is consider and exercise with some restraint.

[Michael Brown]

Yes, that's exactly right. You know, up until very recently, honestly, even at the turn of the 21st century, using sanctions and other tools of economic warfare in an impactful way, there was a pretty high threshold to it because you needed to either have broad international unity, for instance, backing from the entire United Nations Security Council, or the use of naval force. So even thinking back to the 1990s UN embargo on Iraq, that's very famous, that was implemented by a multinational naval force that was patrolling the Persian Gulf 247 for 13 years. What the choke points that I discussed earlier created is it gave officials in the US Government the power to impose economic pain on foreign countries, even more dramatic than those blockades of old, just by signing documents in the Oval Office or in the Office of Foreign Assets Control in the Treasury Department. So it's made it much easier for the United States to deploy economic warfare.

[Matt Levin]

There's a great line in this book about sort of the overuse of sanctions and economic warfare. And you say, quoting you here, sanctions are like antibiotics. They work well when used correctly, but cause a host of problems when used excessively or inappropriately. Talk about that a little bit.

[Michael Brown]

Sure. When you use sanctions too much, you inspire a backlash. Not only does it hurt the US Economy, but more importantly, it encourages other countries to hedge. They start building alternatives to the dollar. So, for instance, in China, the Chinese government has. Has launched a digital version of the rmb, a central bank digital currency that's explicitly designed to evade US Financial infrastructure. The other thing, though, Kai, there's a flip side of that is that, you know, as with antibiotics, you know, if you have a really bad bacterial infection, you need to go big. You need to hit it with the right drug for the right amount of time. And you can't, you know, stop taking that course of antibiotics too soon. I think that's what really happened with Russia. It's the real tragedy of the Russia sanctions, which is that if you go back to 2014, and look, I was involved in negotiating the original Russia sanctions after the annexation of Crimea with the European Union in 2014. Russia's economy that winter was really suffering, and we really had the Russians close to a deal that potentially would have gotten them out of Ukraine. And at that time, the Europeans were so scared of the impact of the sanctions were having on their own economies that they basically threw in the towel and said, we can't escalate sanctions. And the Nord Stream 2 deal was signed a few months later. And so what happened after that? The final year and a half of Obama's administration, he didn't do anything to increase sanctions. And then for all four years of the first Trump administration, Trump did not increase sanctions on Russia. And so by the time we get to 2022, Russia's had six years basically in which sanctions have stagnated. They've fully adapted. And so by then, you know, you basically had this antibiotic resistance that had developed. So, as I say in the book, sometimes with sanctions, you have to go big or go home.

[Matt Levin]

So what do you make then of this current moment where the Trump administration is, at a minimum, resetting what the global economic engagement of the United States is? When the Europeans, as we saw in the German elections this weekend, are working toward independence from the United States, do you suppose this moment generates momentum to move away from the dollar and the Americans unique control over the global economy?

[Michael Brown]

I do, and as I argue in choke points, we are headed for a new international economic order. The days of globalization are over. We are now living in an age of economic warfare. I think that the age of economic warfare could really evolve in two different ways. One scenario is one in which the US Leads a bloc of democratic countries that continue to integrate their economies, continue to use the dollar, whereas you have another bloc led by China, Russia, and other autocracies that, you know, moves away from the dollar and US Economic dominance. I think where Trump is taking us, Kai, is a much different and darker scenario. Trump, of course, is not only threatening sanctions and tariffs against the likes of Russia and China, but also against our allies, Canada, Mexico, Europe. And of course, this could damage American prosperity at home. And I think that's why these tariffs have gotten so much domestic opposition. But the thing I'm even more concerned about is what that augurs is a much more chaotic breakdown of the global economy in which every nation is for itself. Every sort of diplomatic deal is just a business transaction and no economic relations are permanent. And the thing that makes that so challenging and so scary is that, as history shows, if states can't feel confident that they can secure markets through open trade, the temptation for imperialism and conquest rises significantly and the risk of great power war rises. So that's what I really worry about.

[Matt Levin]

Edward Fishman, he's at Columbia now. He was at State and Treasury working on Russia sanctions. Eddie, thanks a lot for your time. I appreciate it.

[Michael Brown]

Thanks, guy. I really appreciate you having me on.

[Manu Powers]

Coming up, we've survived all of this, and that includes three tsunamis, a pandemic, so we're okay.

[Matt Levin]

That's a lot, though. But first, let's do the numbers. Dow industrials inched up 33 points, just under a tenth percent, 43,461 on the blue chips. The NASDAQ down 237 1.2%, 19,286. The S&P 500 dropped 29 points, about a half percent, 59 and 8. Megan McCarty Carino was talking about electricity costs in data centers. So some electric stocks. Shall we? Pacific Gas Electric, PG&E rose a 10th%. Virginia based Dominion Energy descended 1%. Apple added 6 10%. Amazon down 1.8% today. Bond prices went up. When that happens, the Yield goes down 10 year T note sits at 4.40% today. And you are listening to Markets Place. If you want to be savvy about the economy, the Marketplace newsletter is just what you need. Every Friday, you'll get explainers and analysis that make sense of everything from the moving markets to grocery prices. No jargon, no hype, just smart takes delivered to your inbox. Sign up [e-mail] subscribe this is Marketplace. I'm Kai Rysdal. We get earnings reports from publicly traded companies all the time, quarterly, in point of fact, and most of them come and most of them go without much fanfare. This week, though, it's the company that everybody is watching, Nvidia reports. On Wednesday, Marketplace's Kelly Wells explains why the AI chip design giant is getting so much attention.

[Eric Gordon]

There are two main reasons to watch Nvidia, says Eric Gordon. He's a professor at University of Michigan's business school.

[Michael Brown]

The first is its sheer size and.

[Kai Rysdal]

Its influence on the stock market.

[Eric Gordon]

Gordon says last year Nvidia stock made up 22% of the S&P's total gain the other reason Nvidia is sort of.

[Matt Levin]

The poster stock for AI. It's the way most of us can invest in AI.

[Eric Gordon]

Nvidia dominates because its graphics processing units make up around 90% of the market.

[Kai Rysdal]

During the dot com era, there was something like 2,888 startups that went public. So far, there have been zero startups that have gone public for generative AI.

[Eric Gordon]

That's not normal, says Peter Cohen. He teaches management practices at Babson College and authored a book on generative AI. Nvidia became such a gorilla in part because it got its start long before AI took off, Cohen says. Its GPUs were originally used for gaming.

[Kai Rysdal]

Then used for crypto mining, and then.

[Michael Brown]

Now it has proliferated to be used.

[Kai Rysdal]

By data centers that are training and operating large language models like ChatGPT.

[Eric Gordon]

This quarterly report is getting more attention because it might not be an unfettered success story. One problem, says Matt Bryson with Wedbush Securities. Deepseek, the Chinese AI company, launched its AI model and Chatbot in January.

[Kai Rysdal]

China's development suggested that you can do.

[Michael Brown]

More with fewer hardware resources, so in this case, fewer Nvidia GPUs.

[Eric Gordon]

Nvidia's stock plunged 17% after Deep Seek's announcement. The second is Nvidia's new superchip for the next generation of AI.

[Kai Rysdal]

There have been some fits and starts.

[Eric Gordon]

In terms of production there, but Bryson isn't concerned. He says the new chip is ramping up after a slow start, and if Deepseek makes AI more affordable to more companies, it could actually increase demand for AI hardware. I'm Kayleigh Wells for Marketplace.

[Matt Levin]

We're being reminded here in the second Trump administration that in this globalized economy, supply chains are everything, and disruptions to them can be, well, let's just leave it at disruptive. There are few supply chains as closely linked as the ones between Mexico, Canada and the United States. Businesses in all three countries have made billions of dollars worth of business decisions with the understanding that trade across those borders is going to remain free. Exhibit A cars and trucks from Texas, which has been a big winner in the free trade game. Marketplace's Elizabeth Troval reports.

[Edward Fishman]

I'm standing on the sidewalk outside a car dealership next to a Houston high. Rice University's Tony Payan is here with me.

[Matt Levin]

Well, we're here outside of Toyota dealers in Houston, right on 610 loop.

[Edward Fishman]

The lot is full of shiny new vehicles like Tundras made here in Texas, or Tacomas made in Baja California. Go Payan points out.

[Matt Levin]

These are not American vehicles, they're not.

[Edward Fishman]

Mexican vehicles or Japanese vehicles for that matter.

[Matt Levin]

When you see a plant where a vehicle is being built, what you see is parts coming from many different places.

[Edward Fishman]

Take a manufacturing plant in Mexico where labor is cheap.

[Matt Levin]

You see a lot of different component parts that are coming in from the United States. They get to the plant and then they get assembled in Mexico.

[Edward Fishman]

Like labor intensive harness assembly.

[Matt Levin]

Then the software gets installed in the United States. And so it's a very circuitous roof.

[Edward Fishman]

Having component Parts cross the US Mexico border 1, 2, 3 or more times is economical because of the North American Free Trade Agreement, which was signed in 1992. In nearby San Antonio, President George H.W. bush and leaders of Mexico and Canada gathered for an initialing ceremony captured by C Span.

[Kai Rysdal]

We are creating the largest, richest and most productive market in the entire world.

[Edward Fishman]

Fast forward 30 plus years. After NAFTA and then USMCA renegotiated under President Trump, San Antonio has become an anchor to an automaker's corridor that runs from Dallas all the way to San Luis Potosi in central Mexico, almost a thousand miles.

[Matt Levin]

NAFTA was a big part of what's allowed our manufacturing ecosystem to grow.

[Edward Fishman]

Jenna Salceda Herrera with the Greater satx Regional Economic Partnership says now greater San Antonio is a hub for advanced manufacturing.

[Eric Gordon]

And the companies produce a diverse range.

[Matt Levin]

Of vehicles, including SUVs, pickup trucks, heavy duty trucks, buses.

[Edward Fishman]

There's even a special name for the binational manufacturing ecosystem. San Antonio is a part of the.

[Eric Gordon]

Texas Mexico Automotive supercluster.

[Edward Fishman]

It includes companies like Toyota, gm, Tesla, Kia, BMW, which depend on networks of suppliers in both countries that provide thousands of component parts, networks that just might be too complex to unscramble.

[Kai Rysdal]

We can't undo 30 plus years of.

[Eric Gordon]

Free trade overnight, right?

[Kai Rysdal]

Businesses have built their operations around the.

[Eric Gordon]

Principles of free trade.

[Edward Fishman]

And it's not just automakers, but an entire region's economy could be at stake. Just two and a half hours south, uncertainty looms large in Laredo, where component parts cross back and forth across the border constantly. IBC Bank's Jerry Schwebel says the auto sector is one of the drivers of Laredo's ascent to number one port in the US that trade supports many local businesses.

[Kai Rysdal]

Transportation company, the trucking company that moves those parts, the warehouse where you store those parts temporarily, you know, and pick him up, the custom broker who has to process that business.

[Edward Fishman]

The USMCA trade agreement is up for review next year. In the meantime, if auto parts coming in from Mexico do end up facing tariffs. Mike Wall with S and P Global Mobility says sure some companies may take a closer look at their US Operations.

[Kai Rysdal]

And ask is there some low hanging fruit that can be brought back to the US Quote unquote, cheaply and quickly. But overall it's incredibly difficult because the moment you start putting up new brick and mortar, that is a much longer term kind of either decision and or prospect to get it up and running.

[Edward Fishman]

He says automakers are making business plans years into the future. One four year presidential term can only sway them so much. In Houston, I'm Elizabeth Trovall for Marketplace.

[Matt Levin]

Hawaii was hit especially hard in the early days of the pandemic as everybody stayed home and tourism came to a screeching halt. We started talking to Manu Powers right around then about what it meant for her business. She and her husband run SeaQuest Hawaii, which offers boat and snorkeling tours from Kona. And we called her the other day for an update. And suffice it to say, it has been a long haul.

[Manu Powers]

I'm doing fine and sequest is doing pretty good, as well as can be expected, I suppose. So. Numbers at sequester down and those numbers reflect what's happening in the state. Numbers of visitors to the islands across the board are down over the winter. The surface was huge and it just doesn't seem to stop, which is fantastic if you're a surfer and Kona is known for having, you know, virtually no surf. The number of cancellations we've had to make are crazy. And so I think that's why you can hear that laughter in my voice right now, because we've never seen anything like this. It doesn't help that we're understaffed as we continue to be and have been since the pandemic. And so therefore, even when we are capturing the visitors that are coming to the island, we're still not able to run at full capacity. I'm tired of talking about this problem five years later, to be honest. It's a legitimate argument to say, you know, why can't you find qualified workers? But I think that it's universal. There's hiring signs in every window of every business in this state, really. Hawaii's always had, you know, a smaller job pool to work with. That hasn't changed. But some of the things that have changed are cost of living, which has just gone through the roof. It's so expensive to rent a home here. If you don't have two jobs, you have two roommates. We know that. We'll be okay because we do have this Data set of 30 years under our belt where we can kind of look back and say, okay, we've survived all of this, and that includes three tsunamis, a pandemic, so we're okay. Could it be easier? Absolutely. But we'll get back there again at some point. Point. And then, of course, another set of challenges will present themselves. But we'll tackle those when they come, too.

[Matt Levin]

Manu Powers, co owner of SeaQuest Hawaii, based in Kona. This final note on the way out today, eggs again, Denny's. This time an as yet unspecified surcharge depending on where you live. Our daily production team includes Andy Corbin, Nicholas guillon, Maria Hollenhorst, Iru Ekpanobi, Sarah Leeson, Sean McHenry and Sofia Terenzio. I'm Kyle Rysdal. We will see you tomorrow, Everybody. This is APM.

[Manu Powers]

Consumer confidence had its sharpest monthly decline since 2021, which means we're all in our feels about money. And while uncertainty is the only constant these days, it's also a great reason to get serious about understanding personal finance. I'm Janeli Espinal, host of Financially Inclined, a podcast from Marketplace that makes learning about money simple. Learn about practical skills like negotiating job offers, dealing with money and friendship and love, entrepreneurship and student loans. Get serious about your money and build a life you've always dreamed of. Listen to Financially Inclined wherever you get your podcasts.