Summary of "Why Trump's Potential Tariffs Are Making Business Owners Anxious"

The Indicator from Planet Money episode titled "Why Trump's Potential Tariffs Are Making Business Owners Anxious," released on January 23, 2025, delves into the economic ramifications of newly proposed tariffs by President Trump and their profound impact on various U.S. businesses. Hosted by Wayland Wong and Adrienne Ma, the episode provides an in-depth analysis of how these tariffs create uncertainty that ripples through the economy, affecting everything from farmers to specialized art dealers.

Trump's Proposed Tariffs: An Overview

The episode opens with host Adrienne Ma outlining President Trump's latest tariff proposals. Trump has hinted at imposing a 10% tariff on Chinese goods and a 25% tariff on goods from Canada and Mexico, potentially taking effect as early as the following week (00:14). These proposed tariffs are part of Trump's broader strategy to address trade imbalances and protect American industries. However, the hosts clarify that U.S. businesses, not the foreign governments, bear the brunt of these tariffs. As Wayland Wong explains, "If the US slaps tariffs on foreign products, those countries are not the ones who pay it. It's US companies that import those products who pay, usually passing that extra cost onto US customers in the form of higher prices" (00:53).

Impact on U.S. Businesses: Real-World Implications

The discussion transitions to the tangible and intangible costs businesses face amidst these impending tariffs. Adrienne Ma emphasizes that beyond the direct financial burden, the uncertainty surrounding these tariffs poses significant challenges for businesses trying to navigate the volatile economic landscape.

Brad Smith: A Farmer's Struggle with Trade Wars

Brad Smith, a corn and soybean farmer from Milledgeville, Illinois, shares his firsthand experience with the previous U.S.-China trade war. He recounts how, in 2018, China's retaliatory tariffs on U.S. soybeans severely impacted his farming operations. "Soybeans were one of the very few products that China was actually buying from us. I think at that time, maybe they were buying 30 to 40% of the US soybeans, which is a big deal" (03:16). This reliance on Chinese demand was precarious, leading to a sharp decline in U.S. soybean prices as China diverted its purchases to Brazil following the tariffs. Brad explains, "One thing led to another, and essentially Brazil stole a big chunk of our market share at that time, and they still do" (03:44).

In response to these challenges, Brad adjusted his farming practices by increasing corn production, a crop less dependent on Chinese demand. However, with the new administration's potential tariffs on Mexican goods, Brad faces another dilemma. His corn exports largely go to Mexico, and with the proposed 25% tariffs on Mexican goods, he worries about retaliatory measures that could severely impact his sales. "What if Mexico retaliates against those tariffs with tariffs of its own on things like US corn? All this makes it really tough for him to run his farm" (04:41).

The Ripple Effect of Economic Uncertainty

Luis Baldometo Quintana, an economist and professor at the College of William and Mary, provides a broader perspective on how uncertainty from tariffs affects various businesses. Using the example of a hypothetical Ohio-based medical device company, Quintana outlines three primary ways uncertainty can manifest:

1. Uncertain Costs: "If the US imposes a tariff on Mexican goods, those Mexican-made parts you buy might become more expensive. Now, you could pass that cost onto the customer by raising the price of your equipment, but that could also hurt sales. So it's really hard for a company in this situation to know what to do" (05:42).

2. Tariff Retaliation: This involves foreign governments responding to U.S. tariffs with their own, potentially harming U.S. exports. Quintana explains, "If the US follows through with tariffs on Canadian imports, Canada might decide to hit back with tariffs on U.S. goods. And that could hurt your sales in Canada" (06:04).

3. Operational Changes: Businesses might need to adjust their operations to mitigate the impact of tariffs. Quintana suggests preemptive measures like stocking up on inputs before tariffs take effect, although this comes with its own costs: "You go and make a gigantic purchase of inputs for say, one or two years of production. The issue is it costs money" (07:00).

These layers of uncertainty make strategic planning exceedingly difficult for businesses, as they grapple with fluctuating costs and potential market access issues.

Eric Zeterquist: The Art Dealer's Predicament

The episode also features Eric Zeterquist, an Asian art dealer based in New York, who specializes in Chinese ceramics. Eric reflects on his experience during Trump's first term, when the U.S. imposed tariffs on Chinese antiques. "They have to pay higher prices for everything. And to what end? I don't know. I mean, it's, again, it's not helping the American laborer, it's not helping the American farmer. It just doesn't make sense" (07:21).

Despite his efforts to adapt, Eric expresses ongoing frustration and uncertainty about the future. When asked about his preparations for potential new tariffs, he candidly responds, "What can I do but wait and see? Right now, my biggest concern is just I have no idea what's happening" (08:11). His predicament underscores the pervasive anxiety among business owners who feel powerless in the face of unpredictable trade policies.

Conclusion: Navigating Through Uncertainty

The episode concludes by highlighting the central theme of uncertainty and its detrimental effects on the U.S. economy. From farmers like Brad Smith to specialized dealers like Eric Zeterquist, businesses across the spectrum are left grappling with the unpredictability of trade policies. As the hosts aptly summarize, uncertainty from tariffs complicates risk management and strategic planning, ultimately hindering economic stability and growth.

Notable Quotes:

• Wayland Wong (00:53): "If the US slaps tariffs on foreign products, those countries are not the ones who pay it. It's US companies that import those products who pay, usually passing that extra cost onto US customers in the form of higher prices."

• Brad Smith (03:16): "Soybeans were one of the very few products that China was actually buying from us. I think at that time, maybe they were buying 30 to 40% of the US soybeans, which is a big deal."

• Brad Smith (03:44): "One thing led to another, and essentially Brazil stole a big chunk of our market share at that time, and they still do."

• Luis Baldometo Quintana (05:42): "If the US imposes a tariff on Mexican goods, those Mexican-made parts you buy might become more expensive. Now, you could pass that cost onto the customer by raising the price of your equipment, but that could also hurt sales. So it's really hard for a company in this situation to know what to do."

• Eric Zeterquist (07:21): "They have to pay higher prices for everything. And to what end? I don't know. I mean, it's, again, it's not helping the American laborer, it's not helping the American farmer. It just doesn't make sense."

• Eric Zeterquist (08:11): "What can I do but wait and see? Right now, my biggest concern is just I have no idea what's happening."

This episode of The Indicator from Planet Money offers a comprehensive look into how Trump’s potential tariffs are not just abstract economic policies but real factors inducing anxiety and forcing difficult decisions among U.S. business owners. By weaving together personal stories with expert analysis, the hosts effectively illustrate the pervasive impact of trade policy uncertainty on the American economy.