Footwear will likely still be “Made in China”

Speaker 1 This marketplace podcast is supported by Wealth Enhancement, who understand that dreams don't happen by chance, it takes a plan.

Speaker 1 They're ready to build your wealth blueprint for retirement, investing, taxes, and everything else your financial life brings.

Speaker 1 It reveals gaps and highlights opportunities you may have missed at no cost to you. Find out more at wealthenhancement.com slash blueprint.

Speaker 2 This podcast is supported by Odo. Some say Odoo business management software is like fertilizer for businesses because the simple, efficient software promotes growth.

Speaker 2 Others say Odo is like a magic beanstalk because it scales with you and is magically affordable.

Speaker 2 And some describe Odo's programs for manufacturing, accounting, and more as building blocks for creating a custom software suite. So Odo is fertilizer, magic beanstock building blocks for business.

Speaker 2 Odoo, exactly what businesses need. Sign up at odoo.com.
That's odoo.com.

Speaker 1 On the program today?

Speaker 1 Well, pretty much exactly what you'd think. From American Public Media, this is Marketplace.

Speaker 1 In Los Angeles, I'm Khan Risdahl. It is Monday, today, the 7th of April.
Good as always to have you along, everybody. Let's regroup here for a second at the start of a fresh week, shall we?

Speaker 1 A president who believes, wrongly, that trade deficits are losses, those are his words, not mine, he has decided in the space of something less than a week to entirely upend the global economic order.

Speaker 1 Stock markets, as you know, have reacted badly. Consumers and businesses increasingly the same.
And nobody knows what is going to happen next. The rules change on a whim and without notice.

Speaker 1 So for those of us whose job it is to figure out what is going on, while we are turning to some infrequently used indicators, Marketplace's Sabri Benishore gets us going with the two-year Treasury note.

Speaker 3 Almost everybody out here in this economy is touched in some way by interest rates. Harry Mamaisky is a professor at Columbia Business School.

Speaker 4 It's what people pay to lease their cars and their home mortgages and their credit card bills.

Speaker 3 The Federal Reserve influences these interest rates based on what it thinks the economy needs. And what the Fed does is going to depend a lot on what tariffs do to the economy.

Speaker 3 Right now, economists expect tariff policy is going to hit in two big ways.

Speaker 6 One is it'll probably push inflation up, at least for a while.

Speaker 6 And the other is it will push output unemployment down.

Speaker 3 Bill English is professor of finance at Yale School of Management. So tariffs equal inflation.
Tariffs also equal economic slowdown. Here's the tricky part.

Speaker 3 The Federal Reserve can't fight both of those at the same time. It keeps interest rates higher to fight inflation.
It keeps rates lower to fight an economic slowdown.

Speaker 3 The bond market has to guess which one the Fed will do.

Speaker 6 Markets seem to think that the Fed will respond more to the weak economy than to the high inflation.

Speaker 3 Yields on two-year bonds, which look two years out in the future, dropped by a half a percent the past few days.

Speaker 3 Investors think the Fed will have to cut interest rates more than expected because the economy is going to be worse than expected. Ruben Hovanisian is a fixed income portfolio manager at TWC.

Speaker 7 Investors believe that the growth is going to slow, that we are potentially going to enter into a recession.

Speaker 3 At the beginning of the year, markets expected the Fed to cut rates maybe once this year. Now they think the Fed's going to have to do much more than that.
Harry Mamesky.

Speaker 4 Something like two to three rate cuts by the end of the year.

Speaker 3 So interest rates could fall by three quarters of a percent or more this year. So far, Fed Chair Jerome Powell has said the Fed is not in a hurry.

Speaker 3 Colin Martin is a fixed income strategist at Charles Schwab, a marketplace underwriter. He says that may be because tariffs aren't something the Fed can really help with.

Speaker 9 And if the Fed were to cut rates, I don't know how much that's going to encourage companies to invest more.

Speaker 9 I don't think it's the level of borrowing costs that's necessarily affecting business behaviors right now. It's the uncertainty.

Speaker 3 The Fed can't do much about that. In New York, I'm Sabri Benishore for Marketplace.

Speaker 1 On Wall Street, as we start this fresh week, very ugly start, as you surely know, calmer by the close. We will have the details when we do the numbers.

Speaker 1 There's a vibey part of this whole thing that can't be ignored. And I say that not to be flip.

Speaker 1 It's just that things are happening so fast and with such outsized outsized effect that it can be a bit disorienting.

Speaker 1 And in an economy that runs, I mean, usually, on stability in a general sense that people know what's going on, that can really matter. Elizabeth Crowfoot is a senior economist with Lightcast.

Speaker 1 Elizabeth, welcome to the program.

Speaker 10 Thank you so much. Glad to be here.

Speaker 1 As the trained economist in this conversation, what do you make of

Speaker 1 everything that's going on right now?

Speaker 10 Oh, you know, I'm a labor economist, so I think about things from the perspective, obviously, of the labor market.

Speaker 10 And just all the uncertainty that we're seeing is really manifesting itself in several ways throughout the labor market.

Speaker 1 Keep going.

Speaker 10 First of all, we see this frozen labor market, right? There are hirings that have stalled out. Quits and layoffs are relatively steady.

Speaker 10 Job openings have been moving sideways since essentially the summer of 2024. So there's not a lot of job opportunity that people are seeing recently.

Speaker 10 And that's really where you start to see uncertainty come in, at least from the consumer side, right? Because at the end of the day, it's, do you have a job?

Speaker 10 Are you bringing income into your household? And what does that mean for your household budget and your financial situation?

Speaker 10 So if you don't have that job and that solid income, that's going to manifest itself in the real economy in terms of your spending power and your ability to be a consumer.

Speaker 1 Aaron Powell, am I wrong if I take your use of the word uncertainty and flip it and talk about economic confidence?

Speaker 1 Because it seems to me that what is happening now, like since last Wednesday, is that subject to the whims of one man, the global economy now has no confidence in anything.

Speaker 1 There's literally no stability.

Speaker 10 In terms of that stability, it is definitely the whims of one person, right? It can change on any given day. The whole uncertainty around tariffs, all of that hits consumers as well.

Speaker 10 It hits people in their jobs. And, you know, my neighbors, for example, are big travelers and asking them about, you know, what plans do you have for the summer?

Speaker 10 And they're saying, I don't know, we're actually going to hunker down and start saving a little bit more because we don't know what's going to happen to our jobs.

Speaker 10 So that's really hitting everybody on so many levels.

Speaker 1 If you were a business person, which is not to say that economists aren't business people, but if you were like running a manufacturing company and you had to think about starting a new plant here,

Speaker 1 what would your set of considerations look like present day?

Speaker 10 That's a really good question.

Speaker 10 And actually, in my current position at Lightcast, I do talk to a lot of companies, especially those that are in Canada, having the same exact conversation about what am I going to do?

Speaker 10 I need to move operations quickly. But they need to be in an area of the country that's going to make sense for them financially, not only from a labor standpoint, but from other costs as well.

Speaker 10 In terms of energy availability, there's so much that goes into that rents.

Speaker 10 So it's a huge equation. It's the whole gamut of starting to run a business from a different country.
And what are all of the considerations that they need to make?

Speaker 1 What is your, this is sort of a squishy question, but what's your overall level of concern right now about what you see, again, as the economist in this conversation?

Speaker 10 I mean, the real economic data so far is still really solid. I mean, the jobs report from last year.

Speaker 1 That's a super important point, actually, right? Yeah.

Speaker 10 Yeah. I mean, unemployment is still very low, historically low, 4.2%,

Speaker 10 really solid job gain. If this was pre-pandemic times, we'd be all celebrating, right, this huge uptick uptick in jobs.

Speaker 10 But yeah, I mean, it's all the uncertainty around that, and we're just in such a vulnerable position. And the thing is that it changes so quickly.

Speaker 1 Elizabeth Crowfoot, she's a senior economist at Lightcast. Elizabeth, thanks for your time.
I really appreciate it.

Speaker 10 Thank you. Great to be here.
Thanks.

Speaker 1 The thing about global trade is that it's global. So, whatever it is that President Trump says he's doing to the American economy, it ain't going to stay in the American economy.

Speaker 1 Case in point, the second biggest economy in the world. Last week's tariff Orama brought the total tax rate on Chinese imported goods to 54%.

Speaker 1 And then this morning, just to make sure you're completely up to speed, the president threatened another 50% China tariff, which, doing the math for you here, would bring the tally on Chinese imports to 104%.

Speaker 1 You'll recall perhaps that during Trump won, the tariffs were on things like solar panels and computers and footwear, and that as a workaround, A lot of manufacturers tried to set up shop in places like Vietnam and Cambodia.

Speaker 1 That didn't always work out, though. And for a lot of reasons, China is still the place to produce a lot of stuff.
Marketplace Jennifer Pack explains from the southern Chinese city of Dongguan.

Speaker 13 Shoe manufacturing is labor-intensive. Workers punch every hole and lace every shoe by hand, says James Gao, whose company Shoebot owns this factory.

Speaker 1 Every lacing is manual. There's no robot.

Speaker 13 When local wages get too high, he says, shoe manufacturers like him have to relocate. That's been the pattern ever since shoemaking started out in the West.

Speaker 7 The footwear starts from Europe and America.

Speaker 13 By the 1960s, he says shoe factories had shifted to Japan and Brazil, then Korea and Taiwan.

Speaker 13 And for the past three decades, the industry has been based largely in mainland China, until President Trump's first term when he hiked tariffs on China, and China hit back with tariffs on U.S. goods.

Speaker 13 So seven years ago, more companies started to look at relocating production to Southeast Asia. Among them, Colorado Shoe Brand Zero, spelled with an X.

Speaker 12 We actually looked at Vietnam.

Speaker 13 Co-founder Lena Phoenix says, though, the brand didn't make the move to Vietnam because they produce specialized shoes meant to mimic the sensation of being barefoot.

Speaker 12 We make everything from casual sandals to technical hiking boots to professional quality basketball shoes.

Speaker 12 So because we have such a wide range of styles requiring different technical capabilities, we use a number of different factories.

Speaker 13 And those factories are in China because that's where the skilled workforces are. Phoenix's company is doing business with James Gao's ShoeBot.

Speaker 13 Shoebot works with small and medium-sized brands. It also makes shoes in Vietnam, though its operations there are small.

Speaker 13 One of the company's clients, Mark Olson, co-owns a Portland shoe startup called Avale.

Speaker 13 He says Vietnam may be good for big brands, not niche ones like his that make volleyball shoes for women and girls.

Speaker 14 Vietnam is where China was maybe 15 years ago.

Speaker 13 But China, he says, has so-called industrial clusters with everything you need for shoes, from raw materials to foam manufacturers, knitwear, lacing, and embroidery groups.

Speaker 13 They're all within driving distance of Chinese shoe factories, he says.

Speaker 1 So it's just set up to do it right.

Speaker 13 And he says, the Chinese factories are innovative. They find new materials, upgrade machines, and cut down production times.

Speaker 13 Manufacturing in China makes it easier to roll out and test different colors for new volleyball shoe styles, says Avali's other co-founder, Rick Anguilla.

Speaker 15 There's nothing more satisfying than being at one of these tournaments and having our product on display, and you hear those four words as they pass by.

Speaker 1 Oh, those are cute.

Speaker 13 He says his company thought about manufacturing in the U.S., but decided the challenges were too great. Lena Phoenix of Zero Shoes agrees.

Speaker 12 It would take hundreds of millions of dollars of factory investment, training of a workforce that does not exist. It would take an enormous amount of time.

Speaker 13 Vietnam seemed like a more attractive option, despite its less skilled workforce, and her company had hoped to shift manufacturing there.

Speaker 13 Since Trump increased tariffs on Vietnamese exports by 46% last last week, she's been having second thoughts.

Speaker 12 One of the things that's critical for us to know is whether or not these are, in fact, the final tariffs. Given all of the changes that have come out of this administration,

Speaker 12 we are, to some extent, waiting for the dust to settle.

Speaker 13 In these uncertain times, some manufacturers remain optimistic. Again, Schubot's CEO, James Gao.

Speaker 1 As an entrepreneur.

Speaker 13 As an entrepreneur, he says, he's excited because the tough economic climate and uncertainty means large players don't hold all the advantages.

Speaker 13 Small manufacturers like him are more agile and can help clients pivot quickly, he says, for whatever may come next. In Dongguan City, I'm Jennifer Pat for Marketplace.

Speaker 1 Coming up.

Speaker 9 It's the beautiful facility. It works.
Clean, carbon-free.

Speaker 1 And it's getting shut down. First, though, let's do the numbers.
Dow Industrials off 349 points at the close today, 9 tenths percent, 37,965.

Speaker 1 The NASDAQ inched up 15 points, about a 10th percentile, percentile 15,603. The S ⁇ P 500 dipped into market territory in midday trading before swinging back.

Speaker 1 Tally at the close was a dip of 11 points, nearly a quarter percent, 5,062. As I said, very ugly start.
Better buy the clothes. Let us go global now, shall we?

Speaker 1 Hong Kong's Hang Seng dipped 13 and 2 tenths percent, the biggest single day drop since 1997. Japan's Nikkei slumped 7.8%.

Speaker 1 Over in Europe, Britain's FTSE stepped down about 4.4 tenths percent. The Cat Caron, the Cat 40 in Paris, slipped 4.8 tenths percent.
The DAX in Germany off about 4.10%.

Speaker 1 Today, the White House has directed, has directed rather, the Committee on Foreign Investment in the United States, CIFIAS, to take a fresh look at Nippon Steel's bid to acquire U.S. Steel.

Speaker 1 You might remember, the Biden administration blocked that deal. U.S.
Steel shares up 16 and 2 tenths percent. Today, you're listening to Marketplace.

Speaker 2 This podcast is supported by Odo. Some say Odo business management software is like fertilizer for businesses because the simple, efficient software promotes growth.

Speaker 2 Others say Odoo is like a magic beanstalk because it scales with you and is magically affordable.

Speaker 2 And some describe Odo's programs for manufacturing, accounting, and more as building blocks for creating a custom software suite. So Odoo is fertilizer, magic beanstock building blocks for business.

Speaker 2 Odoo, exactly what businesses need. Sign up at odo.com.
That's odoo.com.

Speaker 16 What if you could have reliable and intelligent Wi-Fi at the same price for five years? That's the Xfiniti five-year price guarantee.

Speaker 16 No annual contracts, no hidden fees, and our best equipment included.

Speaker 16 Just five years of Wi-Fi that boosts speeds to the devices that need them most, that finds and fixes problems before you even notice them, and that keeps you gaming in the fast lane.

Speaker 16 Lock in your price and unlock the possibilities.

Speaker 13 Xfiniti.

Speaker 17 Imagine that.

Speaker 16 Select plans only, restrictions apply.

Speaker 1 Now's the time to start your next adventure behind the wheel of an exciting new Toyota hybrid.

Speaker 1 With the largest lineup of hybrid, plug-in hybrid, and electrified vehicles to choose from, Toyota has the one for you.

Speaker 1 Every new Toyota hybrid comes with Toyota Care, two-year complementary scheduled maintenance, an exclusive hybrid battery warranty, and Toyota's legendary quality and reliability.

Speaker 1 Visit your local Toyota dealer today, Toyota. Let's go places.
See your local Toyota dealer for hybrid battery warranty details.

Speaker 17 Is it time to reimagine your future? The right business skills may make a difference in your career.

Speaker 17 At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world.

Speaker 17 We'll teach professional skills to help you pursue your goals, like business management, strategic planning, and effective communication. And you can apply these skills right away.

Speaker 17 A different future is closer than you think with Capella University. Learn more at capella.edu.

Speaker 1 This is Marketplace. I'm Kai Risdahlm.

Speaker 1 Ursula von der Leyen, the president of the European Commission, said today that Europe is, quote, always ready for a good deal as the EU, the world's second biggest economy when taken as a single block, tries to navigate its changing relationship with the United States.

Speaker 1 Whether there's a deal in the offing or not, some imports from across the pond are already caught in the tariff crossfire, cars in particular.

Speaker 1 Audi says it's going to keep recently arrived cars at ports in the United States while it figures out what's what, and Jaguar Land Rover is going to pause shipments of cars from the UK for a month.

Speaker 1 Marketplace's Henry Epp explains what European cars can tell us about how the rest of the world is responding to Trump's tariffs.

Speaker 7 European car companies have a bit of time to plot their next move because they've got cars on dealer lots that came into the U.S. before the tariffs.

Speaker 7 So Sean Tucker at Kelly Blue Book says Audi could keep those cars sitting in port for a while.

Speaker 8 Because at this point, they have more than a three-month supply before their dealers reach a point where they're having having to pay the post-tariff cost.

Speaker 7 But pretty quickly they'll have to make a choice. Selling internal combustion engine cars to the U.S.

Speaker 7 had been a steady source of revenue in a global market that's leaning electric, says Carl Brower at iCcars.com.

Speaker 11 But now they can't really sell even their internal combustion cars that still have plenty of profit built in to the U.S. consumers because of the tariffs.

Speaker 7 So what are their options if these tariffs stay in place? Brower says they could shift more production to the U.S.

Speaker 7 to avoid import taxes, or says Mary Ann Madeira, an assistant professor of international relations at Lehigh University.

Speaker 18 The best option for these firms is to divert trade away from the U.S. and towards consumer markets elsewhere in the world.

Speaker 7 European leaders, she says, have already been looking to open up trade to South America and other parts of the globe, but they're also preparing to respond with retaliatory measures if they don't reach a deal with the U.S.

Speaker 7 The problem is, Madeira says, balancing all the competing interests and politics across the 27 member states in the EU is really tricky. One example?

Speaker 18 The automobile industry is really located in Germany, but a lot of parts and suppliers are in Central and Eastern European countries like Czech Republic and Hungary.

Speaker 7 So hurting the exports of one country in the name of standing up for the bloc could hurt relations between EU members. I'm Henry Epp for Marketplace.

Speaker 1 We told you a couple of weeks ago, I think, about copper and how it was then at a fresh record high.

Speaker 1 Two weeks, as you know, is a very long time the way things are going right now, and copper is cratering, which, as Marketplace's Vanda Peters reports, is something of a macroeconomic tell.

Speaker 19 You need copper to make or build just about anything in this economy. Almost every sector relies on it.

Speaker 20 From construction, infrastructure, and also defense.

Speaker 19 Chief market strategist Philip Stribel at Blue Line Futures says those are the traditional markets for copper, but it's also in high demand for various kinds of emerging tech.

Speaker 20 EV vehicles, which use four times more copper than traditional gas vehicles, AI, which is energy-intense computing, requires copper in order to perform its function.

Speaker 19 All of this is why demand for copper, both the actual metal and copper futures, usually portends healthy economic growth.

Speaker 19 But the recent run on the 29th element doesn't quite fit that pattern, says Trevor Yates, senior analyst at GlobalX ETFs.

Speaker 2 Copper prices were almost synthetically high because of this pre-buying.

Speaker 19 Pre-buying ahead of last week's tariff announcements, which ultimately did not target copper.

Speaker 19 Craig Perrong, professor of finance at the University of Houston, says it's on a short list of products, including lumber and semiconductors, exempted by the White House.

Speaker 21 One possible reason would be that they surmised that Americans would bear most of the cost of the tariff on copper.

Speaker 19 And decided against a specific tariff for now.

Speaker 19 So, why have copper prices been tanking?

Speaker 21 This is a verdict about the overall prospects for the economy, not something specific to the copper market.

Speaker 19 Perong says slowing demand for copper could foreshadow a broader slowdown around the world, especially in China, the world's top buyer of the metal. I'm Savannah Peters for Marketplace.

Speaker 1 Way out in the middle of the Mojave Desert, 200-ish miles northeast of downtown LA, right up against the Nevada border, is a solar plant known as Ivanpah.

Speaker 1 It's not a bunch of solar panels generating electricity directly like on a rooftop, but still it's been supplying enough juice to power 140,000 homes for more than a decade.

Speaker 1 And in yet another example of you just can't fight the market, it's closing soon. Marketplace Kelly Wells explains.

Speaker 22 Ivan Paw creates what's called concentrated solar power. Basically, you set up a bunch of mirrors in concentric circles.

Speaker 5 And those mirrors reflect the heat of the sun to a receiver that's mounted at the top of a big tower.

Speaker 22 Clean energy consultant Ed Smeloff says the receiver has molten liquids that then heat up really hot in the focus of the beam, which is hot enough to cartoon-style fry the occasional bird that flies through it.

Speaker 5 And the fluid in the receiver, molten salts, is used to drive the energy through a conventional steam turbine.

Speaker 22 Just like in a fossil fuel plant, except using sunlight instead of burning coal or natural gas. Ivanpah opened 11 years ago, and it's run by a company called NRG Energy.

Speaker 22 It cost $2.2 billion to build, $1.6 billion of which came in the form of loans from the Department of Energy.

Speaker 5 The cost of the project compared to other renewable technologies looked reasonable.

Speaker 5 That, of course, has changed dramatically over the last 15 years or so.

Speaker 22 Because over that period, the cost of photovoltaic or PV solar power, you know, solar panels, has fallen about 70% to the point where it's significantly cheaper than the energy that Ivanpah generates.

Speaker 22 The main buyer of the plant's power, California Utility PGE, released a statement saying it's pulling out to save its customers money. Ivanpah is set to close early next year.

Speaker 22 Whether that counts as a failure depends on how you view the mission of the Department of Energy's Loan Programs Office, says Jigger Shaw. He's the former director there.

Speaker 14 It was clearly successful in that we gave them money and they commercialized the technology here in the United States.

Speaker 22 He also says taxpayers will get most of their money back. The Department Department of Energy declined to say exactly how much.

Speaker 14 On the other hand, Shaw says it didn't catalyze a trillion dollars worth of investment. So, from that perspective, it wasn't successful, right?

Speaker 14 Whereas the solar PV investments that we made did catalyze a trillion dollars of investment.

Speaker 22 And that trillion dollars of investment is what helped drive the price of PV solar down 70%.

Speaker 14 Long term, the reason we're doing all of this is to get the technologies that succeed to get successful at scale.

Speaker 22 Concentrated solar power won't die when Ivanpa shuts down. There are still people and companies who think the plant has value.
Fred Morse is one of them.

Speaker 22 He's the guy who wrote up the report 55 years ago on whether it made sense to put solar on the roof of the White House.

Speaker 22 Today, he runs a startup called SoulStore Energy that develops concentrated solar.

Speaker 21 I was there two months ago.

Speaker 8 It's a beautiful facility.

Speaker 9 It works clean, carbon-free.

Speaker 8 You really want to shut that down?

Speaker 22 He says, sure, PV solar panels are cheaper in the daytime, but they don't do squat at night.

Speaker 22 Whereas a concentrated solar plant can pump those superheated molten salts it generates into an insulated tank. So the plant can generate electricity at night.

Speaker 22 But Moore says the future investments, like the one Ivanpaugh needed to get off the ground, are more uncertain as the new trade war and the shrinking of the federal government make investment less likely.

Speaker 22 I'm Kayleigh Wells for Marketplace.

Speaker 1 This final note on the way out today: a not great sign of the economic times. Saw this on Bloomberg.
It's data from Empower, which is a retirement services provider.

Speaker 1 It shows that hardship withdrawals from 401ks are running about 15 to 20% above the historical norm. Those early withdrawals, of course, are taxed.

Speaker 1 And if you're under 59 and a half, come with a 10% penalty, it is a not great sign indeed.

Speaker 1 Our daily production team includes Andy Corbin, Nicholas Guillain, Maria Hollenhorst, Iru Ekbinobi, Sarah Leeson, Sean McHenry, and Sophia Terenzio. I'm Kyle Rizdahl.

Speaker 1 We will see you tomorrow, everybody.

Speaker 1 This is APM.

Speaker 1 Now's the time to start your next adventure behind the wheel of an exciting new Toyota hybrid.

Speaker 1 With the largest lineup of hybrid, plug-in hybrid, and electrified vehicles to choose from, Toyota has the one for you.

Speaker 1 Every new Toyota hybrid comes with Toyota Care, two-year complementary scheduled maintenance, an exclusive hybrid battery warranty, and Toyota's legendary quality and reliability.

Speaker 1 Visit your local Toyota dealer today, Toyota. Let's go places.
See your local Toyota dealer for hybrid battery warranty details.