Theme of the day: Uncertainty

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to lender approval. Honestly, the only thing that's economically certain right now

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Honestly, the only thing that's economically certain right now is the uncertainty.

From American Public Media, this is Marketplace. in Los Angeles I'm Kyle Rizdahl.
It is Monday today. This is the 3rd of February.
Good as always to have you along, everybody. We probe only rarely into the financial plumbing of this economy, mostly because it just works.
Invoices are honored, checks are cut, and obligations are paid. But the news over the weekend that Elon Musk has gotten some degree of control over a critical Treasury Department payment system does warrant alarm.
We've called Wendy Edelberg. She's a senior fellow in economic studies at the Brookings Institution to get a sense of exactly how much alarm is warranted.
Wendy, it's good to talk to you again. I'm happy to be with you, Kai.
The Bureau of the Fiscal Service. What, just so everybody understands, does it do? It is the part of our government that makes sure all the money gets to the right place.
All the money coming into the federal government from our tax payments and all the money, most of the money, coming out of the federal government for payments for Social Security benefits, payment to doctors who are treating patients in Medicaid and Medicare, payments to agencies. It is like our huge checkbook.
All right. So on a scale of like one to 10, your level of concern about this, please, with untrained and unprofessional people in charge of this account? I mean, 10? So it's not that Elon Musk and the people who work with Elon Musk are the first people to worry about the integrity of this system.
Congress has worried about this and it's passed legislation to improve this system. There are a lot of very responsible eyes on this system, making sure it works well.
And so having just folks willy-nilly with their hands at the dials know that is not responsible. I'll point out here that we have been since the 21st of January, I believe, in what the Treasury Department calls extraordinary measures because there is the debt limit.
Congress has to figure out what it wants to do about that. And this is the office that almost literally to the penny figures out how the United States doesn't default on its debts.
Is that right? It is. So the way to think about the debt limit, and, you know, we are in a period where the U.S.
Treasury is not allowed to increase the amount that it is borrowing. So it's doing, you know, some payment management to make sure that it always has enough money.
we uh last spoke you and i, when we were doing the show we did on the independence of the Federal Reserve and the importance of that when it comes to monetary policy. And you pointed out that if the Federal Reserve is politically cowed, the entire global economy is at risk.
This seems to be somewhat analogous. If the United States government, if we don't know who's paying the bills and what bills are being paid, because that's what's happening here, the global economy then is at risk.
Is that an overstatement? I am more worried about it when it comes, if we're going to worry about the whole global financial system, I am more worried about interest and principal payments on treasury bonds not being paid on time. I mean, USAID has already not received any money since early last week.
So they're already payments, it looks like, being improperly withheld against the wishes of Congress who, you know, that enacted laws and appropriated money into USAID. So already there are probably some shenanigans.
I wouldn't worry about the global financial system until we get to a point where somebody decides or somebody threatens that it would be clever if we just didn't make interest payments to, let's say, our foreign creditors or something stupid like that. Which, honestly, we don't know, right? I mean, what frustrates me to no end is that there are so many people all over the United States who have been worrying for, in fact, decades about the risk of a fiscal crisis.
And they've just been looking under the wrong lamppost. They're worried about the risk of a fiscal crisis just from grindingly higher federal borrowing.
And I think the real risk of a fiscal crisis is political malpractice. Wendy Edelberg is the director of the Hamilton Project and a Senior fellow in economic studies at the Brookings Institution.
I paused there, Wendy, because I was looking for a follow-up, but I'm not sure there is one at this point, right? We leave it right there. I mean, I can talk more, if it's helpful, I can talk more about how, you know, when it comes to the debt limit, like they're not going to reinvest money in the civil service retirement and disability fund and use that money.
But we just don't the point of this entire conversation that you and I are having and the issue with Musk and his acolytes being in charge of this facility or at least having the access that we now believe them to have. Right.
Because there's been no confirmation or statement of fact from anybody. There's just lots of really good reporting.
We just don't know,

right? That's right. We have people who are in positions to be theoretically deciding what checks get written and what checks don't get written based on their own political priorities.

Wendy Edelberg at Brookings. Thanks, Wendy.

Thanks.

The day's tariff news coming up in just a sec. But Wall Street did have a thing or two to say

about it. I'll tell you that.
Details numbers when we get there. Let me just say right here as I set up this next piece that by the time you hear this on your local public radio station or in a podcast feed,

let me just say that the actual details of the current American tariff posture might have changed.

Or it might not have. It's a fluid

news environment, shall we say. But beyond the specifics of what's getting tariffed and by how

much and from which country, behind all that is the not insignificant question of how long it's

going to take for businesses and consumers to feel it. Marketplace's Kristen Schwab has that one.

It's one of those shot out of a cannon type of Mondays for Lance Ficken at Saver Imports. He's been in meetings with lawyers and managers since 6 a.m., tracking every update from the White House.
Watching the news and trying to figure out what we have going on in terms of imports on the water right now and how we're going to adjust quickly. The company imports about 400 products from over 30 countries, including quinoa from Canada, jalapenos from Mexico, and edamame from China.
Ficken has been preparing for tariffs. He's actually in the middle of an edamame experiment right now, testing to see if the crop grows well in Guatemala.
It'll take four to six months. It's not a quick solve, but it's a solve long term.
Short term, Ficken is kind of at a standstill. He doesn't want to blow up his supply chains or raise prices until he knows what's going on.
Because Peter DeBear, an international economist at the University of Virginia, says this is likely just the beginning of back and forth tariffs with other countries. Are they going to retaliate? How long is this going to take? So this is all not so clear.
De Baer says companies prefer to raise prices once instead of every time the wind shifts. Remember, during Trump's last term, it took the U.S.
and China two years to reach a phase one trade agreement. So businesses will wait.
You probably want to see how far this goes. It means tariffs could take a while to hit goods that have a lot of complicated parts and components, like appliances and cars.
But some commodities have already started pricing in. Luis Ribera, an agricultural economist at Texas A&M, says wholesale avocado prices were up this morning.
Prices and markets react with information. So nothing even had to happen.
It's just a threat of something to happen and the prices are going to jump. That doesn't mean your avocado toast will suddenly be more expensive, but it does mean everyone from importers to grocers to restaurants is holding their breath.
I'm Kristen Schwab for Marketplace.

You know what you don't have to hold your breath for?

Our podcast comes to you every single day,

either at marketplace.org or the platform of your choice.

All you have to do is follow us. Even with the chaos that is the news of this economy the past couple of days, there is an upbeat note to pass on to you.

Manufacturing, as we've been reporting, has been having some troubles the past couple of years.

But the picture got noticeably rosier with the arrival of 2025.

Two closely watched manufacturing indexes both turned positive in January.

A sign manufacturing has been expanding at least a bit and at least before the tariffs hit home. Marketplace's Mitchell Hartman has that one.
Manufacturing may have gotten its head above water in January, but not by much, says economist Mark Zandy at Moody's Analytics. I'll take it.
We're on the positive side, but just barely and doesn't indicate any breakout here. The sector's still facing headwinds.
High interest rates, a strong dollar, weak global demand. And now tariffs.
Zandi points to the damage they did during President Trump's first term. Manufacturing got hit pretty hard.
By the end of 2019, right before the pandemic, it was in recession. He says it's not all gloom and doom.
Some will benefit from the tariffs because they'll be protected from foreign competition, but others will get hurt. The auto industry is likely to feel pain, says Ned Hill at the Ohio Manufacturing Institute, because it's got an integrated North American supply chain.
The Detroit, Windsor, Ontario area, you'll frequently have a park go back and forth at the border several times. Is it going to get a 25 percent tax if it travels four times? We've doubled the price.
There's trouble in store for the Gulf Coast as well, says Al Greenwood at ICIS, which monitors the petrochemical industry. Because of the magnitude of our exports, the industry is vulnerable to retaliatory tariffs.

The upshot of all this is manufacturers are dealing with a lot of uncertainty.

Kell Air Products makes industrial air dampers at a plant outside Chicago.

President Jim Piper says the company just expanded into a new product line

that's assembled in Mexico from components fabricated in the Midwest.

With the threat of tariffs on Saturday, but now rescinded Monday morning,

it doesn't help with my stress level.

Piper says it's hard to plan for the future right now.

I'm Mitchell Hartman for Marketplace. Coming up.
Knowing and understanding food costs and supply chain issues. The ingredients, if you will, of the food business.
But first, let's do the numbers. Dow Industrials off 122 points today, three-tenths percent, 44,421.
The Nasdaq subtracted 235 points, 1.2 percent, closed at 19,391. The S&P 500 down 45 points, three-quarters percent, 59.94.
Before the 30-day reprieve, though, on both sides of the border, well, let's just say it was ugly. Today's tariff news did a number on car makers.
Makes sense, right? General Motors decelerated just shy of 3.2%. Ford Motors spun down 1.9%.
Tesla discharged 5.2%. Chipmakers got hit too.
NVIDIA subtracted 2.8%. They are down 20%, by the way, since that whole deep seek thing happened.
And that was like, what, 10 days, two weeks ago? T. Broadcom gave up 1.1 and two thirds percent.
Rather, Qualcomm retreated almost one in six tenths percent. Tariffs and threats there have also not good for, among others, toy makers.
Mattel gave back 4.6 percent. Hasbro retreated two and a tenth percent.
Bonds rose. The yield on the tenure.
T-note fell 4.54%. You're listening to Marketplace.
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This is Marketplace. I'm Kai Rizdahl.
The Federal Reserve met last week, as you know. The economy is strong, although, as you also know, inflation is still higher than the central bank wants it to be.
And economic policy right now is in some flux. We've gotten Austin Goolsby on the phone to talk about it.
He is the president of the Chicago Fed and this year a voting member of the Interest Rate Setting Federal Open Market Committee. Austin, it's good to talk to you again.
Yeah, great to talk to you again, Kai. I want to talk not about the tariff elephant in the room, but sort of the thing that goes along with that.
And it's been the subject of a lot of conversation, obviously. The Fed chair talked about it last week.
Her colleague, Susan Collins, talked about it on CNBC this morning. And that is uncertainty.
What we seem to have here is a whole lot of induced uncertainty into this economy. And I wonder how you at the Fed are thinking about that as that affects businesses and everyday consumers.
Well, I'm not allowed to speak for anybody else on the committee, just me. How I think about it is the law is pretty specific about how the Fed is supposed to set monetary policy, stabilize prices and maximize employment.

So uncertainty about things that are going to affect prices, we basically have to think about

them, even in the space that we're mostly uncomfortable weighing in on fiscal policy

matters. That's a thing.
Congress,

the president, they should decide that. But then we do have to react because it's right in our wheelhouse.
So I think these uncertainties likely mean that in what was otherwise shaping out to be a pretty good progression, in my view, of

the economy getting back to a 2% inflation, strong growth, strong productivity growth,

and a labor market that looks pretty close to full employment. Now we've got to be a little

more careful and more prudent of how fast rates could come down because there are risks that

Thank you. be a little more careful and more prudent of how fast rates could come down because there are risks that inflation is about to start kicking back up again.

Let me ask you then, if you think it's, you know, you all, and again, I'm not asking you

to speak for anybody but Austin Goolsbee, but you in the collective always say, you

know, we do monetary policy, fiscal policymakers do fiscal policy, that is to say, Congress and the White House taxing and spending. Do you think it's realistic to try to keep those separate now anymore? They do seem to be ever more intertwined.
They're definitely intertwined in the sense that they're affecting the base conditions. But it's what I always say out here in Chicago.
Our thing is there's no bad weather, only bad clothing. You tell me the weather, I'll tell you what jacket we're going to put on.
And these fiscal choices, if they affect prices or employment, the law requires us at the Fed to think about them. That's different from us weighing in on fiscal policy.
We're not saying what's a good idea or bad idea. We're just saying we have to do our jobs.
And part of our job is if something's threatening to affect prices, we've got to run through the scenarios and think it through. As those prices get affected by the tariffs or what have you, just to generalize it, what part of the current economic environment are you most worried about? Are you most worried about inflation, which you guys have been fighting for years now and seem to have a hold on? Or are you worried about what might happen with growth? Right? Because if you have inflation with growth that slows as it has in the past because of tariffs, what do you do? Yeah.
Thanks for bringing up such a painful scenario. It's my job.
Look, we have to think about both of those. In the uncertainties of this exact moment, I do think you've seen growth continue to come in pretty strong.
The consumer, very strong, not slowing down. And so there are concerns about what's happening with inflation and this muddying of the water.
Normally, we're watching inflation to get a sense of, is the economy overheating, in which case monetary policy might want to act. It's going to be hard to tell the difference between a sign of economic overheating and a sign of this is just a temporary result of an escalating trade war or of some other geopolitical thing that's happening.
And if you're one of the data dogs, which, Kai, I know you are and I am, it's hard to sniff. You know, you got you got blankets over the thing.
We're trying to sniff out what's the what's the through line. And we might have to slow the pace of getting to the settling point if we have that much uncertainty.

I absolutely do not want to put words in your mouth.

But to a layperson, no, and you'll you'll obviously correct me. Right.

But but to a layperson listening to you right now and most of the audience of this program are lay people is lay people.

You you you are using words that to an an attentive observer sounds like you're expressing some real concern. Correct me if I'm wrong.
I'm always concerned. If you say what keeps me up at night, my view is the central bank's job is not to sleep at night.
We're on the night shift. We want you well rested, though.
That's the point. We can nap in the

daytime. So I am always concerned about anything that's going to raise prices or knock us off the

employment track. Our seventh district out in Chicago is the heart of the Midwest,

is really the district. And we have the highest manufacturing

of all the Fed districts and by far the highest auto production. So I'm out talking to industrial executives.
I'm going to Detroit on Wednesday to meet with a large number of folks from the from the auto industry. And I got to say, the concerns that I have are in large measure coming from the business people that I'm talking to.
Not everything is bad. I want to emphasize we've had very strong productivity growth, which is a positive.
And what matters is everything taken together. But I do have to tell you, when I'm out

talking to people participating in the economy, this is on their mind.

Yeah. Austin Gouldsby at the Chicago Fed.
Austin, thanks a lot. It's always good to talk to you.

Anytime. So So Entrepreneurship in this economy has boomed since the before times.
And a report from Wells Fargo shows women-owned businesses are major drivers of that growth, increasing nearly twice the rate of male-owned businesses. And with that in mind, here is today's installment of our series, My Economy.

I'm Marissa Farola. I run a Korean-American bakery cafe called Nine Winters, and I am based in Cambridge, Massachusetts.

The shop really began as a passion project of baking with Korean ingredients with my oldest daughter, who's now seven, Janine, when she was around two and a half years old. I was working for an ice cream shop.
My boss and mentor at the time offered me the opportunity to run a weekly pop-up and just kind of see where it would go. The pop-ups went really great.
We had a lot of fun with them. And it got to a point where I really wanted to see if this could work.
It's really hard to start a brick and mortar. Real estate is at what feels like an all-time high in the city of Boston.

I really wanted to be sure that I would serve the community that I care about, so I had a very specific idea in mind that I didn't want to stray from. we are planning on opening spring of 2025, pending construction.
A food business, it's a tight margin. Knowing and understanding food costs and supply chain issues and also wanting to keep food accessible is a line that I'm walking every day.
And it does force me to think more creatively. So these problems that food businesses face can have really innovative and exciting solutions.
I really want my children to feel loved and feel seen through the work that we have collectively as a family put out into the world. I hope that they see when they're older that they have deeply inspired me to dig deeper into my own identity and to love myself more and to be more open with sharing who I am as a person.
That was Marissa Farola, owner of Nine Winters in Cambridge, Massachusetts.

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