Grocers Try to Hold Prices Steady as Tariffs Threaten Produce

Summary

WSJ What’s News: Grocers Try to Hold Prices Steady as Tariffs Threaten Produce
Release Date: March 14, 2025

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1. Consumer Sentiment Hits Lowest Since 2022

The latest data reveals a significant drop in U.S. consumer sentiment, reaching its lowest level since November 2022. The University of Michigan's sentiment index fell 11% from 64.7 last month to 57.9 mid-March, marking a 27% decline compared to the previous year. This downturn was more pronounced than economists had anticipated.

Key Insights:

• Justin Lehart, WSJ Economics Reporter: "The expectations component of the University of Michigan sentiment index is really the most predictive when it comes to future spending, and we saw that expectations really deteriorated across the board. Even Republicans were feeling less cheery. It doesn't mean that people are going to stop spending just because they're feeling a little down. However, you do have to be a little bit more worried about consumer spending in the months ahead than you might have been before this number came out."
  (Timestamp: 01:26)

The decline in the expectations component, which dropped by 15%, is particularly concerning as it suggests potential reductions in future consumer spending, a critical driver of the economy.

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2. Stock Market Reacts Amid Economic Uncertainty

Despite the dip in consumer sentiment, the stock market concluded a challenging week with notable gains. The Dow Jones Industrial Average increased by approximately 1.7%, the S&P 500 rose by about 2%, and the Nasdaq surged by 2.6%.

This positive market performance occurred as the threat of a government shutdown decreased, and investors navigated the complexities of uncertain economic indicators.

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3. Tariffs Pose Challenges for Grocers

President Trump's shifting trade policies have introduced significant challenges for the grocery sector, particularly concerning tariffs on imported produce.

Impact on Produce:

• Patrick Thomas, WSJ Agriculture Reporter: Analyzed the effects of Trump's new tariffs, highlighting that fruits and vegetables are the most affected, especially those imported from Mexico and Canada. These perishable goods cannot be stored long-term, causing price increases to ripple quickly through the supply chain.

Grocers' Strategies to Mitigate Costs:

• Alex Osola: "If you think about the supermarket right now, they're balancing a lot of cost increases on certain commodities. One of the grocers that I talked to for the story talked about his 80/20 rule. For example, you price 80% of the wholesale increase and then eat the other 20%. So basically he's been doing this with eggs and what that does for him is his eggs look cheaper than store down the street. Maybe it's a big Kroger Albertson store, Whole Foods and might gain market share from them because the consumer is going to see that and maybe they'll think, wow, this is the low priced retailer. I'm going to keep coming back here."
  (Timestamp: 03:13)

This 80/20 pricing strategy helps grocers remain competitive by absorbing a portion of the increased costs, thereby avoiding significant price hikes for consumers.

Challenges in the Supply Chain:

• Alex Osola: "It's just a tough math for these guys and some of them took losses last week on this. And trying to figure out what to do with it has been really complicated for a lot of people in the supply chain."
  (Timestamp: 03:56)

Grocers are grappling with fluctuating tariffs, uncertain trade policies, and the immediate impact on perishable goods, making supply chain management increasingly complex.

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4. Universities Navigate Trump Administration Policies

In response to the Trump administration's actions targeting higher education, universities across the nation are implementing various measures to safeguard their operations and funding.

Federal Actions:

• The administration canceled approximately $400 million in federal grants and contracts to Columbia University over anti-Semitism allegations.

University Responses:

• Sarah Randazzo, WSJ Education Reporter: "A lot of schools are preemptively doing hiring freezes... PhD students are also having some offers withdrawn because they just don't know if they can support those PhD students for the next five years. There was a letter that the Education Department put out that didn't have the force of law, but gave a kind of deadline at the end of February to get rid of a lot of DEI related things. So some schools were worried about that and didn't want to get in the crosshairs."
  (Timestamp: 06:55)

Universities are facing headwinds from directives to eliminate Diversity, Equity, and Inclusion (DEI) programs, potential cuts to research funding from the National Institutes of Health, and increased scrutiny over anti-Semitism. These challenges are prompting institutions to adopt measures such as hiring freezes and reevaluating their support for graduate students to mitigate financial uncertainties.

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5. Government Funding and Political Developments

The Senate is poised to vote on a Republican-led measure to fund the government through September, aiming to prevent a shutdown. However, internal pressures persist:

• Chuck Schumer, Senate Minority Leader: Announced support for the bill to avoid a government shutdown, despite opposition from members of his own party.
• Potential Budget Cuts: Ongoing negotiations include possible reductions to Medicaid, a crucial program for low-income Americans, with broader implications for state budgets and healthcare services.

These developments underscore the intricate balance of political maneuvering required to maintain government operations amidst divergent party agendas.

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6. Intel’s New CEO, Liam Bhutan, Outlines Vision

As Intel prepares for a leadership transition with Liam Bhutan taking the helm as the new CEO, expectations are high regarding his strategic direction for the tech giant.

Dan Gallagher, WSJ Tech Reporter: "His initial email to employees suggests he's going to keep going down the two tracks of trying to build out a manufacturing business that makes chips for other companies, as well as improving Intel's own products that they design, making those more competitive against AMD and Nvidia. So for the time, it looks like he's going to still do things the way they've been doing them, but I would expect there's going to be some major changes, possibly a lot of restructuring going on."
(Timestamp: 09:39)

Bhutan aims to enhance Intel’s manufacturing capabilities while boosting the competitiveness of its proprietary products. However, his prior departure from Intel's board due to frustrations over the company's pace and size hints at potential significant restructuring initiatives under his leadership.

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7. University of Oregon’s Marathon Basketball Season

The University of Oregon’s basketball team, newly joined to the Big Ten Conference, has undertaken an extraordinary season of travel:

• Total Miles Traveled: 26,700 miles, equivalent to circling the Earth plus several thousand more miles.
• Performance: Despite the extensive travel, the Ducks boast the best record among Big Ten newcomers.

This remarkable feat highlights the dedication and resilience of the team amidst the logistical challenges of their expanded conference schedule.

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8. Upcoming Content

Listeners can look forward to additional content in the coming days:

• Markets Wrap-Up: A comprehensive review of the week's market movements.
• What’s News in Markets: An in-depth analysis of market trends.
• What’s News Sunday: Featuring an interview with Palmer Luckey, founder of Anduril, on transforming government approaches to national security.

Production Credits: The episode was produced by Pierre Bienname and Anthony Bansi, with supervising producer Michael Kosmides. Theme music was composed by Michael Lavalle, and additional contributions were made by Aisha El Musleam, Scott Salloway, Chris Insinsley, and Falana Patterson.

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Notable Quotes

• Justin Lehart: "The expectations component of the University of Michigan sentiment index is really the most predictive when it comes to future spending..."
  (Timestamp: 01:26)

• Alex Osola: "It's just a tough math for these guys and some of them took losses last week on this..."
  (Timestamp: 03:56)

• Sarah Randazzo: "A lot of schools are preemptively doing hiring freezes..."
  (Timestamp: 06:55)

• Dan Gallagher: "His initial email to employees suggests he's going to keep going down the two tracks..."
  (Timestamp: 09:39)

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This comprehensive summary encapsulates the key discussions and insights from the episode, providing valuable information for those who have not listened to the podcast.

Transcript

[Alex Osola]

This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news there. [e-mail] Washingtonwise.

[Patrick Thomas]

US consumer sentiment hits its lowest level since 2022. Plus, grocers try to hold prices steady as tariffs come for the produce aisle.

[Alex Osola]

It's just a tough math for these guys, and some of them took loss last week on this. And trying to figure out what to do with it has been really complicated for a lot of people in the supply chain.

[Patrick Thomas]

And universities are scrambling to avoid becoming President Trump's next target. It's Friday, March 14th. I'm Alex Osola for the Wall Street Journal. This is the PM edition of what's News, the top headlines and business stories that move the world today. Consumer sentiment sank this month. The University of Michigan's closely watched index fell 11% to 57.9 in mid March from 64.7 last month. That's the lowest level since November 2022 and was much weaker than economists expected compared with a year earlier. Consumer sentiment is down 27%. WSJ economics reporter Justin Lehart says that particularly worrisome was also a decline in the expectations component of the sentiment index, which fell 15%.

[Justin Lehart]

The expectations component of the University of Michigan sentiment index is really the most predictive when it comes to future spending, and we saw that expectations really deteriorated across the board. Even Republicans were feeling less cheery. It doesn't mean that people are going to stop spending just because they're feeling a little down. However, you do have to be a little bit more worried about consumer spending in the months ahead than you might have been before this number came out.

[Patrick Thomas]

Despite consumer sentiment, with a threat of a government shutdown receding, stocks wrapped up a tough week with a rally. The dow rose about 1.7%, the S&P 500 added about 2%, and the Nasdaq led the way with a 2.6% gain. As we've talked about before on the show, President Trump's rapidly changing trade policy is affecting goods from cars to champagne. One place Americans might start feeling it the grocery store produce aisle. Patrick Thomas covers agriculture for the Journal and breaks it down for us. Patrick, what is the produce most affected by Trump's new tariffs?

[Alex Osola]

So the biggest item that you're going to see, fruits and vegetables. The first thing in the supply chain that you would see affected. The tariffs are constantly changing, but we import quite a bit of fruits and vegetables from both Mexico and Canada. So depending how the tariffs work out, that would be an area really affected. Especially if you think about produce perishable goods, you can't put it on ice like you could even in meats. So you're going to see that cost pass down the supply chain a lot faster than you would say something else like the ingredient in a cereal that used maybe wheat imported from Canada.

[Patrick Thomas]

So what do tariffs mean for grocers?

[Alex Osola]

It's a tricky equation for them. If you think about the supermarket right now, they're balancing a lot of cost increases on certain commodities. One of the grocers that I talked to for the story talked about his 8020 rule. For example, you price 80% of the wholesale increase and then eat the other 20%. So basically he's been doing this with eggs and what that does for him is his eggs look cheaper than store down the street. Maybe it's a big Kroger Albertson store, Whole Foods and might gain market share from them because the consumer is going to see that and maybe they'll think, wow, this is the low priced retailer. I'm going to keep coming back here.

[Patrick Thomas]

If consumers are getting sticker shock from particular goods that are going to be impacted by the tariffs, what options do they have? Can they look for a different supplier?

[Alex Osola]

Well, that's one of the things that companies are starting to talk about. Kroger about a week ago talked about their willingness to start looking at their supply chain and shifting around to some trading partners that maybe aren't immediately of concern to the president about which country he's going to slap tariffs on one of the produce companies quoted in the story. He talked about the uncertainty that the last two weeks has brought and he has had to cancel orders, bring them back. He paid two days worth of tariffs and instead of passing that along to the customer, eight, the cost. It's just a tough math for these guys and some of them took losses last week on this. And trying to figure out what to do with it has been really complicated for a lot of people in the supply chain.

[Patrick Thomas]

That was WSJ reporter Patrick Thomas. Thank you, Patrick.

[Alex Osola]

Thank you for having me.

[Patrick Thomas]

President Trump and Russian President Vladimir Putin painted a rosy picture of discussions to bring an end to the war in Ukraine. Trump described the talks as productive, while the Kremlin said that there were reasons to be cautiously optimistic. Meanwhile, Ukrainian President Volodymyr Zelensky called on the US to press Russia to do more to end the three years of grueling fighting as he appeared to acknowledge that Ukraine's incursion into the Kursk region was coming, coming to an end. Coming up, what universities are doing to avoid becoming President Trump's next target. That's after the break. At kpmg, we make the difference by creating value, like developing strategic insights that help drive M and a success or embedding AI solutions into your business to sustain competitive advantage. KPMG make the difference. Learn more at www.kpmg.us insights. President Trump has been pushing for changes at universities. Last week, the Trump administration canceled roughly $400 million in federal grants and contracts to Columbia University over anti Semitism allegations. Now some universities are making tangible changes in response to government spending cuts and the Trump administration's DEI guidance as they're trying to avoid President Trump's next target. Education reporter Sarah Randazzo is here now with more. Sarah, what exactly are universities worried about here?

[Sarah Randazzo]

Universities are really facing headwinds on a few different fronts here. And so one of them is around a lot of the Trump administration's directives around DEI and getting rid of DEI programs. Schools are also reacting to changes in federal funding to research the National Institutes for Health. There's a big formula change potentially coming that would cost universities potential potentially hundreds of millions of dollars. And then there's also a task force into anti Semitism at the federal level that schools are responding to. And so there's really a lot of different fronts at this point that they're responding to.

[Patrick Thomas]

So what are universities doing?

[Sarah Randazzo]

A lot of schools are preemptively doing hiring freezes. For instance, we've seen dozens of universities across the country, from elite ones on down, saying that they're having temporary hiring freezes because they need to figure out whether that money for research grants is coming or not. And as part of that, PhD students are also having some offers withdrawn because they just don't know if they can support those PhD students for the next five years. So those ones are a little in the preemptive bucket around the dei. There was a letter that the Education Department put out that didn't have the force of law, but gave a kind of deadline at the end of February to get rid of a lot of DEI related things. And so some schools were worried about that and didn't want to be get in the crosshairs. So again, it didn't totally have legal bearing, but it was kind of a big scary letter that went out from the Education Department. And then obviously, there are some schools facing immediate backlash like Columbia.

[Patrick Thomas]

How central exactly could these changes be to a university's identity, the education it.

[Sarah Randazzo]

Offers, the research it does, it permeates across campuses. The research grants themselves are mostly focused on the sciences, but it's interesting because schools are saying that even if there's cuts to the science research grants, that's going to have trickle effects because they'll have to maybe move money from elsewhere to accommodate. And culture wise, if you do things like some of the schools we found that canceled a black student alumni event or are no longer going to have graduation ceremonies for different ethnic or affinity groups, it's going to be smaller changes that impact the overall culture of a place and then also some larger changes when it comes to, say, employment or opportunities for graduate programs that are more tangible.

[Patrick Thomas]

That was WSJ education reporter Sarah Randazzo. Thank you, Sarah.

[Sarah Randazzo]

Thanks so much.

[Patrick Thomas]

The Senate is set to vote today on a Republican measure that would fund the government through September. As we mentioned on this morning's show, Senate Minority Leader Chuck Schumer said that he would vote in favor of the bill to avoid a government shutdown, but members of his own party are begging him to reconsider his decision. Congress is also working on a budget and cuts to Medicaid are on the table. The program is mainly for low income Americans, but deep cuts could affect state budgets and health care more broadly. What questions do you have? Send a voice memo to wnpodsj.com or leave a voicemail with your name and location at 212-416-4328. We might use it on the show. LIT Bhutan is set to start as Intel's new CEO next week. WSJ heard on the street columnist Dan Gallagher told our Tech News Briefing podcast about what Tan is expected to do once he's in the top job.

[Dan Gallagher]

His initial email to employees suggests he's going to keep going down the two tracks of trying to build out a manufacturing business that makes chips for other companies, as well as improving Intel's own products that they design, making those more competitive against AMD and Nvidia. So for the time, it looks like he's going to still do things the way they've been doing them, but I would expect there's going to be some major changes, possibly a lot of restructuring going on. There are reports that when he left the board last year, it was out of frustration that he thought intel was moving too slow, it was too bloated, too many employees. So there might be some major changes on that front, but beyond that, we don't really know what he'll do ultimately. Is he going to do partnerships sell one end of the business or the other. That all remains to be seen.

[Patrick Thomas]

For more from Dan, listen to today's episode of Tech News Briefing. And finally, what lengths would a team go to to win? In the case of the University of Oregon's basketball team, I mean, literal lengths. This year, the Ducks joined the Big Ten Conference, and since their season began in November, they've spent more time in the air than actually playing basketball. The total distance they've traveled this season is 26,700 miles, the equivalent of traveling the entire circumference of planet Earth, plus a few thousand more miles. Fortunately for Oregon, it hasn't stopped them from attaining the best record of any of the Big Ten's newcomers. And that's what's news for this week. Tomorrow, you can look out for our weekly Markets wrap up, what's News in Markets? Then on Sunday, we'll be bringing you an episode of the WSJ's Bold Names podcast. It features an interview with Palmer Luckey, who founded the weapons manufacturer Anduril, talking about how he's trying to remake the government's approach to national security. That's in what's New Sunday. And we'll be back with our regular show on Monday morning. Today's show is produced by Pierre Bienname and Anthony Bansi, with supervising producer Michael Kosmides. Michael Lavalle wrote our theme music, Aisha El Musleam is our development producer, Scott Salloway and Chris Insinsley are our deputy editors, and Falana Patterson is the Wall Street Journal's head of news Audio. I'm Alex Osola. Thanks for listening.

[Sarah Randazzo]

Hello, I'm Laura Castleton with Janice Henderson Investors. We work to help our clients achieve superior financial outcomes and fulfill our purpose of investing in a brighter future together. To learn more, go to Janice henderson.com.