Auto repair shops struggle under Trump's tariffs

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On the program today, the past five days in this economy, because you know, it's Friday.

Then we got to talk tariffs, but then a little ultimate frisbee from American Public Media.

This is Marketplace.

In Los Angeles, I'm Kai Rizdal.

It is Friday today.

This one is the 20th of June.

Good as always to have you along, everybody.

Big week this week.

You know, geopolitics, of course.

The Federal Reserve, also, of course.

And so, of course, we've got Courtney Brown from Axios here, also CD Breddy, the Washington Bureau Chief at MSNBC.

Hey, you two.

Hey, Kai.

Kai.

Hey, Kai.

Courtney, let me begin with you, and we'll talk Jay Powell first, I suppose.

Fed meeting this week, the chair came out and in his press conference said what we all expected him to say, which is things are fine.

We need more data.

No change in rates, obviously.

But then he kept saying

the committee, the Federal Upper Market Committee, believes it is well-positioned, in essence, to see what's going to happen down the road.

What exactly does well-positioned mean in your eyes?

I've also been asking that question.

It's kind of this phrase that he said quite often during this week's press conference, but he's been saying it before.

And I kind of just squint and lean forward when I hear him say that.

Here's what I think it means.

I think he's trying to say that

if there were to be signs of a shock on the inflation side of their mandate or the employment side of their mandate, they are,

oh, God, well positioned.

Right, right, right.

But wait, you can't use a word in a definition to define what the word means.

They are in a good spot.

He sees policy as in a really

good spot.

How's that?

And, you know, this is a complicated question because the Fed, as Chair Powell said this week, is supposed to be forward-looking.

But if you are waiting for some sort of sign that the economy is deteriorating and then you're you know so-called position well positioned to uh respond like that is naturally backward looking you're naturally going to be late maybe so that's the big question all right so let me ask this i'm going to ask you the same question i'm going to ask it a different way in my eyes the federal reserve is between a rock and a hard place right it's between uh uh tariff price increases and potentially significant uh inflation triggers that it knows are coming versus what that might do to number one, economic growth and number two, the labor market.

So how can they possibly be well positioned if they are in between a rock and a hard place?

That's like by definition a bad position.

You know, the word Jay Powell used was humble.

Like you have to be humble about how you look through a moment like this.

And

he thinks he's going to learn more over the summer.

I was waiting for him to just say in two weeks we'll learn more and see how that plays out

on the other side of town.

But

he has to be prepared to respond once the data comes in.

And we've seen jobless claims rise a little bit, but we haven't really seen any meaningful impact from all of this because when we got the April 2nd big Liberation Day tariffs, everybody realized that the sky would be falling.

And then when you pull back from it to significant but not disastrous tariffs, what does that look like when it's more of a slow burn?

And that's what he's got to be thinking in his head.

And obviously when the Middle East could be on fire again, he's got to be thinking, like, oh, God,

what is this going to actually lead to over the course of several months?

Yeah.

Courtney, I want to follow up on a question that your colleague Neil Irwin asked the chair.

It was late in the meeting, and Neil

asked Powell about economic data.

And we've seen in the past couple of weeks the folks who collect the CPI data say, you know what, we're going to stop collections in like in Provo, Utah and Buffalo, New York and some other places.

And that's, you know, part of its budget constraints and part of it's just people not responding as frequently as they used to in as high percentages as they used to to survey questions.

And Neil said, look,

how big a deal is this for you?

And this is part of what Powell said.

It helps, it not just doesn't help the Fed, it helps the government, it helps Congress, it helps the executive branch.

More importantly, really, it helps businesses.

They need to know what's going on in the economy.

The United States has been a leader for many many years in this whole project of measuring and understanding what's happening in our very large and dynamic economy.

And

I hate to see us cutting back on that.

So I want to be clear here.

There are no indications as of yet that the data is being manipulated or otherwise short-changed, but we are collecting less of it, Courtney.

And I want you to help folks understand why that matters.

Well, less is obviously not more.

And as Chair Powell said in the press conference, in a very passionate and by my account, one of the longest answers he gave at the press conference, there are

so many economic decisions that are made

based on the consumer price index or the producer price index or jobs data.

And

I think that

there has been worry about the state of government-produced economic data for some time now.

I think you mentioned the declining response rates.

That's a problem.

I learned that when they say

they are

guessing what the inflation data might mean,

I mean,

making it up is another way to do that using smart guesstimates.

But that's worrying because what if they're wrong?

What if they're wrong and

inflation is hotter or crueler than they say because they don't have the resources to collect data like they used to?

I mean,

the Fed and other policymakers could be caught on the back foot.

So I think there is worry among economists that the quality of the official government data isn't going to be as good as it usually is.

And what kind of private sector data can help supplement that?

Right.

Supplement there being the key word, right, Courtney?

It's not like it's going to be able to replace it.

Definitely not.

And

I was speaking to an economist this week who mentioned that the problem is that after the pandemic, there was this huge demand for data.

And private sector started opening their books, essentially, letting the public in on what they're seeing is going on in the economy.

And

they've started to pull that back a little as the pandemic gets further behind us.

And so in some ways there is more private sector data than ever before, but in other ways, you know, businesses that might have been willing to show consumers, policymakers what's going on before, they're not doing that as much.

Right.

Sadip, the last minute of the segment goes to you and it's pretty straightforward.

Why aren't we seeing

those things that the Fed is looking for in the hard data?

We've been waiting now since like April-ish for real tangible concrete signs and we're not seeing it and I want to know why.

This is why everybody needs to be humble.

We spent years wondering how sky-high interest rates would whack the economy and they're not really that much lower in the mortgage market and borrowing costs.

And it has not really dealt the blow that people thought.

We're seeing some noisy data, retail sales.

I think building permits have shown some trouble, but jobless claims being slightly higher, but not seriously higher.

I think it really plays to the things that we've learned since the pandemic in 2021 and 2022.

Businesses had so much difficulty readjusting when they did layoffs, when they cut back.

They don't want to make any fast moves, especially when some of this is driven by policy, either Fed policy or Trump policy.

And you never know when that's going to change and actually make your life a little bit easier.

And so that is the caution that's driving everybody away from doing anything crazy right now.

We are waiting and seeing.

Sadiq Reddy, he runs things in Washington and MSNBC.

Courtney Brown is at Axios.

Thanks, you too.

Thanks.

Have a nice weekend.

Wall Street finished the day and the week, actually.

Pretty close to even.

Details, numbers when we get there.

Whichever way the Fed goes on interest rates is, of course, going to depend in a large measure on which way the labor market goes.

So far, so good on that.

But antennae are up for some signs of change, and one of them might have come from the Federal Reserve Bank of Philadelphia this month, its survey on manufacturing activity.

Subdued is the short description.

Both factory demand and factory production were down, which is affecting employment.

That's the way that works.

The Philly Fed's Manufacturing Employment Index fell to its lowest level since the early days of the pandemic.

Marketplace Adjustin Ho has more on that one.

Manufacturing activity has been slow for years now.

Ben Ayers, senior economist at Nationwide, says, look at what happened just after the pandemic.

We really saw consumers shift from buying goods to buying services.

The demand for goods has really waned.

And then came the Trump administration's tariffs.

Ayers says many manufacturers aren't able to adjust their supply chains to avoid those higher costs.

So because of that, they're making any changes they can make to try to cut back on the cost front.

Manufacturers aren't announcing big waves of layoffs, says Ryan Sweet, chief U.S.

economist at Oxford Economics.

He says firms are more likely to just put off any decisions about hiring since things are so uncertain.

That creates paralysis, not just for hiring, but also for business investment, equipment and structures.

That said, there is evidence that the tariffs during the first Trump administration caused manufacturing employment to eventually fall.

Sweet says the sector itself isn't a huge component of the economy.

But on the other hand, he says manufacturing layoffs can have broader consequences, especially if those workers reduce their spending.

That reduction in spending then reduces the demand for workers in other industries, and therefore they either cut back on hours worked or they cut back on employment.

Sweet says that's why a pickup in manufacturing layoffs could be concerning, because a strong labor market is the economy's last line of defense against a recession.

I'm Justin Ho from Marketplace.

President Trump's trade policy is mercurial at best, changing in some cases literally by the day.

But some of his tariffs have been in effect for more than a month now, including a 25% tax on some imported car parts, which is putting small businesses in the automotive industry between that economic rock and a hard place.

Here's Marketplace's Henrietta.

Abby Blankensop has been hearing this noise coming from her 2018 Subaru Forester.

And it happens when I'm driving, like when my wheels are turning.

It's like a

effing annoying.

She's describing the problem to Naya Key, the manager of Gurlington Garage, a repair shop in South Burlington, Vermont.

Key says she'll have her technicians look into it.

And we might say we didn't find anything.

Okay.

But it's worth us digging into it a little bit.

Yeah, I'm good with that.

It's a job that might require new parts, and that has recently brought some unwelcome surprises, Key says.

I had a customer in here that was supposed to.

We found a wheel bearing that was broken, and we created an estimate with Volkswagen parts.

And the next week he was already scheduled.

We ordered the parts, and they arrived without any notice.

They were

three times the price.

She says the company did not spell out the reason for the increase, but Key suspects tariffs may have been a factor.

The customer went with parts made by a third party, not VW.

They're generally cheaper, but Key says some prices for third-party parts are rising too.

She got a notice from a battery company recently that said, Hey, by this date, we have to increase our prices.

This is because of tariffs, and it's increasing $5 from the original price.

That bump of roughly 4% takes effect near the end of this month, she says.

But she can't stockpile a bunch of batteries to get ahead of it because there's not enough space in the shop.

Tires are stacked in the lobby.

There are nuts and bolts in the back office.

So many parts she orders week by week and stores them on a few shelves in the shop.

As you can see, the first two shelves that are full, that has

a set of great parts on it, just pads and rotors, a coil spring, and then some like loose suspension parts, and that covered the whole shelf.

So, like, there's no way we could prepare for a month or anything like that.

Further up the supply chain, companies that make and import auto parts have more leeway to navigate tariffs, says Todd Compo, who analyzes the car parts and repair industries for SP Global Mobility.

Parts companies, he says, are taking a variety of approaches.

Some are trying to hold the line and absorbing the price increase for the time being until more certainty emerges.

Some are passing them along.

And then I'm sure there's some that are still, you know, just kind of going to wait and see.

Hoping, he says, that the tariffs might not be permanent.

But despite rising import costs, the parts industry is in a good position right now, Campo says.

Rising new and used car prices have led drivers to hold on to their vehicles longer.

The average car or pickup is now 12.8 years old, according to SP.

And older cars, Compo says, need more repairs.

I think even though we're in the midst of tariff and trade concerns, which will be a headwind, that the tailwinds are actually quite a bit stronger from the confluence of tailwinds that we have.

But as those tailwinds have picked up, so have car maintenance costs.

According to the Consumer Price Index, repair costs are up 39% since 2020.

Parts costs are up 23%.

Naya Key at Gurlington Garage says the best she can do in this situation is to be transparent as the industry fluctuates.

We just have to go probably month by month and make sure we're updating our customers as much as possible.

And giving them options.

That whooshing sound that brought in the 2018 Subaru Forrester was a brake problem.

It needed new front pads and rotors.

Key says she gave the customer the choice of premium or economy replacement parts for the job.

The customer went with economy.

In Burlington, Vermont, I'm Henriette for Marketplace.

Coming up.

These schools are

trying to find different ways to boost their revenues.

Ultimate Frisbee, anyone?

But first, let's do the numbers.

Dow Industrial is up 35 points today, just about a 10th percentile, 42,206.

The NASDAQ subtracted 98 points, 12%, 19,447.

The SP 500 down 13 points, 2 tenths percent, 59, and 67.

For the week, the Dow off 1.8%.

The NASDAQ backed down one and one-tenth of one percent.

The SP 500 down 1.3%.

Auto parts, since Henry was just talking about them.

LKQ Corporation sells aftermarket and recycled replacement parts, added 7 tenths percent.

Auto leave, makes seatbelts, other safety components decreased 1%.

You're listening to Marketplace.

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This is Marketplace.

I'm Kai Rizdahl.

If a big city is in your leisure plans this summer, maybe you've got museums on your mind, iconic food, perhaps?

Well, have you thought about, and hear me out now, that city's rivers and harbors and estuaries?

Waterways have, of course, been economic assets for cities for centuries, but right now, think recreation, kayaking, and paddleboarding, and swimming, surfing sometimes.

It'll both attract and keep residents, the theory goes, and bring in some tourism dollars.

But for cities with histories of polluted waterways, which is to say a lot of them, that's going to take some persuading, as Marketplace's Stephanie Hughes reports.

It's a little before 6 a.m.

at the Baltimore waterfront, where about half a dozen paddleboarders are getting ready to launch.

All right, Bridget, first.

I don't really know.

Sorry, watch the juice poop.

I haven't launched that off in 40 days.

Jesse Benson owns B-More Sub, and this location on the harbor is a new one for her paddleboarding business.

And we'll just paddle that way towards the sunrise, and then we're just gonna do yoga right in this area for this.

It feels like business is meeting nature here.

Along with the bird chirps and goose poop, you can hear train whistles and sea cargo ships.

It may seem a little unusual to paddle for fun in Baltimore's harbor, which is known more for shipping and manufacturing.

But Courtney Marshall, who's training to be an instructor at Beamor Sup, isn't too phased.

I mean, I feel like I'm not going to fall in, so

I'm like a little bit less worried about it.

The class costs $40 and there are only a handful of people signed up today.

Benson says it's been slow going partly because people are worried about getting wet.

They're still nervous.

They're nervous to try paddleboarding on the inner harbor.

Like there's still that perception of like ew, I don't want to fall in the harbor.

It's still relatively early days for Baltimore's water sports scene, says Adam Lindquist, vice president of the Waterfront Partnership.

It's one of the groups behind an initiative to clean up the harbor that that started 15 years ago.

And there has been a market improvement in Baltimore's water quality since then.

We say the harbor is conditionally swimmable.

Last year, Baltimore held its first organized public swim in the harbor in over 40 years.

Another one is being held later this summer.

Tickets are already sold out, and Lindquist wants this to be a regular thing.

The end game is that we want a public swimming spot in the Baltimore harbor so that people can come down and swim on their own whenever they feel like it.

Lindquist says for the time being, he would avoid swimming in the harbor outside of organized events because there are some conditions that make a dunk unsafe.

For example, when it rains, that can cause the city's sewer system to overflow.

That carries bacteria into the harbor that can make people sick.

It takes about two days for that bacteria to die off.

And Linquist says when you do jump in, you probably shouldn't touch the bottom.

We have a very industrial past in Baltimore City, like many cities, and basically you don't want to stir up the sediment at the bottom of the harbor.

There are still challenges with pollution, including a recent diesel spill in the harbor.

It was in a contained area, and linquists say it won't affect the upcoming harbor swim.

But it doesn't help build the image of Baltimore as a swimming mecca.

And for decades, lots of cities were more interested in protecting themselves from their rivers as opposed to jumping in them.

We walled ourselves off from rivers and waterfronts out of fear.

Brian Trustee is with Pros Consulting.

His firm advises places, including Baltimore, on parks and recreation systems.

He says over the last 20 years, that attitude has changed.

And now he's getting calls from places around the country that want to turn their waterways into economic engines.

Communities are seeing each other.

They're seeing examples.

They're like, oh, I want that.

One place Trustee's worked with is Des Moines, Iowa.

Iowa does not have the ocean.

We do not have mountains, right?

But we do have rivers.

Stephanie Oppel leads the nonprofit Iowa Confluence Water Trails.

In 2022, it found that recreation on the water in Des Moines and the surrounding areas brought in more than $11 million in consumer spending.

Over half of that was from tourists.

It's expecting to about double that yearly spending by making some of its waterways not just boatable, but also surfable.

We are putting in what's called a wave shaper.

It is this big mechanical flipper that can create a surf wave.

So, late next summer, people will be surfing on the Des Moines River.

This is not cheap.

The wave shaper costs a million dollars.

And Opple says one challenge is these projects take a lot of time to both fund and build.

You have to make sure people understand they won't be here tomorrow, but in a couple of tomorrows.

In Baltimore, I'm Stephanie Hughes from Marketplace.

These are difficult times for university enrollment in this country for a lot of reasons.

So some schools are getting creative, smaller schools in particular.

Athletics, generally speaking, Ultimate Frisbee, specifically in intercollegiate athletics.

Xavier Martinez at the Wall Street Journal wrote about this the other day.

Thanks for coming on the program.

Thanks for having me.

So of all the things that a small college could invest in where money is always tight, right, why Ultimate Frisbee?

Well, Ultimate Frisbee is one of those kind of niche sports that's seen a lot of growth in the last couple of decades.

And it's not a sport that requires a lot of money to get off the ground and to sustain year over year.

And so for a lot of colleges, it's a way to attract talent that wouldn't otherwise come to their school.

And it's a way to do that pretty inexpensively.

And then you get more people coming to school, right?

Is that the deal?

That's the thinking, right?

Is you can boost your enrollment.

And it's especially important at a time that a lot of small and kind of niche colleges are seeing a real large cliff, a drop-off in their expected enrollment in in the next couple of years.

Yeah, we're seeing a lot of those schools closed.

But let me ask you this, and I say this with zero offense meant to any of my Ultimate Frisbee playing friends out there, but as you portray in this article,

Ultimate at this level has become really super competitive.

And my experience with Ultimate is that it's usually kind of granola-ish and get-along-to-go-along, man.

Absolutely.

You know, they have this tradition in the game called the spirit of the game, and that's the rule that they abide by.

And it basically says that, you know, you should support teamwork over competitive success, right?

If there's ever a moment where you have to choose between winning and helping a teammate or something like that, that you should choose the latter.

And, you know, we've seen a couple of teams break on the scene here and really overtly prioritize winning.

And that's caused kind of a tumultuous reaction from some in the community.

I am obliged to point out here, though, that much as many people would like to not think so, higher education is a business.

And one does have, if not profit motives, then certainly business-oriented motives.

And that explains why a lot of these schools are doing this.

Absolutely, Kai.

I mean, these schools are

trying to find different ways to boost their revenues.

And

this is a sport just like any other.

They compete in a sanctioned league.

It's not under the NCAA,

but it's through an independent organization.

And I think for these schools, it's a real great way to kind of boost their bottom line.

I will point out here that Oklahoma Christian got the lowest score in the spirit of the game competition at the most recent championship.

So, you know.

Absolutely.

That was last year in 2024's competition.

And, you know, I think that that kind of shows the reaction a little bit, right?

You know, some of these teams that don't have scholarship programs that compete following, you know, that spirit of the game rule, I think that they feel a little irked that there's this real new team that has garnered a lot of competitive success.

And obviously, you're you're seeing that through some of their reactions and, of course, you're pointing out those scores.

Trevor Burrus, Jr.: And it's spreading, too.

Right, sorry, just the idea of Ultimate as a recruiting tool.

It is spreading to other places.

Certainly.

Last year, we saw another school besides Oklahoma Christian, Davenport University in Michigan.

They started an Ultimate Frisbee team as well.

And they provided scholarships to both men's and women's teams, actually.

And they've kind of expressed their intent to to go kind of full throttle next year.

They're going to move from that Division III league all the way up to Division I next year.

They said that the competition just wasn't quite good enough for them at that level that they were at.

Xavier Martinez writing about Ultimate Frisbee, which is, I guess, becoming a cutthroat collegiate sport in the Wall Street Journal.

Xavier, thanks a lot.

I appreciate your time.

Thank you, guys.

Oh, my, look at the time.

Got to go.

No time for a final.

Courtney and Sadif and I went way too long.

B.J.

BJ Lederman composed our theme music.

Marketplace executive producer is Nancy Vergali.

Donna Tam is the executive editor.

Neil Scarborough is vice president and general manager.

And I'm Kai Rizdahl.

Have yourself a great weekend, everybody.

We are back on Monday, all right?

This is 8 p.m.

Hey everybody, I'm Kai Rizdahl, the host of Marketplace.

I'm going to join Amy Scott on September the 9th.

She's the host of How We Survive, and also science writer Elizabeth Kolber for a conversation about the economic consequences of our climate crisis.

We're going to break down how the acceleration of climate change is going to disrupt jobs and entire industries, even our daily lives.

But it's not all doom and gloom.

We're also going to dive into the solutions that are giving us hope right now.

Thanks so much to Odu for sponsoring this free webinar.

And you can sign up today at marketplace.org/slash climate.