Deep Dive
Shownotes Transcript
If your small business has a problem, you could say, Ugh, just my luck. But you should say, Like a good neighbor, State Farm is there. And we'll help get you back in business. Like a good neighbor, State Farm is there.
Attention all early birds. When you make a donation to Marketplace during the first two days of our May fundraiser, it can make a huge impact. The Investors Challenge Fund has issued us a challenge. If we raise $25,000 in the first two days of this fundraiser, we'll unlock another $25,000 from the Challenge Fund. But we can't afford to fall short here. So please step up and show your support today. Give what you can at marketplace.org slash donate. And thanks.
The theme of the day is, no surprise, tariffs, because their fingerprints are all over the economy right now. From American Public Media, this is Marketplace. In Baltimore, I'm Amy Scott, in for Kai Risdahl. It's Thursday, May 8th. Good to have you with us.
The scene in the Oval Office this morning was boisterous as President Donald Trump and U.K. Prime Minister Keir Starmer on speakerphone announced a new trade deal between our two countries. The United Kingdom is currently the U.S.'s 11th biggest trading partner per the Census Bureau, with $148 billion in total goods traded last year.
Today's agreement is the first such deal since the Trump administration imposed widespread tariffs just over a month ago. And the president has promised many more deals to come. Marketplace's Elizabeth Troval starts us off with what details we have.
UK automakers found relief in today's deal. Their tariffs will go down from 25% to 10% on the first 100,000 vehicles exported to the US, according to today's announcement. The US is a big customer of UK cars, so those 25 cent tariffs were a big concern. Christopher Salmon runs the UK-based trade consultancy Clear Border.
Tariffs on UK steel and aluminum also caught a break. Still, the 10% baseline tariffs remain. This is the qualification when we say, you know, relief rather than elation, because, you know, prior to that, the average tariff was about a two and a half percent. And many details remain to be hashed out. Today, US officials boasted this agreement would grow the market in the UK for US agricultural products like ethanol and beef.
But the topic of U.S. meats opens up a whole can of worms, says Eric Golson with the University of Surrey in the U.K. You can't have American beef with lower standards circulating in the U.K. He says the U.K. is subject to very specific health laws against things like genetically modified organisms and washing chicken in chlorine.
Meanwhile, the real meat of the U.S.-U.K. trade relationship is financial and business services, says Dan Hamilton with the Brookings Institution. U.S.-U.K. services trade is much more important, frankly, than goods trade. And yet there's no mention of this.
All of this is why Gary Hoffbauer with the Peterson Institute for International Economics qualifies today's announcement as more of a teaser versus a substantial agreement. The biggest single thing is that there's an announcement at all.
whatever the content is, because it shows some reversal of Trump's extreme tariff agenda. He says it may not be robust or detailed, but that a deal was made at all is a positive signal for markets. I'm Elizabeth Troval for Marketplace. Wall Street seemed to take it that way as a positive signal. We'll have the details when we do the numbers.
Ever since President Trump announced a 10 percent minimum global tariff in early April, U.S. businesses and consumers have grown more anxious and pessimistic, according to pretty much every measure. That includes the New York Fed's latest survey of consumer expectations, which came out this morning. It finds people are feeling much worse about their own personal financial situations, both now and looking ahead to the future, than they were in March.
But their expectations about inflation over the coming year haven't changed much since then, which is interesting given the constant headlines about how tariffs will raise prices. Marketplace's Samantha Fields has that one. Stop me if you've heard this story before. Consumers feel like the economy is bad and getting worse. But the hard data shows it's actually pretty solid. The unemployment rate is low. Consumer spending is strong.
Benjamin Page at the Urban Brookings Tax Policy Center says that's what we saw in 2022 and 23 when inflation spiked. There was a huge amount of negativity in those surveys, and people just kept right on buying, and the economy just kept chugging along. And the recession that lots of economists expected never materialized.
It turns out what consumers say doesn't always correspond to what they do. So why do we keep looking to what they say as if it were a magic eight ball? Official data is kind of backward looking. And surveys like this on the mood and expectations of consumers, in theory, can provide some advance notice of people's spending plans. And consumer spending, of course, is hugely important for the economy.
Ted Rossman at Bankrate says how consumers feel used to give us a better sense of where the economy was headed. That really hasn't been true the last five years or so. I mean, really, ever since the onset of the pandemic, consumer sentiment has been much gloomier than actual economic data. And that seems to be the case right now. The fear is that tariffs are going to be the straw that broke the camel's back.
But Justin Wolfers at the University of Michigan says it's too soon to tell if this latest consumer expectations data is foreshadowing an actual downturn in the economy this time. Because so far we only have hard data for the period before Liberation Day. If you want to see the effect of the Trump tariffs on the economy, you have to collect data from after the Trump tariffs. And he says we don't have much of that yet. I'm Samantha Fields for Marketplace.
Another factor weighing on some consumer expectations right now is debt repayment. This week, after a five-year pause started during the pandemic, the federal government is back to collecting on student loans that are in default.
Catherine Ann Edwards, a labor economist, posed this question in a column for Bloomberg. Why is it that the federal government is cracking down so hard on student loan borrowers, but less so on those who cheat on their taxes? Catherine, welcome to the program. Thank you so much for having me. So what is the current administration's approach to tax enforcement and how would you compare it to how it treats student loan debt?
Every year, the IRS has calculated how much they think is owed in taxes that is not paid due to underreporting, whether that's a mistake or intentional, and it's called the tax gap. And they know that the more money they have for audits, especially of the highest income households, the more of the tax gap that they can claw back.
That funding that was increased after a 10-year stagnation in IRS funding during the Biden administration has been kind of piece by piece clawed back in the Trump administration and by Republican members of Congress to essentially limit the amount of funding for the IRS and collect less in taxes. But it's taking a very different approach with student loan debt. Talk about that.
Yes. Five years ago, when the pandemic took hold, student loans were put into forbearance, meaning that you didn't have to pay them and you would not be penalized for it. And after five years, the Trump administration has restarted debt collection. So if you are more than a half a year behind on your student loan payment, you're going to have to pay for it.
of which there are currently 5 million borrowers who meet that, their loans are being sent into debt collection. Now, these are obviously really different pools of money, student loan debt versus uncollected taxes. But why do you think the administration is treating the collection so differently? There's no fiscal or economic justification for coming down harder on student loan borrowers in default than on tax cheats.
To start, the money doesn't even come close to comparing. The tax gap is $600 billion every year. And of course, the risk to not collecting taxes that are owed is that you're teaching people who don't pay them that they can get away with it. The economic risk is that you'll accelerate the erosion of fairness in the tax system and you'll accelerate the federal government's bottom line further going into deficit.
On the student loan side, the entire student loan portfolio is $1.6 trillion, of which potentially $400 billion is in collection. But that's $400 billion spread over 10- and 20-year loans. So the dollar amount, it's not close to what is being risked. And then, of course, on the economic risk is that you're teaching student lenders and potential college students that if college doesn't work out for you, you will dearly pay for it.
Do you think this is just a difference of philosophy in terms of, you know, students are borrowing money from the federal government to go to college, but many people view taxes as their money that's being taken by the government? If it's a philosophy, it's a convenient one.
I mean, some would say you have to pay back what you owe, and it should be as simple as that, but even that is not fairly applied. So it seems like it's more of a convenient moral gymnastics to say that people who cheat the federal government should be given a lighter touch than people who borrowed from it to make an investment that the economy and the government views as a very important one.
As these collections resume, what do you expect the impact to be on students who owe money, some of whom never even graduated from college?
Debt collection is a very harsh hit to your personal finances, right? It's going to reduce your income through the garnishment of your income and your wages if you have a job or if you have public benefits. And it will send your credit score spiraling downward, making everything harder to borrow and more expensive to borrow. So it hits the bottom line of someone in default in multiple ways.
This debt collection is entering at a really dicey moment for the idea of going to college because so many people have found, you know, you don't get the wage gains to make the debt worth it. So right as college has become a more risky endeavor, we've basically made it a punitive one for people for whom it doesn't work out. Catherine Ann Edwards wrote about the unequal treatment of different kinds of unpaid federal money for Bloomberg. Thank you so much. Thank you for having me.
Coming up... There's a car that we carry that has increased $80 over the last month. Tariffs at a toy shop. But first, let's do the numbers. ♪
The Dow Jones Industrial Average lifted 254.6% to close at 41,368. The Nasdaq increased 189 points, 1.1% to finish at 17,928. The S&P 500 added 32 points, 0.6% to end at 5,663.
Bitcoin was trading above $100,000 for the first time since February. Traders seem to like the deal announced between the U.S. and the U.K. that President Donald Trump announced today. Worth noting, in Europe, Britain's FTSE slipped 0.3%. U.S. bonds fell. The yield on the 10-year T-note rose to 4.38%. You're listening to Marketplace.
At Comcast, our commitment to the military community goes back to our founder, U.S. Navy veteran Ralph Roberts.
Today, we honor his legacy by partnering with organizations to help veterans, transitioning service members, and military spouses succeed in today's digital world. Delivering the internet connection, skills, and support they need to advance economic mobility and open doors to new opportunities. Visit ComcastCorporation.com slash military to learn more. Comcast, proudly supporting our military community because your service matters.
This Marketplace podcast is supported by HIMSS. HIMSS is changing men's health care by providing you with access to affordable sexual health treatments from the comfort of your couch, with access to a range of doctor-trusted ED treatments like chewable tablets, Viagra and Cialis, and their generics for up to 95% less.
The process is all online, so no uncomfortable doctor's visits. Just fill out an intake form on HIMSS.com and a medical provider will determine the right treatment option. If prescribed, your medication ships directly to you for free. No insurance needed and one low price covers everything from treatments to ongoing care. Start your free online visit today at HIMSS.com slash marketplace. That's H-I-M-S dot com slash marketplace for your personalized ED treatment options.
Hymns.com slash marketplace. The featured products include compounded products which are not approved nor verified for safety, effectiveness, or quality by the FDA. Prescription required. See website for details, restrictions, and important safety information. Price varies based on product and subscription plan.
High Five Casino is the top sweepstakes casino that's free to play. Sign up today to receive a free welcome bonus and exclusive first purchase offers. Choose the premium jackpot package for $29.99 and claim up to 700 game coins, 55 sweeps coins, one sweeps coin daily bonus for five days, and 400 diamonds. Your high five moment awaits at highfivecasino.com. No purchase necessary. Boardware prohibited by law. Must be 21 years or older. Terms and conditions apply.
This is Marketplace. I'm Amy Scott. Okay, here's a story that isn't about tariffs. Or is it? We learned today that labor productivity in the U.S. dropped in the first quarter of this year. That's according to new data from the Bureau of Labor Statistics. Productivity is a measure of how many goods and services the average worker produces per hour.
And it's important, economists tell us, because when workers are more productive, that often means they get paid more. Daniel Ackerman looked into what's behind the recent drop. And yes, I gave you a hint.
productivity had been on something of a hot streak. For years, workers had been producing more and more, until now. The rate overall kind of fell by 0.8%, and that, in terms of magnitude, was the largest since 2022. Celeste Carruthers is an economist at the University of Tennessee, and she says a single drop is no reason to panic. Quarter to quarter, the labor productivity measure can be fairly volatile.
Productivity comes from a simple ratio, GDP divided by the total hours worked. And there's a reason it fell last quarter, says Gerald Cohen, an economist at the University of North Carolina. So that's really the result of the kind of funky nature of the GDP number that was released last week. Funky because GDP fell last quarter, thanks to a jump in the trade deficit. People front-loading before the tariffs.
So Cohen says that funky GDP number explains this funky productivity number, and it could all be just a one-off drop.
Gary Schlossberg is with the Wells Fargo Investment Institute, and he says productivity could go right back up. We should start to pick up some of the benefits of artificial intelligence, digitalization. But government policy is a wild card, says Pavlina Chernova, an economics professor at Bard College. Of course, we're talking about tariffs and direct government investments, something the Trump administration is trying to reduce.
They're contractors that are relying on government spending, and they will see a decline in output if those dry up. And if lower output leads to lower productivity, Chernova says that would be bad news for worker wages. I'm Daniel Ackerman for Marketplace.
The past few years have been a rough time to be in the shipping business here in Baltimore. In March of 2024, the cargo ship Dali struck a pier of the Francis Scott Key Bridge. The collapse of that bridge forced the port of Baltimore to partially shut down for 11 weeks. Then there was that dock worker strike last fall.
In spite of all that, the port handled roughly 46 million tons of cargo in 2024, its second best year to date. Now the port economy is dealing with a new obstacle, though. So we called Sue Monaghan, president of Baltimore International Warehouse and Transportation, Inc., to see how she's doing. Hi, Sue. Hi. How are you? I'm doing pretty well. How is business?
Our business right now is good. It has been. For the last little bit, it has been pretty good. You know, it's amazing that in the year after the Key Bridge collapsed and the port temporarily shut down, I'm reading that 2024 ended up the second best year for the port ever in terms of volume. How is that possible? Oh, yeah.
Well, I think what happened was most of the cargo came back to Baltimore, and there were also additional steamship lines that started calling the port of Baltimore. And Baltimore is also one of the biggest ports for, you know, cars and specialty equipment, what they call roll-on, roll-off cargo. So I think there was, you know, just expansion in Baltimore. Yeah.
And how much of this do you think has been the sort of sudden increase in imports that we've seen in preparation for the tariffs? That happened at the beginning of the year. There was a lot of cargo that came in before the new administration. And so we were extremely busy at the beginning of the year. Yeah. So what are you seeing in your warehouses? What are shelves like right now?
We have warehouse space available, but we're still carrying on the same kind of cargo, the same customers. I imagine that some of that will stop when the Chinese vessels don't call anymore.
But we try to diversify and handle different cargo for different people. So we're always looking for other avenues other than not everything tied to the Port of Baltimore, although most of our business is tied to the port. So I remember when I visited you maybe a year or so ago, there was a lot of food that you brought in. Can you talk about where those products are coming from and how tariffs might affect them?
Usually the food comes in because people are going to eat. But anything coming from China will be affected by the tariffs. A lot of people are trying to hold off, hoping that that changes. There's also a tremendous push for bonded storage space in which the cargo actually comes into the port, can be put in our warehouse.
And then the duty paid at a later date. So we're getting a lot of push for that from customers because they're thinking we're going to bring the cargo in and then we're just going to hold it and hope that the tariffs will go down. And if the tariff doesn't come down, they just ultimately end up paying it? They would have to ultimately end up paying it.
Well, right. And there's been so much back and forth, up and down. I mean, what is it like to be managing a business that relies on imports at a time when tariff policy is so changeable? For our business, it has been like that because we don't own what we store. We store products for other people. So if, let's say, this customer isn't doing the same business, then we go out and we look for business to replace it.
So in the last, what, five years, you've had a global pandemic, you've had the bridge collapse that closed your port. Now this, are you saying it's just kind of business as usual? I don't think that it is business as usual, but it's business. It's just the way that it's operating right now. So we go along with it. We try to go along with the flow and see where our strengths are and
you know, develop additional business. All right. Sue Monahan is president of Baltimore International Warehouse and Transportation out in Baltimore. Thanks so much. Absolutely.
Staying in Baltimore, because why not? Somewhere else tariffs might be starting to take a bite is the city's sporting goods, musical instruments and bookstores. You know, places that sell the things we don't have to spend money on. We just want to. We asked Marketplace's Stephanie Hughes to check in with a few hobby stores about how that's playing out.
Richard Whitfield has been mulling over a name for his 30-pound remote control car. I think I'm going to call it Betty. That's what I've been thinking about. Yeah. Whitfield bought Betty here at Remote Control Hobbies just north of Baltimore. He drives the truck for a living, and in his spare time, he still likes to drive by remote control. Every day after work, go straight home, come right outside, boil it right out. What do you do with it? Bash it. Whitfield.
Whitfield spent about $1,000 buying Betty and has spent about $500 in the past year repairing her. He says even with some prices in the store going up as a result of tariffs... About a quarter of the store's revenue comes from repairs...
That doesn't sound good. But the rest comes from sales, and store owner Michael McIntyre says he's dealing with price hikes from his vendors as a result of tariffs. He says while a lot of the cars are designed in the U.S., pretty much all of them are made in China. There's a car that we carry that has increased $80 over the last month.
McIntyre has had to mark up his prices accordingly. But he says no one's brought it up. And he thinks his customers, who he affectionately calls RC guys, are still going to be willing to buy. It's an addiction when it comes down to it. I mean, and it is a rabbit hole, a deep, dark one. About 10 miles south, at Tochterman's Fishing Tackle, customers stop to pet the dog, Hunter. All right, buddy.
Tony Tochterman, who owns the nearly 110-year-old store with his wife Deanna, is trying to anticipate how his costs are going to change. Nobody has any idea what the hell's going on. About three-quarters of the store's products are imported, and Tochterman says they are dealing with price increases from tariffs. One fishing reel that used to sell for $530 now costs $620.
The thing that's funny about it, when we bring it up to the people about the tariff and sorry for the increase, people are more happy with getting the product than they're worried about the price. Toderman says he thinks people are cutting back on things like eating out, but prioritizing their hobbies. People are looking for an escape, and fishing is a perfect escape. So we're not seeing sacrifices in this industry yet.
But down the street at Canton Games, the owner, Daniel Hoffman, who goes by Legend Dan, is worried about the store's future. These tariffs have an extremely real chance of shutting down not just my store, but my entire industry. If you look around the store, absolutely everything you see is printed in China.
Canton Games specializes in niche board games. If you're the kind of person who thinks Settlers of Catan doesn't have enough rules, Legend and Ants got you. But those games, they aren't cheap. A lot of the games I sell are $150. And scaling that up, it becomes unobtainable. Yeah, and it's just, it's miserable.
Hoffman is also worried he'll have fewer new games to sell, period. He says lots of game publishers are holding off on creating new products until they have a better sense of what's going on tariff-wise. In the short term, he's planning to buy more collections of used board and video games so he won't have to deal with tariffs. And for any new items, he's raising prices and he's telling people why.
What I'm forced to do is put a little sticker on a lot of my products saying, tariff fee, X dollars. He's also trying to keep costs down. He'd been planning to bring on another person, had even been doing interviews. But now that's all on hold. If Sarah's listening to this, I'm sorry. That's why we haven't called you yet. There's one thing that gives Hoffman hope. He says, buy a board game today. It'll entertain you for years to come.
This is a kind of theme among everyone who's passionate about their hobby. They think of money spent as an investment in future enjoyment. In Baltimore, I'm Stephanie Hughes for Marketplace.
This final note on the way out today, a little economic context on the name of the new pope, Leo XIV, Jubilee USA, an interfaith group that advocates for economic reforms to end poverty, pointed out that Leo XIII, the previous Pope Leo, was the author of the 1891 encyclical Rerum Novarum, which, quote,
became the church's primary teaching on the rights of workers and those who struggle for a better life and to live in dignity. John Gordon, Noya Carr, Amanda Peacher, and Stephanie Seek are the Marketplace Editing staff. Amir Bubawi is the Managing Editor. And I'm Amy Scott. Hope to see you again tomorrow. This is APM.
This Old House has been America's most trusted source for all things DIY and home improvement for decades. And now we're on the radio and on demand. I think you're breaking into this wall regardless. I was hoping you wouldn't say that. I need to go and get some whiskey, I think. I would get the whiskey for sure. Subscribe to This Old House Radio Hour from LAist Studios, wherever you get your podcasts.