A new trade deal with Japan

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Speaker 6 Hey, did you hear there's a trade deal with Japan?

Speaker 1 Yeah,

Speaker 1 we've had one for years

Speaker 7 from American public media. This is Marketplace.

Speaker 8 I'm Kai Rizdahl.

Speaker 10 Wednesday, today, July 23.

Speaker 12 Good as always to have you along, everybody.

Speaker 5 It has perhaps escaped the President's notice, but with all the news of a trade deal with Japan the past day or so, I am obliged to point out here that back in 2019, President Trump's own first-term trade representative, Robert Lighthizer was his name, he signed an actual trade agreement with Japan, an agreement that ran 169 pages all in, and as a result of which the effective tariff rate on Japanese goods coming into this economy was 1.5%.

Speaker 19 Thanks to our friends at the Yale Budget Lab for that analysis.

Speaker 7 The deal that President Trump says he has struck with Japan announced on his social media, so details are scant, it will have American consumers paying a 15% tax on Japanese imports.

Speaker 15 So

Speaker 21 more,

Speaker 1 10 times more.

Speaker 7 The White House says, among other things, that these tariffs will support American manufacturing, making imports more expensive, their logic goes, incentivizes domestic production.

Speaker 22 But as marketplace adjustin ho reports to get us going today the tariffs might be having the opposite effect when it comes to getting manufacturing back on american shores u.s manufacturers already have a hard time competing with many foreign manufacturers because of the cost and availability of labor first of all aaron mclaughlin senior economist at the conference board says building factories and supply chains can be more expensive in the u.s too and then you add tariffs into the mix so any u.s manufacturer that needs to import components from other countries will now be paying tariffs on those components.

Speaker 22 And they may end up paying those tariffs several times. Thomas Goldsby is a professor of supply chain management at the University of Tennessee, Knoxville.

Speaker 22 He says to build a car, for instance, parts and sub-assemblies may go back and forth across borders. And if any step of that chain involves the U.S.,

Speaker 24 Those parts could be taxed multiple times over the course of their assembly process before ultimately being placed on a finished automobile in a U.S. production plant.

Speaker 22 Meanwhile, trade deals can give foreign companies an edge over American ones. Teresa Fort, a professor at Dartmouth, says, compare a product that's designed by a U.S.

Speaker 22 company and made in Taiwan with one that's designed and made in Japan. After this week's trade agreement, the Japanese product will have a lower tariff.

Speaker 24 Now, with these different trade deals, there's these examples where you're going to perversely be taxing the foreign ideas less than the U.S. ideas.

Speaker 22 All of this can mean there's not much incentive for a manufacturer to expand in the U.S., says Katie Russ, an economics professor at UC Davis.

Speaker 25 It would be an incentive to expand production elsewhere where they don't face tariffs on imported inputs.

Speaker 22 A recent paper written by researchers at the Federal Reserve Board of Governors found that the tariffs imposed during the first Trump administration caused producer prices to rise and manufacturing employment to fall.

Speaker 22 I'm Justin Ho for Marketplace.

Speaker 7 Call it what you like: a deal, an agreement, actual trade negotiator language, or a social post.

Speaker 17 Traders liked what they heard today.

Speaker 9 We will have the details when we do the numbers.

Speaker 16 The U.S.

Speaker 26 dollar has seen better days and years.

Speaker 5 The dollar index, that's a measure of the greenback against other major currencies, is at a three-year low.

Speaker 7 Concerns about chaotic trade policy and our rising government debt are the proximate causes.

Speaker 16 Foreign exchange fluctuations can actually be a mixed bag.

Speaker 7 A weaker dollar is bad news for companies importing into the United States.

Speaker 15 It takes more dollars to do that.

Speaker 7 Also, not so great for American tourists going overseas.

Speaker 13 But for bigger companies that do a lot of business outside the U.S., that weaker dollar can have some benefits, benefits that might start showing up as companies report their quarterly results.

Speaker 7 Marketplaces Henriette has that one.

Speaker 27 Say you run a large multinational company based in the U.S. that does a lot of business in Europe.

Speaker 28 You have $200 million in Euro-based revenues because you're selling in various European countries.

Speaker 27 Joanne Feeney is a partner at Advisors Capital Management. Then say the value of the dollar compared to the Euro has dropped by 10%, which is about how much it's fallen this year.

Speaker 27 When you convert that Euro revenue back to dollars.

Speaker 28 That's an extra $20 million in dollar revenues that you'll have that quarter.

Speaker 18 Not bad.

Speaker 27 That's what some companies are experiencing right now.

Speaker 27 The weaker dollar is making their overseas sales a bit more valuable, but they shouldn't get used to it, says Nelson Yu, head of equities at Alliance Bernstein.

Speaker 29 What might be a benefit this year might actually be a headwind next year.

Speaker 27 Currency values are generally pretty cyclical, he says, meaning while the dollar is weaker now, it could strengthen again, wiping out that advantage.

Speaker 27 Companies have no control over those fluctuations, which is why Yu says you might not hear them talk much about them in upcoming earnings calls.

Speaker 29 It's not something that they would want to talk up in terms of, oh, we're deriving a lot of growth from the fact that the foreign currencies have strengthened against the dollar.

Speaker 27 On the other hand, when the dollar has been strong in recent years, some companies have been happy to talk about the downside or what they call FX foreign exchange headwinds, says Santosh Rao at Manhattan Venture Partners.

Speaker 30 We saw that for the last number of quarters when the dollar was strong, the tremendous headwinds from the dollar strength, and that showed up, they reduced their profitability by a certain percentage.

Speaker 27 But for now, the weaker dollar could boost the profitability of some companies, or at least offset some of the added costs they're seeing from tariffs.

Speaker 27 Ultimately, says Joanne Feeney at Advisors Capital: What investors should be asking is: How well is the company managing their fundamental business, the things they can control?

Speaker 27 Because currencies and tariffs are going to keep changing. I'm Henry App for Marketplace.

Speaker 6 A high temperature in Houston, Texas today, 96 degrees.

Speaker 5 My iPhone says it's going to feel like 101.

Speaker 7 Hot enough all by itself to do a number on that state's electricity grid. Close to unmanageable when you throw in a growing population.
More data centers.

Speaker 4 The list goes on.

Speaker 13 Monthly energy demand in Texas is expected to double roughly by 2030.

Speaker 4 That's according to ERCOT, the state's grid operator.

Speaker 14 To make sure supply keeps up as best it can, investment is being made in new power generation, things like natural gas and solar.

Speaker 14 But energy companies are desperate for every extra electron they can get their hands on.

Speaker 7 And as Marketplace Elizabeth Troval explains, it's all part of a new strategy that focuses on pooling at-home energy resources.

Speaker 31 In Houston's trendy heights neighborhood, I'm touring what Texas energy company NRG calls their smart home.

Speaker 31 In this two-story house, the company shows off its latest tech to make the most of every kilowatt, which is important in Texas summers, even on what passes for a cool July day like today.

Speaker 31 It's in the mid-90s.

Speaker 32 So we're walking out of the house now through the backyard to the detached garage.

Speaker 31 NRG's Wayne Morrison is showing me around.

Speaker 32 You can hear the air conditioners humming.

Speaker 31 I'm about to see just how much energy that giant AC is using to cool the smart home.

Speaker 31 We go to the second floor in this test home's garage where there's a large screen with a moving graph that shows the entire home's energy consumption in real time.

Speaker 33 This is what's actually going on in this house right now.

Speaker 31 Energy's Mark Parsons shows me what happens when we plug in an electric vehicle.

Speaker 33 You can see the big spike.

Speaker 31 Energy consumption doubles. Then we stop charging the EV and turn off the AC.

Speaker 33 Now you see everything coming offline.

Speaker 31 The graph dips way, way down.

Speaker 33 Your consumption, it's pretty much air conditioning.

Speaker 31 Which is why setting people up with free smart thermostats is one key to NRG's virtual power plant.

Speaker 31 It's a program developed to balance energy supply and demand by tweaking energy usage in hundreds of thousands of homes.

Speaker 33 Instead of doing everything at 2 o'clock in Houston when it's 100 degrees outside, charge a car later. Cool your house before that.
cool your house after that.

Speaker 31 Because those tweaks add up.

Speaker 33 If you had 650,000 thermostats acting together,

Speaker 1 that's a middle-of-the-road power plant.

Speaker 31 A power plant, you might not have to build. Instead, you get that virtual power plant.
And yes, demand-side programs have been used for decades.

Speaker 31 But what's different here is the sophistication of these programs.

Speaker 31 Texas energy consultant Doug Lewin says these programs use machine learning with smart thermostats in your house, so it automatically pre-cools.

Speaker 34 Think of like, you always want your house to be 75. You don't want it to go above 75 or in the summertime.
You wouldn't necessarily care if it's 72 inside your house sometimes.

Speaker 31 Pre-cooling your house when the sun is high saves you, the customer, money and lessens strain on the grid because solar energy is cheaper and is only abundant in the daytime.

Speaker 31 These virtual power plants are monitoring prices and the weather and learning consumer patterns to a level a residential customer wouldn't.

Speaker 34 No human has to take any action. Your comfort is maintained and you get a payment as a customer.

Speaker 31 And there are also programs like this on the supply side. I'm talking residential batteries that can be pooled together.

Speaker 31 When she worked for Tesla after the 2021 winter storm that caused massive outages in Texas, Arushi Sharma Frank helped create a pilot program.

Speaker 31 So people who buy home batteries could get paid for the small amounts of electricity they send back into the grid.

Speaker 36 We have to squeeze out juice from everything we can. We need to allow customers who invest in insurance policies wherever they can to make a return on their investment.

Speaker 31 Though these kinds of programs are growing in popularity, a big question remains, says Doug Lewin, how customers will be compensated.

Speaker 34 What you're adding to the grid is very valuable. What you're actually removing in demand also has a value.

Speaker 34 And actually, ascribing that value and then literally paying the customer for it, that is a difficult thing to work out the details on.

Speaker 31 Still, he says that a large energy company like NRG has rolled out a virtual power plant in Texas marks a pretty big shift. In Houston, I'm Elizabeth Troval from Marketplace.

Speaker 7 The big entry in our data and statistics file folder today was existing home sales, courtesy of the National Association of Realtors, from whom we learned that the median home price in this economy now sits at an all-time high $435,000 US dollars.

Speaker 14 That is a 2% bump year-on-year.

Speaker 14 Consider that the setup then then for today's installment of our series, Adventures in Housing.

Speaker 37 My name is Brandon Adams. I live in Durham, North Carolina.
I am 40 years old, and I recently became a first-time homebuyer.

Speaker 37 I bought my house in early January and moved in in March. I came from a one-bedroom.
Now I'm in this three-bedroom, three-story townhouse, so I've been buying things for the home.

Speaker 37 I can say for sure my girlfriend is very excited about this because it's like a blank canvas for her.

Speaker 37 She's like helping me brainstorm what else we are going to do. Well, we need some accent walls, and there are some rose bushes that came with the place.

Speaker 37 I can't take any credit for them, but they do look like they need a little bit of some TLC.

Speaker 37 So, I'm going to be investing in some tools for that and starting to try to cultivate my green thumb a little more. So, spending a lot of money,

Speaker 37 I always saw myself as wanting to probably buy a townhouse because, you know, while you are a homeowner, you still have, there are some things that are taken care of, like, you know, the lawn care and certain exterior features of the home fall under somebody else's responsibility.

Speaker 37 So I had my first homeowner issue. I found that I had water leaking from somewhere.

Speaker 37 So having to kind of triage that myself, but for that particular situation, that does actually fall under my homeowners association's responsibility.

Speaker 37 So even though I am the homeowner, I can kind of outsource this problem to them for logistical scheduling the roofers to come by and then paying the bill in the end. So

Speaker 37 that's actually been a big relief to that, you know, that problem.

Speaker 37 I just never, I never saw myself being a homeowner for a long time. I just didn't think it was ever going to be attainable.

Speaker 37 All of my 20s, there would have been no point there where I was making enough money, nor did I possess the maturity, I don't think, to like have been a homeowner. So I did a career change.

Speaker 37 I went back to school and things started to change for me and I started earning more money. And so it became a little bit more in my mind.

Speaker 37 I thought, well, maybe I could become a homeowner at some point, but I don't know.

Speaker 37 Once I got to a certain amount of savings, and then I also received a small inheritance from my grandparents, at that point I realized that, oh I could actually get really serious about buying a house now finally.

Speaker 37 I'm pleased and surprised with myself that this is where I've gotten.

Speaker 37 You know I don't see myself living here forever. This does not seem like a forever home.
I would like to stay here for at least you know five to ten years but we'll see what the future holds.

Speaker 1 I don't know.

Speaker 14 Brandon Adams, first time home buyer at 40 Durham, North Carolina is where he's at. We cannot do this series without you, you know, and your adventures in housing.

Speaker 7 Singular or plural, actually. One adventure or many.

Speaker 16 Share them with us, would you?

Speaker 7 Marketplace.org slash adventures in housing.

Speaker 1 Coming up.

Speaker 38 Every time you've ever really smelled plum in a fragrance has been a kind of lie.

Speaker 7 Hey, what do you suppose AI smells like anyway, huh?

Speaker 10 First though, let's do the numbers.

Speaker 14 Dow Industrial is up 507 points today. 1.1% finished at 45,010.

Speaker 8 The NASDAQ rose 127 points, 6 tenths percent, 21,020.

Speaker 8 The SP 500 gained 49 points, 8 tenths percent wrapped a day at 63.58.

Speaker 2 Third consecutive record close, should you be curious.

Speaker 11 Japanese car makers are set to benefit from the news out of Washington and the president's social feed yesterday.

Speaker 16 Toyota shares surged 14%.

Speaker 16 Rising tide will lift all boats or cars, I suppose.

Speaker 17 European and Korean car stocks also rose, anticipating a similar deal.

Speaker 16 Sweden's Vavo up 7%.

Speaker 13 Mercedes-Benz up 7% as well. Kiev banked 8% today.
Bonds down. Yield on the 10-year T-note, 4.38%.

Speaker 7 You're listening to Marketplace.

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Speaker 7 This is Marketplace. I'm Kai Rizdahl.

Speaker 17 With the the caveat, again, that social media posts do not an actual trade agreement make.

Speaker 7 President Trump said last night, and this is a quote: Japan will open their country to trade, including cars and trucks, and rice, and certain other agricultural products and other things, random capitalization included.

Speaker 7 American exporters have long complained about the obstacles to them selling their wares in Japan. But as Marketplace's Matt Levin explains, those obstacles often go beyond what a trade deal can fix.

Speaker 41 About a year and a half ago, economist Mary Lovely at the Peterson Institute for International Economics visited Japan for a work trip.

Speaker 41 And while she saw plenty of Toyotas and Hondas cruising through crowded Japanese streets, Ford's or Chevys or Chryslers?

Speaker 35 I can't say that I saw any.

Speaker 41 U.S. automakers have a tough time complying with Japanese safety regulations, something this new trade deal reportedly addresses.
But Lovely says the bigger reason American cars don't sell in Japan?

Speaker 41 You tried driving a Ford F-150 pickup or Chevy Tahoe SUV through central Tokyo.

Speaker 35 Japanese roads are just not made for the very large vehicles that U.S. manufacturers increasingly have specialized in.

Speaker 41 While American car makers have publicly expressed disappointment with the trade deal, American rice farmers may have more cause for optimism. The new trade terms will reportedly exempt more U.S.

Speaker 41 rice from Japanese tariffs, which can total over 200%.

Speaker 41 But international trade lawyer George Thompson says the Trump administration will need to make sure American rice navigates a bureaucratic maze to actually reach Japanese consumers.

Speaker 24 There is an impenetrable system

Speaker 24 for importing and distributing rice, both governmental and non-governmental.

Speaker 41 It's important to remember here that while Japan is the fourth largest market for U.S. exports, we actually don't sell all that much stuff over there, about a fifth of what we sell to Canada.

Speaker 41 Ben Steele's with the Council on Foreign Relations.

Speaker 24 Despite the obvious hype from the White House, Japan is not an important export market for the United States.

Speaker 41 Steele says he doesn't see much in the trade deal that will change that, although he's still waiting for details. I'm Matt Levin for Marketplace.

Speaker 5 Generative AI is in plenty of what we all see these days, art and video easily created through the artificial intelligence tool of your choice.

Speaker 20 It's in what we hear, too, with reports of Spotify pushing out AI-generated music.

Speaker 7 But what about what you smell?

Speaker 7 Arabelle Sicardi writes on beauty, most recently in The Verge, in a piece titled How AI Infiltrated Perfume. Arabella, welcome to the program.
Good to have you on.

Speaker 38 Thanks for having me.

Speaker 12 We are going to do what we call in the trade an anecdotal lead here.

Speaker 21 I want you to tell me about the digitized plum that you had the experience with.

Speaker 38 Of course. So every time you've ever really smelled plum in a fragrance has been a kind of lie because up until now, every version has been an approximation of what a plum smells like.

Speaker 38 And the reason why this one was so scandalous was because they claim to have found the code of an actual true plum.

Speaker 38 So theoretically, you can be smelling a true plum in a different room or in a different building. It's like smell-o-vision.

Speaker 1 Okay, good.

Speaker 19 Okay, so that gets me to the crux of this whole thing about AI and the fragrance industry and business.

Speaker 19 And maybe this is some false romanticism here, but smell is, as we all know, one of the most evocative things that's out there.

Speaker 14 And when you start injecting digitization and AI,

Speaker 12 I understand that it's a multi-dollar million dollar billion-dollar business,

Speaker 4 but it does take a little of the emotion out of it, no?

Speaker 38 I mean, I would agree with you, but the reality is AI is already in so many of the beauty products that we already use and love.

Speaker 38 Your shampoos and your conditioners and your soaps and your laundry detergents.

Speaker 38 chances are that the conglomerates that produce these things have been using AI to make the process of getting it to you faster for years. And you just haven't known about it.

Speaker 19 Is there a way that I, Joe Run of the Mill fragrance consumer, I'm going to know the degree to which AI has been involved in whatever fragrance I'm applying that day?

Speaker 38 Honestly, no. And it's unfortunate.
It's all relying on your own curiosity because there's no industry standard requiring any of these companies to disclose that.

Speaker 38 It's not something, let's say, that the FTC would say, hey, slow down. But the thing about perfume is that it's full of infinite variations.

Speaker 38 And what AI does is kind of standardize the variations so there's less surprise. And the brilliance of a good perfume is the surprise.
It smells differently on a person throughout the day.

Speaker 38 But you are within your right to ask a brand on social media or via email or at the counter, hey, is this using AI in some way?

Speaker 38 And honestly, they should be able to answer that without being squirrely. And if they can't, are they ashamed of it?

Speaker 1 Yeah, it tells you that. They are.

Speaker 38 They have to explore that. Yeah.

Speaker 4 So what do you make of all this, right?

Speaker 19 So listeners are going to hear this and say, okay, that's kind of interesting.

Speaker 21 And it's a little weird and maybe slightly creepy.

Speaker 19 But

Speaker 15 as you say in this piece, you're an experienced beauty writer.

Speaker 19 You've judged fragrance and perfume competitions

Speaker 19 and all of that. And I guess I wonder what you, the expert, make of what is being done to,

Speaker 19 again, maybe this is false romanticism, but such a visceral

Speaker 42 product.

Speaker 38 I believe that AI can be a tool for creative innovation and surprise when it's not not used as a crutch for your creative thinking.

Speaker 38 But at the same time, it's unfortunate to me to see how pervasive the use of AI is in beauty before anyone can even talk about it amongst ourselves and be like, is it worth this cost that we don't understand quite yet?

Speaker 38 And we were never given the chance as consumers to really ask that question. So that ship has sailed, unfortunately.

Speaker 38 I don't think that there's refusing it at a large scale, but to me, this means that my investment in independent and artisanal perfumers and small-scale producers is that much deeper because they see what they could do differently and easier and they're choosing not to.

Speaker 38 I love that. I appreciate that devotion and I think it's important that we celebrate it.

Speaker 19 Arabella Scarty is a writer on beauty and fragrance and lots of other stuff.

Speaker 7 Such a writer on it, actually.

Speaker 12 She's got a book coming out.

Speaker 15 It's called The House of Beauty.

Speaker 19 drops in October.

Speaker 14 Arabel, thanks a lot. Appreciate your time.

Speaker 38 Thank you so much for having me.

Speaker 8 This final note on the way out today, and believe me, please, when I tell you you I want to let this tariff stuff go, but the news is what the news is.

Speaker 13 One more data point from the Yale Budget Lab on the actual state O import taxes on Japanese goods.

Speaker 14 Their analysis is that the average effective tariff rate on Japan is actually about 19.5%,

Speaker 6 because remember, there are separate global tariffs of anywhere from 25 to 50% on steel and aluminum and copper too.

Speaker 6 Our media production team includes Brian Allison, Jake Cherry, Jessam Dueller, Drew Johnstad, Gary O'Keefe, Charlton, Thorpe One College Torado, and Becca Wineman.

Speaker 8 Jeff Peters is the manager of media production and I'm Kyrisdahl. We will see you tomorrow everybody.

Speaker 1 This is 8 p.m.

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