Acting on uncertainty

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Capricious.

Adjective given to sudden and unaccountable changes of mood or behavior.

Also, the trade policy of the United States of America.

From American Public Media, this is Marketplace.

In Los Angeles, I'm Kai Risdahl.

It is Wednesday, today, the 9th of April.

Good as always to have you along, everybody.

I don't...

What?

I mean,

where do you start on a news day

like today?

We started around here with Chad Baume.

At least, that was the plan, anyway.

Chad's a senior fellow at the Peterson Institute for International Economics, and we had him lined up to talk about trade and tariffs and what the what.

And we're going to play that because it's a good interview, but

well, you'll see.

First question to Chad was a pretty basic one: Are trade deficits, contra to what the president believes, are they inherently bad?

Nope.

It's essentially the United States is buying things, so other countries are willing to sell us stuff.

And the match on the other side isn't necessarily that they just want to buy our goods.

They may want to invest in companies that are producing things in the United States,

or they might want to buy stocks and bonds in the United States.

So running a trade deficit in general is not a terrible thing for the U.S.

economy.

The subtext of what you said there is important.

We take our dollars and we send them overseas and overseas companies send us their stuff.

But then they also take those dollars and a lot of them come back into this economy.

That's exactly right.

It's an open loop kind of system and

it's worked pretty well.

Doesn't mean it always works and that there aren't some challenges sometimes associated with trade.

But I think the ones that President Trump has identified, the trade imbalance and bilateral trade imbalances in particular with just specific countries, is probably not the biggest problem for the United States to be worrying about.

Aaron Powell, yeah, we should be clear here, right?

What the President is going after here is bilateral trade imbalances and thus imbalancing the entire global economy.

On the issue of those dollars coming back and the circular loop thing, what happens, as is now happening, when tariff rates go up so quickly, so

haphazardly, and barriers to trade are erected.

Then what happens?

That's really what we don't know.

So I think it is important to talk a little bit about.

It's not reassuring, Chad.

I just have to say that.

It really is.

We're in uncharted territory here.

But part of this is the sheer size of what the Trump administration has done in terms of tariffs.

So everybody remembers the first Trump administration and the trade war with China there.

Well, in that instance, tariffs went from on the U.S.

side, 3% or so to 19%.

Seemed like a lot at the time.

But over the first two months of this administration, they've gone from 20%

to now, overnight, they are now over 100%,

right?

And so this is just enormous.

And we've never seen anything like this before.

They cover everything.

The last time around, the tariffs that were put, the Trump administration applied went on over a period of 16 and 18 months.

This time around, they've gone on in two months, right?

So the speed is also also incredibly important.

And it's really unclear what is going to happen, what the impact of this is going to be on the macroeconomy, on

people like you and me, the things that we buy, as well as the companies out there that are operating in the economy, too.

The president says that what he is going to do is reestablish manufacturing in the United States.

Is this going to get us there?

It's hard to tell.

You know, certainly if he erects barriers that are so high and he's on the path here and he says that they're permanent, Americans are going to want to continue to buy stuff.

And so if it's impossible for Americans like me and you to be able to buy things from China or Mexico or Europe or Japan or anywhere else anymore, then yes, we will make it here.

The challenge will be it will just be a lot more expensive.

The second, of course, is there may be a lot more manufacturing activity taking place here in the United States, but we're not really sure if there's going to be a lot of jobs associated with that, right?

Companies are looking to cut costs.

They might want to do automation, robots, AI, you name it, right?

So it's not necessarily a jobs gainer as well.

I don't want to pay $9,000 for an iPhone, Chad.

I don't think any of us do.

But the truth of the matter is we're a lot closer to $9,000 for an iPhone today than we were a week ago, and certainly than we were

before January 20th.

Chad Bound at the Peterson Institute for International Economics.

Chad, thanks a lot.

I appreciate your time.

Thanks for having me.

So that was that.

Interview was in the can.

I left the studio, walked back toward my office, checked my phone along the way, and saw that everything had changed.

So we got Chad back on the phone.

All right, Chad, you let me know when you're ready.

We're going to bang this out again.

Yes.

All right.

I frankly don't know how we're going to put this together for Air, but I'm just going to throw you the question and then

we're going to figure it out, all right?

We'll figure it out.

All right, you roll on on your end?

Yep.

All right.

So this is one of those, this just in kind of situations.

I'm going to read you something that the President of the United States posted on his social media account this morning, and then I need your response.

It's a long one.

I'm going to read part of it.

Based on the lack of respect that China has shown to the world's markets, I am hereby raising the tariff charged to China by the United States of America to 125% effective immediately.

And then he goes on and on and on.

And down at the end, he says, I have authorized a 90-day pause and a substantially lowered reciprocal tariff on other countries during this period of 10%

effective immediately.

Thank you for your attention to this matter, says the president.

What do you say to that?

Wow.

Yeah.

Well, I guess there's still some questions as to what he actually means, and we'll wait for the legal details from the lawyers to tell us that.

But it could be that the initial 10% tariffs that went on everybody on April 5th, those are going to stay on.

And that the additional tariffs that went on countries with which the United States has a trade deficit this week, those tariffs wouldn't go on or they would get rolled back.

But with the exception of China, and China gets this special treatment.

You know, the tariffs he had already imposed were already over 100%.

I guess he's going to raise them up to 125%.

So even further.

Last thing, Chad, and then I'll let you go for reals.

You're a foreign country trying to do business with the United States, and you see what can be characterized at best as arbitrary and capricious tariff policy.

What's your reaction?

If I'm a government policymaker, it's really hard to strike deals with the United States because you don't know if what the president is offering you today is going to stick tomorrow.

And then if you're a foreign company trying to make a decision about where you want to invest around the world, boy, the United States looks like a really uncertain market at the moment, too.

Chad Bown at Peterson.

Chad, thanks a bunch.

I appreciate your time.

Thanks for having me.

It is critically important to point out here that there are still tariffs of plenty being imposed by the Trump administration, but Wall Street did not pay that.

No, never mind.

We will have the details when we do the numbers.

We've spent an inordinate amount of time on the bond market the past couple of days.

Treasury bonds, corporate bonds, today higher education, bonds issued by small colleges and big universities for capital projects and long-term expenses.

Bloomberg reports college bond issuance nearly doubled 2023 to 2024, and this year, they're on track to issue even more.

Marketplace of Justin Ho, looking into what's going on there.

One of the reasons colleges have been issuing new bonds over the last few years is to address a growing challenge, declining enrollment.

Some of the schools are trying to retool themselves and change their academic offering.

Pat Luby is senior municipal strategist with Credit Sites.

He says schools are borrowing money to create new academic programs, update their facilities, and build new ones.

These are capital-intensive endeavors, and it takes multiple years to not only get the facilities up and running, but also to get students in there, to attract students.

But this year, colleges are facing a new challenge, the Trump administration.

It's already halted or threatened to halt federal funding to several universities, including Cornell, Northwestern, and Columbia.

Luby says universities rely on those funds for research.

So especially for schools that have large medical programs, teaching hospitals, you know, even postgraduate programs where they're providing medical degrees and fellowships.

That's why many big universities, including Harvard and Princeton, are issuing more bonds as a buffer, says Liz Clark with the National Association of College and University Business Officers.

They're going to issue them so that they can pull together the resources they need to provide the experience that students are looking for and that scientists need.

Last month, the ratings agency Moody's lowered its outlook for the higher education sector from stable to negative.

Moody's pointed to those federal cutbacks, uncertainty over student aid, and the shaky economy.

But Ryan Henry, municipal strategist at FHN Financial, says those factors don't threaten every college equally.

There's a bifurcation between the haves and have-nots, and it's usually due to size.

Henry says big research universities that issue bonds have plenty of resources, including multi-billion dollar endowments.

That makes their bonds less risky, which keeps a lid on interest rates.

But smaller universities don't have that cushion, which means they'll have to pay more interest on their bonds.

Just like anything where if someone with a credit score of 800 goes to get a loan versus someone with a credit score of 600, there's access to credit.

It's just at a different price.

As a result, many smaller colleges might decide that those higher borrowing costs aren't worth it.

I'm Justin Howe from Marketplace.

It's important to say outright here, echoing what Chad Bound said, that despite despite the president's about face on tariffs this morning, it's not like all the uncertainty out there has suddenly gone away.

And actually, it might even be worse now.

That brings us to Delta Airlines, which back in January had said that 2025 was going to be its best year yet.

2025, however, clearly had other plans.

This morning, Delta pulled that prediction, forward guidance, it's called, and the company didn't offer any new ones.

It is weird, but not unprecedented, for companies to respond respond to market uncertainty with a big,

I don't know,

Marketplaces Kelly Wells has more.

The last time this happened was about five years ago.

The economy was in uncharted territory.

I'll give you one guess why.

This is very much what happened during the COVID pandemic where companies were highly uncertain about what their earnings would look like.

Jamie Cox is managing partner of Harris Financial Group.

He says choosing not to issue guidance is the responsible thing to do.

Because the street street is going to punish you more for trying to predict your earnings path when it's unclear.

Predicting earnings correctly is sometimes even more important than the earnings themselves, says Eric Gordon, who teaches at the University of Michigan's Ross School of Business.

If a company made a dollar a share in profit last year and makes a dollar 25 this year,

but predicted that it would make $1.30,

its stock will get pounded.

He calls these predictions an art form because it's so costly to make a prediction that a company fails to meet.

The art form is to predict a number and beat it by just a little bit so that it looks like you know how to make predictions, but the company is doing especially well.

The recent back and forth on tariffs have certainly made for a more tumultuous economy that's difficult to predict.

But Shiraz Meehan with Zach's Investment Research says this cagey behavior started months ago.

As we got going this year, January, February, March, that growth, particularly consumer spending, was decelerating.

He says that could have been tariff fears or the recent slowdown in consumer spending.

But now?

The current bout of uncertainty and the resulting announcements we are seeing from companies, that's 100% tariff-centric.

Meehan says it's most likely companies that rely on international trade that will avoid future predictions.

So he says, look to retail companies to join the list next.

I'm Kayleigh Wells for Marketplace.

Coming up.

I'm willing to spend to feel that connection with the rest of the world.

Can you buy happiness?

First though, let's do the numbers.

yeah we call this the sad happy music because read the room gang Dow industrial is up 2962 points today 7 and 9 tenths percent 40 608 Nasdaq 1857 points to the good 12 and 2 tenths percent 17 124 the S ⁇ P 500 474 points up 9 and a half percent 54 and 56 there Goldman Sachs released a revised 90-day forecast after the president announced a 90-day pause on new tariffs, as we said.

It has downgraded the probability of a recession.

This is a downgrade, remember, to 45%.

Gold prices are back up.

Gold futures trading at about $3,100 a Troy ounce.

Bond prices fell.

Yield on the 10-year T-note rose to 4.32%.

Bonds overnight is a whole different thing, man, but the program's only half an hour.

You're listening to Marketplace.

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This is Marketplace.

I'm Kai Rizdahl.

Depending on which administration official you listen to, the Trump tariffs are either supposed to raise revenue or protect American industries and reshore jobs.

Setting aside for the moment that those are mutually exclusive goals, the truth of it is that ultimately some things might be reshored and others might not, but there is going to be a price to pay either way.

Marketplace is Supreme Benishaur has that one.

Benzene is a clear liquid made mostly out of carbon.

Each molecule is like a little ring.

This is a building block chemical.

Al Greenwood is deputy news editor for ICIS, a market intelligence firm for the chemicals industry.

It's used to make plastics used for picnic dinnerware, plastic plates, engineering plastics used in automobiles, washing machines.

The U.S.

is a plastics powerhouse.

It's the largest exporter of polyethylene plastic in the world.

The U.S.

consumes more benzene than it produces.

So it imports some from South Korea, which this morning had a 25% tariff on it.

Now that's temporarily down to 10%.

But if one goal of these moving tariffs is to reshore U.S.

production, Greenwood says that's not going to happen with benzene because of how it's made.

Benzene is a byproduct of refineries refineries mostly,

and nobody is going to expand a refinery just to make more benzene.

You don't build a chick hatchery just to get more eggshells.

So if you want more, you import it.

Now, with potentially higher tariffs.

Companies that buy this benzene, they're going to have to eat the costs.

So tariffs aren't likely to bring new benzene jobs.

They're just a new cost.

The Tax Foundation estimates Liberation Day tariffs would cost U.S.

consumers $1,500 per household this year.

And there are other products that, like benzene, we're going to pay more for, but that are just probably not going to move here.

We do not expect that industries will reshore if the labor calculation and the capital outlay at the beginning does not make sense.

Erin McLaughlin is a senior economist at the conference board.

Sneakers, textiles, things that don't require advanced or smart manufacturing, but are fairly labor intensive and are fairly low-dollar.

What could come come back or otherwise put, what jobs would consumers be paying higher prices in order to bring back?

Light industry such as semiconductors, so a lot of automation and high-tech manufacturing.

Christopher Tang is a professor at the UCLA Anderson School of Management.

He says pharmaceuticals can come back too.

Because the footprint is not high and also the physical labor content is also not high.

But unlike with benzene, there's a price we don't easily see.

Using blanket tariffs to resurrect jobs in one industry can cost jobs in another.

That's what happened last time.

Industries pulling back on hiring.

Katie Russ is a professor of economics at UC Davis.

She crunched some numbers from when President Trump applied tariffs to steel and aluminum in his first administration.

Like if you squinted, you could see, you know, maybe a thousand new jobs in steel production, but there were about 75,000 fewer manufacturing jobs in firms where steel or aluminum were an input into production.

The Tax Foundation estimates the original Liberation Day tariffs would have cost the economy the equivalent of 605,000 jobs.

In New York, I'm Sabri Benishore for Marketplace.

Whatever happens with tariff and trade policy, and if today teaches us anything, it's that anything can happen, good or bad.

But whatever does wind up happening, consumers are going to be on the receiving end of it.

Higher prices, slower growth, all those changes trickle down.

But at the same time, you kind of run this economy.

Regular listeners have heard me say it, 70% of gross domestic product is spending by or on behalf of consumers.

So today we're launching a new series called Lived Economies.

Marketplace's Kristen Schwab is going to be following a group of consumers, people, right, to get a better sense of how they see this economy and how they're going to navigate it as it changes.

Here's our first story.

When I think back on all the time I've spent reporting on how people feel about the economy, I often replay this one piece of tape in my head.

It's from a story I did a couple years ago talking to consumers about the pandemic.

And frankly, It's a little dark.

Here's that story.

So many people lost loved ones during that pandemic and they were saving money and they had plans and they didn't get to do those things.

The fact that we're getting closer to death every day, whether we like it or not.

What am I saving for?

I want to feel as little isolated as possible and I'm willing to spend to feel that connection with the rest of the world.

These are not fun memories, but sometimes it feels like we've filed those pandemic years away.

We've forgotten how they turned our world and our economy upside down.

And ever since, the economy has not been behaving the way we'd expect.

The consumer spending that happened after businesses reopened wasn't just pent-up demand.

Inflation wasn't transitory.

And so far, the Federal Reserve has managed to tackle inflation without tanking the economy, mostly because consumers, to the surprise of economists, keep spending.

Here's Wendy Edelberg at the Brookings Institution.

You know, it feels a little bit like right now we've thrown all the data up in the air like a deck of cards and I'm seeing where each individual card has landed on the on the table and it's just it's super confusing.

Everything,

everything is up for grabs.

This gets at something that's been nagging at me for years.

Maybe data can only get us so far.

Take consumer confidence surveys.

For years, they've been showing people are grumpy despite all the markers of a strong economy.

I think that they were answering answering those questions, reflecting anxiety on a million different fronts.

And I think expecting people to parse out all of those different feelings that they had when they answered surveys was just an unreasonable expectation.

And I think it just means that we weren't learning a ton.

So I'm here to learn in a less data-driven way by having lots of conversations with different consumers.

Over the next few months, we'll hear from a group of people I'll check in with regularly about how they see the economy.

I've got a house.

I've got my finances taken care of.

I can continue on doing what I'm doing and be happy.

I'm worried for my children.

We'll hear from people from different backgrounds, of different ages, and at different life stages on how they spend.

I am fairly responsible with my money.

I'm not like making it rain at the target dollar spot, but I have nothing to show for it.

The goal is to better understand how Americans feel about the economy and their place in it.

On paper, you know, many people would think, oh, this person is successful.

So that should equate to financial success.

And it's, you know, not necessarily the case.

That was David Rames in New Hampshire, Ashley Ayala in Texas, and Karima Dassey in California, a few of the folks I'll be following.

I think you'll hear a a bit of yourself in some of their stories, and also learn about people whose financial situations you have less in common with.

Because we are in the midst of another period of dynamic change.

The Trump administration's tariff policy and major government cuts are overhauling the economy.

The stock market is seeing wild swings.

Economists have upped the odds of a recession.

And one way to understand how all of this is going to play out is by zooming in on consumers.

Instead of collecting data, we'll collect stories.

Because with so much happening right now, I think it's time for an experiment.

Let's document the consumer economy a bit differently this time around.

I'm Kristen Schwab for Marketplace.

This final note note on the way out today.

It is entirely possible that the most relieved man in Washington, D.C.

right now is one Jerome Powell.

Next Fed meeting is the first week of May, and the 90-day tariff pause has taken some, but just some,

of the pressure off the central bank.

The minutes of their March meeting came out today.

Here's the money quote for you.

Participants judged that inflation was likely to be boosted this year by the effects of higher tariffs, although significant uncertainty surrounded the magnitude and persistence of such effects.

You can say that again.

Our media production team includes Brian Allison, Jake Cherry, Justin Dueller, Drew Johnstead, Gary O'Keefe, Charles and Thorpe, Juan Coliserado, and Becca Wineman.

Jeff Peters is the manager of media production, and I'm Kyle Risdal.

We will see you tomorrow, everybody.

This is APM.

Hi, I'm Katie Drummond.

I'm Wired's Global Editorial Director, and I'm excited to be joining the hosts of our flagship podcast, Uncanny Valley.

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