Trump aims axe at community lender fund
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See your local Toyota dealer for hybrid battery warranty details. Good news, bad news, we got it all. From American Public Media, this is Marketplace. In Los Angeles, I'm Kyle Rinsdahl. It is Thursday today, the 24th of April. Good as always to have you along, everybody.

I got good news on trade and I got bad news on trade. We're going to do the good first. The White House, President Trump himself actually said this week that his people are actively, that is the word he used, talking to Beijing about all things trade. The bad news is that the Chinese foreign ministry said today, quote, China and the United States have not held consultations or negotiations on the tariff issue, let alone reached an agreement on

The spokesman went on to say that reports of those talks, and again, this is a quote, are fake news. The president's newfound interest in negotiating on trade has come after he met with retail CEOs this week, CEOs who told him they are worried about shelves being empty thanks to his tariffs.

I mention that because this morning we learned how the first quarter went for some big name consumer brands, PepsiCo and Procter & Gamble and American Airlines by name. All three cut their forecast for the year. All three say trade policy is creating uncertainty for them. And as Marketplace's Kristen Schwab reports, it is creating uncertainty for their consumers, too. Consumers who are thinking about buying flights and soda, even staples like laundry detergents.

John Lear, chief economist at Morning Consult, is taking these company earnings reports with a grain of salt because in the business world, it's better to under-promise and over-perform. My sense is that

is that companies are being sort of overly conservative right now, as opposed to setting up too lofty of expectations and then fail. So then, why are companies on their earnings calls so worried about consumers being worried? Really what we're talking about is how are their expectations of the future changing

changing the way that they behave currently. Expectations affect actions. And right now, consumers are expecting prices to go up because of tariffs. Blake Drosh, a senior analyst at eMarketer, says that especially hits Pepsi, which makes sweet and savory treats.

It really can only be a matter of having to raise prices by a little bit to get the consumer to start thinking about switching to another alternative. But what really concerns Drosh is that after years of consumers making discretionary downgrades, switching from nacho cheese Doritos to store brand corn chips, people are now trying to cut costs on their favorite household staples.

Consumers are typically going to be more willing to, let's say, cut back on buying their favorite name brand cookies than they are to switch from a toothpaste or a deodorant brand that they've been using for years and they're loyal to.

Some consumers have even started rationing. Meaning not doing laundry as frequently, using less shampoo and soap. Erin Lash, who directs consumer equity research at Morningstar, says this kind of behavior doesn't raise big red flags yet. It does take more than a quarter, maybe more than two quarters before there is the expectation or the opinion that that

change in behavior is likely to prove lasting and prove to be a real shift in how consumers and companies interact with the economy. I'm Kristen Schwab for Marketplace. Here's a housing data point to keep in your back pocket. The spring home buying season seems to be off to a shaky start.

The National Association of Realtors said today sales of existing homes fell 5.9 percent February to March, lowest that number has been since 2009. Also, if you recall, not a great time in housing. Wall Street today, traders somehow did not have a care in the world. We will have the details when we do the numbers.

The plan, such as it is that the president and his administration offer for his trade policy, tariff rates not seen in 100 years is that policy, is that making imports to this economy more expensive is somehow going to revitalize American industry and create jobs. Millions and millions of jobs, says Commerce Secretary Howard Lutnick. Details, so far, are thin. This is not, though, the first time an economic golden age has been promised with tariffs as the motivating factor.

Marketplace's Supriya Beneshwar takes a look at what history has to tell us about how that worked out. The world's economic landscape 85 years ago looked very different from today. Industries that are now dead were thriving. Countries that are now struggling were rich. Argentina is outstanding in wealth and progress in South America. This is from a documentary for schoolchildren in 1940. A leader on her own continent and a rival of the United States. Our

Argentina was one of the richest countries in the world then. Agriculture had treated it well, but it and many other countries at the time felt an urgent need to recreate the industrialization they saw in Europe and the U.S. Newly independent former colonies would embrace this too. Here's Ghanaian Prime Minister Kwame Nkrumah in 1963. It is impossible to think that

The way to do this, many believed, was to wall their economies off from imports. It was the idea that you will

put on tariffs, other kinds of restrictions on imports. Paul Krugman is a professor of economics at the City University of New York and a former New York Times columnist. Why buy from abroad when you can make it at home, creating manufacturing or industrial jobs and accelerating the development of the country along the way?

The rhetoric in many ways resembled what Trump is saying, although there was never any talk about make Brazil great again, because Brazil hadn't been great. Brazil was a poor country that was trying to get a little bit richer. The idea was called import substitution industrialization, and it started to take hold after World War II. Build up an industrial sector behind those barriers and then

supposedly it'll become efficient and will no longer need the barriers once it's matured. So you saw that followed everywhere from India to Brazil. So many countries raised tariffs again and again, Argentina among them. At some point they were on average 200%, so that's really high. Sebastian Gagliani is professor of economics at the University of Maryland and former secretary of economic policy for Argentina. But something happened when the tariff wall went up.

The industries that emerged were competitive only inside the bubble of Argentina. They were not advanced. Gagliani remembers it. When Gagliani was a kid in Argentina in the 70s, decades after import substitution started, his dad would travel internationally for work. And so he always brought me back toys from Europe. So I got this big band toy.

Big Ben liked the clock. Very state-of-the-art for a toy at the time. And there's a guy that wants to copy them in Argentina under protection. So he says, if you give me your toy, I'm going to have to break it apart to copy it, but I'll give you three of the ones that I make.

Being cut off from trade made economies less efficient and less innovative. This pattern repeated itself.

And so a good country example here would be India. Douglas Irwin is a professor of economics at Dartmouth. India produced a car known as the Ambassador. Which was basically the same in the 1970s as it was in the 1950s. It looked the same. It didn't really improve the quality of the product. He says living behind a tariff wall saddled the country with a large manufacturing sector that wasn't internationally competitive and didn't much improve living standards. So yes, import substitution can bring about a lot of manufacturing,

But whether that's efficient and adds to the wealth of the nation is another question. After three or four decades, governments around the world became disillusioned with this experiment.

It was not a success story. Again, Paul Krugman. The industries never became efficient. Economic growth was really disappointing. And rather rapidly in the 1980s, the developing world changed to a strategy of embracing international trade. He says it's a piece of history the U.S. could learn from. In New York, I'm Sabri Beneshour for Marketplace.

Should you miss something on the actual radio, we get it. That happens. We understand. We do have a podcast just in case you can get it on our website, marketplace.org or the platform of your choice. Just follow us there. Among the many things the pandemic did to this economy and to the people in it is that it prompted a lot of Americans, a lot of Americans to

to move from the Northeast and the West Coast to the Sunbelt, to Nashville, Atlanta, Tampa, and Austin, and Phoenix, and points in between. Incentives being what they are, developers in all those markets build housing, lots of it. New apartment construction jumped almost 40% between 2020 and 2022. That's from the Census Bureau. But since then, apartment construction starts have fallen below where they were in the before times.

Marketplace of Justin Ho has that one. Early in the pandemic, apartment construction was booming in Texas. You had robust job growth, population growth in the central Texas region. That's John Kirk, the founder of the Lightpath Company, an apartment development firm based in New Braunfels, Texas, about an hour south of Austin. He says that construction boom started to taper off a couple years ago when it started getting harder to get loans.

Lenders started getting really tight on capital. The interest rates where they were very difficult to underwrite.

At the same time, all of those new apartment buildings that were built early in the pandemic started hitting the market. And that new supply caused rent growth to slow down. That gave builders less incentive to start new projects. When you put all that together, all those different levers, it needs to produce a return. And if that return is not there for the risk that you're going to take, well, OK, it doesn't make sense to start this project.

Developers are facing other headwinds, too. Dhanushka Nanyakara with the National Association of Home Builders says there's a construction labor shortage. And then, of course, the president's tariffs. So the costs are expected to rise for steel, aluminum, copper, appliances.

As a result, apartment construction starts are likely to fall even farther. Xander Snyder, senior commercial real estate economist at First American, says that'll have consequences in 2026 and 27. Starts is really just a leading indicator for completions. As you can imagine, you can't deliver new apartments that haven't started to be built yet.

Snyder says there's still a national housing shortage. So if developers deliver fewer apartments in the coming years, rents will probably stabilize for a little bit and then they'll turn back into growth territory because that housing shortage dynamic will pick back up.

Developers are still trying to find ways to meet the demand for housing, given all the headwinds. Paul Habibi is principal of the real estate consulting firm Grayslake Advisors. He says right now, many developers are trying to add capacity to existing properties. That could be something as simple as building ADUs on a portion of the parcel that may have capacity. It

It could be, you know, renovation and rehabilitation of existing units to try to add value. Habibi says other developers are focusing on building single-family homes for rental instead of big apartment buildings. If you think about a built-to-rent single-family community, the construction and delivery tends to be somewhat more simple. You're typically not building a large, complicated project.

In New Braunfels, Texas, John Kirk, the apartment developer, says the construction slowdown is an opportunity. He's laying the groundwork for a new apartment building with almost 300 units that'll break ground this fall. We got our construction loan in place, so very exciting. And so, you know, taking the risk to finalize design and submit for permits. Kirk says even though it's an expensive and risky environment right now, the new building will hit the market at a time when supply will be low and rents will be picking up.

I mean, when you're delivering into less supply, it's always a good thing. You know, it's a fundamental supply and demand. And so if there's less supply and there's more demand, that's always a good scenario for success. A good scenario for apartment developers, not so much for renters. I'm Justin Ho for Marketplace.

Coming up. It was a ranch style home for the most part. Five steps to get from the driveway to the home. Life as a first time home buyer coming up. But first, let's do the numbers.

Dow Industrial is up 486 today, 1.2%, 40,093. The NASDAQ grew 457 points, 2.7%, 17,166. The S&P 500 added 108 points, 2%, 54,84. The CEO, Procter & Gamble, says the company will likely raise prices because of tariffs.

The maker of such products is Charlie Banana Diapers and Fix-It-Ent Entry Adhesive, reported a third quarter revenue loss and cut its full year guidance shares down 3.7% today. Speaking of passing tariffs on to consumers, the Fed's page book yesterday noted that, and this is a quote, many firms have already received notices from suppliers that costs would be increasing. Yes, that's how it works. Those costs get passed on.

The maker of products like Nerf Blasters and My Little Pony Mini World Magic Critter Corner Compact Creation Playset, up 14% today. What company is it, you ask? Hasbro. That was first quarter results of Beat Expectations. You're listening to Marketplace.

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Just for listening today, you also get three months free. Go to gusto.com slash marketplace. That's gusto.com slash marketplace. This Marketplace podcast is supported by the University of Illinois' Gies College of Business. Earn a world-class MBA degree completely online at your own pace. Through our engaging online MBA program, you learn from esteemed faculty and network with classmates on a global scale without having to put your career on hold.

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There is a list, a very long list of programs and offices and agencies that are being targeted in the Trump administration's disassembly of the federal government. On that list is a program run by the Department of Treasury that goes by the initials CDFI, Community Development Financial Institutions. Technically, it's the CDFI Fund. It

It offers loans and financial services to underserved communities and individuals that aren't served by traditional banks. Last year, it awarded more than $400 million in grants and loans. And while exactly what is going to happen to a lot of the programs and agencies the president is targeting is still up in the air or in court, lenders that rely on CDFI fund support are getting ready for a future without it. Marketplace's Savannah Peters has more.

Tongass Federal Credit Union runs 14 branches along the southeast Alaskan coast, most on remote islands where you can't just drive to a bank in the nearest city. That's not how it works. You get on a plane and pay $350 round trip or more. CEO Helen Mickle says the credit union's presence in those communities is possible because of low-interest loans from the Community Development Financial Institutions Fund.

It's helped us to kind of level the playing field and get in to areas that otherwise would never have had any financial services. Areas like the Metlakatla Indian community of less than 1,500 people. And Mickel says the credit union offers loan products specifically for Alaska Native fishermen, who sometimes lack the proof of income usually required to take out a loan.

We have made arrangements to accept their fish tickets, which is the proof of the sale that they get from the fishery. And we're able to use that to help qualify them. In other words, Tongass Federal has expanded and tailored its services to meet these small communities' unique needs in ways Mickel says big commercial banks won't.

Now, she says her credit union can keep its doors open without that federal support. It will just slow down any additional work that we might do in erasing banking deserts.

In mid-March, President Trump deemed the CDFI fund, quote, unnecessary and ordered it to be eliminated to the maximum extent legally possible. That got the attention of 23 senators from both parties who signed a letter urging the Treasury Department to protect the program. Michael Swack is with the University of New Hampshire's Center for Impact Finance.

This is typically something that's not very controversial to serve communities that aren't well served by mainstream lenders, mainstream capital markets. For now, it's business as usual at the CDFI fund. It accepted funding applications for this year. But it's not clear if the fund's small staff and relatively modest budget are safe from future cuts.

So there's still a limbo. You know, what will happen to the executive order? Will the CDFI fund be continued? And if it is continued, where will it sit in the budget? Swack says that's a tough environment for community lenders. Most that I reached out to declined to speak on the record right now. That's not surprising to Lenwood V. Long, head of the African-American Alliance of CDFI CEOs.

Oh, no, no, no. They don't want to draw attention to themselves, but sadly, the attention is on them. Without CDFI Fund's support, Long says some of the smallest lenders in his organization would fold. So when you think about the gap it would create in communities that have been bypassed for so long, it's frightening and chilling. Community lenders and their investors are waiting for clarity.

Anne Hines is CEO of DreamSpring, an Albuquerque-based loan fund supporting small business owners that uses the CDFI Fund brand to attract partnerships and capital from commercial banks, which may be wary of the risks that come with the now uncertain funding. In an environment where there is, at the moment, a lot of uncertainty, that absolutely affects us.

the underwriting decisions that those lenders make. Even if the fund survives federal downsizing, Haynes says a chilling effect on investment in the community lending sector has already set in. I'm Savannah Peters for Marketplace. In addition to the monthly home sales data that I mentioned up at the beginning of the program, every year the National Association of Realtors puts out a big report about who exactly all the buyers and sellers of homes in this economy are.

From the 2024 version of which, I am now going to pull two data points. First, last year, the percentage of homebuyers who were first-timers fell to a record low of 24%. Second, and also 17% of homebuyers bought a multi-generational home. That is a record high. You got aging parents, kids that moved back in after college, lots of reasons. Here's the latest installment of our series, Adventures in Housing, all about first-time homebuyers.

My name is Savannah Melendez. I am 27 years old and I just bought my first house in Anchorage, Alaska. In 2015, my mom was diagnosed with a sarcoma. She went for surgery in 2023. It was a partial pelvic reconstruction so that she could get rid of the cancer but still maintain her ability to walk.

There were times where she'd have to, you know, be carried up the stairs. There were times where, you know, we'd scooch her up the stairs one by one. So finding a different apartment that was more accessible and a place that wasn't three flights up

It sounded like the best option at the time because the home purchase felt so unobtainable at that point for a 20-something-year-old. But I really wanted to intervene and make sure that my mom was taken care of the way that she had taken care of so many people her entire life. The cancer has never fully gone away. And so they are just trying to make sure that she has as healthy and as happy of a life as she possibly can.

I happened to come across this one house that seemed like a unicorn. It had a really big yard and it was a ranch style home for the most part. Five steps to get from the driveway to the home, but a ranch style home.

And I serve at a local restaurant here. And I remember telling one of the other waitresses that I was so bummed because look at this house and look how beautiful it is. And if I just had the opportunity, if I was just in a different position that I might be able to own this home, but I'm not. And so I ended up having that same conversation with my supervisor at the other job that I have. And

And that's where she gave me the advice to not necessarily deny myself the opportunity before I was even given it. We offered $256,000 for the home, which was just a bit over asking. My first mortgage is for just over $200,000. And then the down payment assistance covered the rest with a second mortgage that made it. So I came to closing with only prepaid expenses and the closing cost fees.

Closing was very emotional. I remember at one point looking over and seeing tears in my mom's eyes and that I had to bite my cheeks to not cry with her because I remember us having a conversation years and years prior where she wanted to purchase a home. She just never felt that it was possible. So to be able to be a part of her homeownership dreams coming true was

It's beautiful, and I'm so grateful for it. Savannah Melendez in Anchorage. We cannot do this series without you no matter where you live. So if you're hunting for your starter home or settling into your first mortgage already, tell us about it, would you? Marketplace.org slash Adventures in Housing. This final note on the way out today, we started with good news and bad news. So shall we end?

We got March durable goods orders from the Commerce Department today. Big, expensive stuff. Durable goods, right? The good news is they were up 9.2% from a month earlier. The bad news, and if you're a regular listener, you know where I'm going. The bad news is that that bump is A, because people were trying to get ahead of tariffs. And as a result, also B, there's likely to be a sag in those orders coming.

John Gordon, Noya Karr, Amanda Peacher, and Stephanie Seek are the Marketplace Editing staff. Amir Babawi is the Managing Editor. And I'm Kai Risdahl. 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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