Some trade deficit whiplash
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I'm David Brancaccio in Los Angeles. First, there's news the difference between what America imports and what it exports shrank by the most ever recorded in a single month. Goods and services imports way, way down. But to understand what really happened in April, you have to appreciate what happened the month before, given changing trade policy. Diane Swonk is chief economist at the audit tax and advisory firm KPMG.

It's a bit of whiplash here. We saw 55.5% narrowing of the trade deficit in April. That is simply stunning. And it follows the largest widening of the trade deficit in the first quarter on record. Now, a big part of that narrowing was a reduction in imports from Ireland.

of all places? Well, guess what we get from Ireland? Pharmaceuticals. And in fact, we saw a lot of front running of tariffs. Pharmaceuticals are actually on the list of things to be tariffed even separately, in addition to the country 10% tariffs that we see out there. And there was a lot of front running in the first quarter. So we didn't see as many in April. And what's this with Switzerland? We actually imported a lot more something here. I mean, it's not cuckoo clocks.

It's gold bullion. We imported a ton of gold bullion in the first quarter from Switzerland. And so now that we got it here, we don't need to import it again. Now, tomorrow will be the big employment report and the big hiring report. We didn't see the new tariffs reflected much in the employment reports from the earlier month. You think we'll start seeing it tomorrow?

We could see a very minor imprint from the New Terras on manufacturing activities. Some manufacturers actually had to idle production because some parts didn't make it in already due to disruptions from trade. And the manufacturing sector, certainly the National Association for Manufacturers, their optimism index absolutely plummeted.

in May. And that was before we saw the steel tariffs. We know from 2018, 2019, the steel tariffs of only 25 percent, and this is now at 50 percent. On top of that, those steel tariffs actually created 1,000 jobs in the steel industry at the expense of 75,000 in manufacturing because of higher input costs. Diane Swonk, Chief Economist, KPMG. Thank you for the briefing. Thank you.

Maybe the clip art for economic output might be a factory with a smokestack, but the service sector is also a huge part of what we do. And there is news service sector activity has fallen for the first time in about a year. The May data is from a survey conducted by the Institute for Supply Management. It found a lot of business people focused on tariffs. Marketplace's Henry Epp has that.

Higher import taxes are trickling into the service sector because even if they're not selling goods, service companies have to buy goods to operate. And a lot of those goods were subject to new tariffs last month. Take a new restaurant, for example, says Shannon Grein, an economist at Wells Fargo. You need the lighting and you need the chairs and you need the tables and you need all the things that set that operation up.

Companies in food service to retail to finance and insurance all reported paying more for the stuff they needed in May, according to the ISM. But what's not clear yet, Grind says. How sustained or sticky is this price pressure? It'll take a few months to find out.

What this report does show is businesses across the economy have been trying to prepare for the impact of tariffs. Many stocked up in April, but as they work through that inventory, they'll have to restock at higher prices, says Betsy Stevenson at the University of Michigan. So now, she says, The things companies have done to try to brace for the storm, it's starting to not be enough.

And soon, she says, consumers will start to feel more of a pinch from tariffs as the summer goes on. I'm Henry Epp for Marketplace. Stock markets now open and the Dow is down 114 points, three-tenths of a percent. The S&P and the Nasdaq are both down two-tenths percent. The European Central Bank was able to cut interest rates by one-quarter of a percentage point this morning, with inflation there dwindling. ♪

A court decision before the last presidential election allowed companies to take bets on who would win. You can also buy predictive contracts for all sorts of things, from your view on what the Federal Reserve would do on interest rates to who will win the Oscar for, say, best picture. But some states see this as gambling and want to treat predictive contracts as such. WYPR's Scott Massione reports.

Predictive contracts let people with a hunch try to cash in on that hunch for guesses about all kinds of things. Who might be the next Nobel Peace Prize winner or how many tornadoes will hit the U.S. this month? The options are taking trading apps by storm. CalShe, the predictive market company, now pairs with online brokerage platform Robinhood to offer the options. Sarah Slain's the head of corporate development for CalShe. We do think that this is going to be one of the largest financial instruments that's out there.

Trade prices fluctuate on demand, but the payout is always $1 per contract. So traders could buy 10 contracts predicting which team will win the NBA final. And if they're right, they get 10 bucks. If they're wrong, they get nothing. According to Slane, Kalshi processed more than a billion dollars in prediction trades this year for just two events, the Super Bowl and March Madness. It's capitalizing on predictions that traders have already been making for years.

Like GDP growth rates, inflation levels, unemployment, weather derivatives. Johnny El-Hashim is a partner at Holland & Knight who specializes in gaming regulation. But what is happening now is that we're, I could say we're like at a crossroads where financial innovation and public regulation are colliding in a way.

They're colliding because six states now say the contracts are essentially bets and are not properly regulated or taxed. They've issued cease and desist letters to Kalshi and Robinhood. It's a classic battle of state versus federal jurisdiction. At the end of the day, this is a federalism fight. Andrew Kim's a partner specializing in gambling at the law firm Goodwin. Congress left it unclear as to what kind of role that the state regulators should play in this space.

As of now, the states seem to be losing. The Federal Commodity Futures Trading Commission gave Calchi approval for trades last year, and state attempts to challenge that in court have so far failed. I'm Scott Mascione for Marketplace.

Question, can you spot super realistic deep fake videos online? Now you can take a test developed by Northwestern University to see how well you do at spotting them. At our sibling program, Marketplace Tech, our Nova Sappho took the test, sifting through a bunch of real and fake images. He got five out of six right, which makes him average. Give Nova a C. Here's researcher Matt Groh, who helped develop this litmus test, a series of things to look for to spot deep fakes.

The taxonomy here is anatomical implausibilities, like way too long neck, you know, six fingers kind of thing. Stylistic artifacts. This is when it's too waxy or too shiny. Or functional implausibilities. That's like where the guitar strings or the tennis racket strings are not taught like you'd expect them to be. Or any other kind of thing around that. Violations of physics. Or

where the shadow doesn't match up with the other shadows in the scene and what you expect the source of light to be. And then sociocultural implausibilities, where it just doesn't make sense with whatever the social or cultural or historic context might be. Anatomical implausibilities. You can hear more of this discussion and get tips on how to spot deep fakes. It's all at marketplace.org. A critical thinking test every time an image opens, right? Marketplace Morning Report from APM, American Public Media.

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