Marketplace - Import rush

Episode Date: November 7, 2024

If President-elect Donald Trump gets his way, importers are about to pay a ton more in tariffs. Some businesses are scrambling to bring as much stuff as possible into the country before his inauguration — and that’s not exactly easy. Also in this episode: Streaming platforms gain more international subscribers, hybrid workers Lyft to the office and the Fed cuts its key interest rate.

In case you were wondering... So let me say that in the near term the election will have no effects on our policy decisions. Happy Fed Day everybody. From American Public Media, this is Market Plans. In Los Angeles, I'm Kyle Rizdall. It is Thursday today, the seventh day of November. Good as always to have you along, everybody. Question number one for Fed Chair Jay Powell at his post-meeting press conference today right out the gate was about the election. The short answer you heard up in the open, the slightly longer answer

goes like this. Now, just in principle, it's possible that any administration's policies or policies put in place by Congress could have economic effects over time that would matter for our pursuit of our dual mandate goals. The dual mandate, of course, just as a refresher, stable prices and maximum employment. As to the economic details, an as expected quarter percentage point cut in the federal funds rate because, as Powell did all but tick off on his fingers, the economic activity data have been stronger than expected. Item number one, the NIPA revision was stronger.

Certainly the September employment report was stronger. Item number two. The October report, not stronger. Item three. Retail sales stronger. Which gets us to. So I think really the question is December. You know where this is going, right?

Longtime listeners will recognize the central bank's standby. By December we'll have more data. I guess one more employment report, two more inflation reports and lots of other data and you know we'll make a decision as we get to December. Data, data, more data. The next Fed meeting, 17-18 December, we'll meet you there. Wall Street today, tech moved, not too much else. We'll have the details when we do the numbers. Businesses across this economy are starting to think about what a change in the White

House is going to mean for them. So we called one of our regulars, Austin Golding, to talk things over. He's the president and CEO of the family business, Golding Barge Line in Vicksburg, Mississippi. Austin, good to talk to you again. Good to talk to you, Kyle. So as you know, the standard question when we chat is how's business? I'm going to amend that and ask you how you expect business to be in the next six months to a year.

Okay, thanks for having me. And we've had a really good year so far. I think we've got a correction back to pre-COVID levels. And I can see business not accelerating as fast as it has into this correction, but I think we'll be within a two to three percent growth rate over the next six to 12 months. And do you expect the change politics of this economy to help you out? I do. I think the energy I can feel within the energy sector ispable. I think a lot of people see the future being a lot less headwinds. But I can tell you, Kai, the understanding that I get about sustainability and where

we have to go, I have to say it's not lost within our customer base. I think the emphasis on sustainability and knowing that a world where we evolve with a changing climate as opposed to bring everything to a halt because of it. I think people would much rather evolve through that process. So the path to sustainability is alive and well, but I do think there'll be less headwinds towards energy production and energy transport. And we should point out here, just for those who aren't familiar, you carry a lot of oil and gas, petroleum products on those barges, right? That's primarily what we carry. And I will tell you, just through my short career, we have, our propulsion engines have

gone from a tier one to a tier four, which for the average listener out there means a much cleaner emission out of the engine and a much more efficient engine. So in moving these carbon products, even the you know, even the people moving them are, you know, we're very aware that sustainability is a near and dear part of our future, no matter what the political climate may suggest. Another thing that the president-elect has talked a lot about is tariffs. I'd be remiss if I didn't ask you about that and what that might mean for you. Sure. You know, the oil and gas world, you know, I don't know, you know. I don't really look at these companies as American companies. I look at them as global entities. And so I don't know if it's the

source material coming in and out, or if it's where the finished product can go, or how much we have to charge the tax on where it goes. I mean, we make a lot of the world's energy here and then ship it there. We have the best and most, I would say, efficient and environmentally friendly oil and gas kitchen, if you will, within the Gulf Coast of the United States. So I don't know. I hope that the global economy continues to rely on the United States and we can play ball with everybody out there because we are certainly part of that supply chain. Yeah. So the unspoken thing here is retaliatory tariffs, right?

Sure, yeah, absolutely. I will say, like I mentioned, these oil and gas companies are very international. So I watched them navigate the different political climates in my career. And I know this one may present more challenges. But they are a global entity. They are not patriotic in many senses.

You said a minute ago in your short career, and I don't know how long we've been talking. It's gotta be probably five, seven years at least. So you've been doing this a while. What's the one thing that's on your mind as this economy evolves with the president-elect and what that's on your mind as this economy evolves with the president-elect and what that's gonna mean? Sure, I think it's the working environment that I've had,

my career's coming up on 20 years in the industry, Kai. Wow, you're like barely 40, man, come on, right? Well, look, in the family business, you start early. But I will say, we're looking for stability. We're looking for growth. We're looking for, I think, a world that is competitive and not mandated. In my world, I think things like EV mandates, they don't just create a bottleneck at the car production level, but people stop investing in everything that supports oil and gas when that happens. And when that happens, it chokes everything down to where it's overpriced

and under invested in. And so, you know, I think we need to, you know, we're looking for a world that makes us evolve through competition, not through mandate. So I think, I think that's where my focus is. Austin Golding running that family business. Well, he's been in it for 20 years. I don't know. You've been running it for 20 years now? Oh no, no, no, no. I'd earn that step, but no, 20 years, yeah. Been a good journey. Wow.

Vicksburg, Mississippi is where they are, Austin Golding or Golding Bargelines. Austin, thanks a lot. Talk to you soon. Hey, talk to you. Thank you, guy. Economic life marches on this second day after the general election. Millions of Americans woke up, poured themselves a cup of coffee or a cup of tea if you like, and if remote work wasn't really an option, set off on that bleary-eyed commute to the office. Millions of Americans will do the same thing tomorrow and all the days after. And it turns out a lot of those trips to the office now

are happening via rideshare. Lyft said this week nearly half of the company's weekday rides are commuters. That's a bigger share than it was back in 2019. Marketplace's Matt Levin explains the growing appeal of the ride share commute. The idea of paying for an Uber or Lyft every day to schlep you to and from work sounds prohibitively expensive, but maybe just two or three schleps a week? Because people work hybrid, work from home some of the days of the week, that changes the economics. Jeremy Mahalik is a professor at Carnegie Mellon who studies urban transportation.

He says remote work has allowed commuters to reconsider the expense of owning a car versus relying more on rideshare, which sounds like great news for carbon emissions. But if you live in San Francisco or New York, you probably weren't driving into the office anyway. Jason Tannes, UBS Director, UBS Cities that have higher wealth and fewer children are the ones where people seem to shift away from public transit and take an Uber instead. Nat. Srinivas, UBS Director, UBS

Lyft is capitalized on the rideshare commute trend, offering a popular subscription option that caps the price of repeat routes at the same time a day. Liv's Jason Tan says most rideshare commuters are still generally heading into the office around 9 and home around 5. But since hybrid work also means days in the office are often more intentionally social, team dinners, happy hours, that type of thing, rideshare gives you options. Maybe you want flexibility in the evening so that you can go out and be with your coworkers

for a little bit. Rideshare drivers hope those happy hours extend late into the night. LA Lyft and Uber driver Sergio Ovidian, who writes for the website The Rideshare Guy, says serving the 1 a.m. exiting the bar crowd is generally more lucrative than commutes. Not everybody is willing to take that risk and drive at those hours. But the supply is not there and demand is a lot stronger. That's when surges show up. But he says even if the tips are lighter and the traffic is heavier for commuting trips, there are other perks. I prefer

morning. Morning and afternoon rush hours, people are awake. And thus less likely to make a mess in the back seat. I'm Matt Levin for Marketplace. It was quite a day for ticker symbol WBD. Should that one escape you, it's Warner Brothers' discovery, which has been, shall we say, troubled of late. But some salvation is coming from its streaming service, Max. It added 7.2 million new subscribers in the third quarter, the biggest quarterly increase

since it launched back in 2020 when it was still called HBO, Max, if you remember those days. Other streamers, Netflix and Peacock among them, have been seeing increases in subscribers as well. Marketplace's Stephanie Hughes has more on that. Most of Max's new subscribers are located outside of the US and Canada. And one reason they're subscribing now is they couldn't before. Until the beginning of this year, Max was a US only service basically.

Seth Schaefer is a principal analyst at S&P Global. He says another driver, at least for viewers in Europe. If you wanted to stream kind of Olympics coverage, Max was the place to go to. It wasn't just super athletes bringing people in, but super villains too. David Arditti, author of the book Streaming Culture, points to the success of the Max show, The Penguin. You've got Batman fans.

You create the Penguin that's going to drive a particular population to the subscription platform. International subscribers don't pay as much on average for Max as viewers in the US. Charles Schrager, who teaches marketing at NYU and Fordham and used to be an HBO executive, points out that in the third quarter, Max took in about $12 a month on average from domestic users. Internationally, it was about four. If you're selling a streaming service in a country that has less wealth,

you offer it at a much more modest price because that's what the economy will absorb. Across the industry, companies are using different tactics to add more subscribers, says Seth Schaeffer at S&P Global. Netflix has grown by launching a less expensive tier that has ads. Also, it's cracked down on password sharing. And he says that's a way other streaming services could up their subscriber numbers too. You know, we all have a service or two that we're borrowing a password to access these days still.

Like, I won't mention the one that I'm borrowing at the moment, but it's just really common. Schaeffer also says Netflix and Amazon are investing heavily in local language programming, which is expensive, but a way to keep people around once they're done watching standard Hollywood fare. I'm Stephanie Hughes from Art of Place. ["The Daily Show"]

But wait, what's the common password? Okay, coming up. Likely the riskiest and most complex transaction a company might ever do. Mergers and acquisitions, gang. But first, sure, why not? Let's do the numbers. Down Dustro's down less than a point today. We'll call that flat because it is 43,729. NASDAQ increased 285 points, one and a half percent, 19,269. The S&P 500 up 44 points, three quarters percent, 59.73.

Matt Levin was talking about the growth of the ride share commute, Uber slowed one and 1.7 percent today. Lyft, which just reported more than a billion and a half dollars in third quarter revenue and beat estimates to boot, surged 22.9 percent. According to Nasdaq's earnings calendar, there are literally hundreds of companies reporting today. Airbnb ascended 4.6 percent. Vaccine maker Moderna subtracted 2.9 percent. The betting giant Draftkings added 1.9%.

Today WBD, which I mentioned up in Stephanie Hughes' piece, up 11.8%. Today BondsUp yielded on the 10-year T-note 4.32%. You're listening to Marketplace. What do they say? More money, more problems, and way more questions from your kids, right? But not to worry. Million Bazillion, a podcast from Marketplace, has you covered. I'm Bridget Bodner and with my co-host, Ryan Perez, we take you and your young ones on grand adventures and comedic sing-alongs to answer all the questions your little ones have about money. Join us as we explain how banks work, why name brands are more expensive, and what happened to Black Friday sales. Listen to Million Bazillion wherever you get your podcasts.

This is Marketplace. I'm Kyle Rizdal. You know how on days Jay Powell has a press conference, we only play you short-ish snippets of what he said, because, I mean, monetary policy, right? We are actually going to play you a good long chunk of power right now, because it's a pretty interesting example of how the Fed goes about deciding what it's going to do. He was asked this morning about bond yields, which, as we have been telling you, have been going up. And he was asked whether he's worried about those yields going even higher with the higher deficits that Congress and the Trump administration might run.

So we know common fiscal policy. And again, I don't have a lot more to say on on what's driving bond yields in terms of of policy changes, though. Let me give you a sense of how this works in the ordinary case. Let's say Congress is considering a rewrite of the tax laws. Doesn't matter what's in the content. So we would follow that. At a certain point, we'd think we see the outline, so we'd start to model it.

And then we'd wait and we'd wait, and at a certain point the staff would brief the FOMC and say, you know, these are the likely effects. There's lots and lots of literature on the effects of tax policy changes on various parts of the economy. So we'd try to get smart on that. And then the law actually passes.

And you'd start to put it, you'd probably run an alternative simulation before that happens, just to keep people trying to understand it. Then when it actually passes, it goes into the model, along with a million other things. So we have a very large economy. Many things are affecting it at any given time. And a law change of some kind would go in there,

but it would go in. But it's a process that takes some time. Clearly, the legislative process takes a lot of time. And of course, the real question is not the effect of that law. It's all of the policy changes that are happening. What's the net effect? And the overall effect on the economy at any given time.

So I think that's a process that takes a lot of time and that we go through all the time with every administration constantly. And this will be no different. But right now, there's nothing to model right now. administration constantly. And I just, this will be no different. But, you know, right now we're, there's nothing to, there's nothing to model right now. We're, it's such an early stage. We, we don't know what the policies are. And once we know what they are, we won't, we won't have a sense of, you know, when they'll be implemented or, or all those sorts of things.

So I think I would just say we're not doing that now. And all that will take time, and it will be very much regular order when we do do that. That was a lot. I know, a little bit nerdy too, but it is a pretty good insight into how the gears of this economy, there is still is a certain degree of what if that has to be factored in. For us today, the what if of his plans for new tariffs, which to remind, are for import taxes of up to 20% on all imported goods, 60%, 60% on everything coming from China. Again, and for the umpteenth time, if that does happen,

businesses would pass most, if not all of those costs of those tariffs, onto consumers. But businesses don't want to do that, right? Raising prices does not endear a company to its customers. And there is still some time between now and whenever those tariffs are going to be put into place. So what if, to beat the clock, those businesses just start ordering ahead? Marketplaces' Kristin Schwab is back on the tariff beat today with the rush to import. Grant Hennegan, who owns a small chain of outdoor furniture stores in North and South Carolina, is hoping to double his imports from China as soon as possible. We've been talking to our vendors in the last couple of days, trying to understand

what their capacity is and what availability will be. It's not looking so hot. Suppliers have already received extra orders ahead of the Lunar New Year in January when factories shut down for weeks. Plus, lots of U.S. businesses are rushing to ramp up production too. Meanwhile, the inauguration is less than three months away. The tariff is going to affect you at the time of customs clearance, which may be four to five months from the time you've placed your order. So I think time is against us if we wanted to get more product in the first quarter of next year.

It's unclear when or even if tariffs are coming. But Brian Burke, CCO at Seco Logistics, says businesses are preparing the way they did when the Trump administration imposed tariffs in 2018. Never once has a country paid those. The importers pay those. And the importers will look to mitigate against rising costs in any way that they can. Even if it's a gamble. Burke says shipping and storage rates will rise with demand. And it means spending money on stuff that might sit for a while or not sell at all. The whole point of pulling inventory forward is to beat the clock when it comes to tariffs,

but then you don't necessarily have a customer quite yet. Trends come and go, so do seasons and seasonal goods. Some items even become obsolete. Willie Shi is a professor of management practice at Harvard. You don't want to have six months or a year's worth of inventory of notebook computers, okay, and when it becomes excess when the newer models come out and you don't want the old stuff. It means some companies can't stock up. I'm Kristin Schwab for Marketplace. place. Let's pretend for a second that you're the CEO of a big corporation and you want to make

a bet on the future of your company. If you're optimistic, you might want to expand by investing in new hiring or new machinery or new locations. And you might issue new bonds or stock to raise the money you're going to need to do all that expansion. That kind of thing has been booming this year because, in part, borrowing money is starting to get cheaper. But there is a different kind of corporate bet that a CEO could make.

You could merge with or acquire one of your competitors. That actually has not been happening very much. This year, in fact, on track to be the slowest for mergers and acquisitions in more than a decade. That is data from the research company, Dealogic. And as Marketplace's Justin Ho reports, that slowdown in M&A is kind of an economic indicator.

Companies buy one another for a variety of reasons. It could be to expand geographically, to sell more types of products, to cut costs. But whatever the reason, a merger or an acquisition can be extremely risky. And likely the riskiest and most complex transaction a company might ever do. That's Drew Pasquarella. He teaches finance at at Cornell University and he spent about 25 years advising companies on mergers and acquisitions. He says buying a company starts with spending millions upon millions of dollars. Then the buyer will have to combine two corporate cultures, convince employees, shareholders

and customers that the purchase is the right move and hope that nothing bad happens in the broader economy. You know, if you're doing a deal where the whole point is to sell much more product into the market over the next couple of years and then the economy goes into the tank and people aren't buying product at all, well, now you've doubled down on your ability to sell product and there's no market for those products. That's why Pascorella says mergers and acquisitions are the ultimate bets that a company can make on its future, on the success of the combined company,

and the economy at large. That means if there's a big pickup in the M&A activity? Executives and boards of directors, and ultimately shareholders, are feeling comfortable enough with what tomorrow will look like, that they're willing to take that big, risky bet. Over the last few years, companies have not been all that comfortable with what tomorrow

will look like, says Christina Soder, a law professor at Southern Methodist University. She says a big unknown has been inflation and how it could affect consumer spending. Also, where interest rates will end up, because they affect the initial cost of a merger and how much the combined company might need to invest after the deal closes. It's just hard to plan for financing of their continuing operations to keep the company running as usual. Soder says political uncertainty has been a factor too. The Biden administration has taken a hard line against deals that it says could reduce

competition. And up until this week, there was a lot of uncertainty around the election. That said, a lot of the economic uncertainty behind the M&A slowdown has started to clear up. Inflation is coming down, so are interest rates. And Afra Afsharipour, a law professor at UC Davis, says some companies have been laying the groundwork for deals.

And that might mean that the sellers are really kind of putting their books in order or putting their house in order in order to make themselves attractive to buyers. Afshar report says that's most likely to happen in sectors that have been growing quickly. Take the tech industry, for example. One of the things that buyers are really thinking about is evaluating kind of how AI might impact their business models and sort of a lot of investments and looking into potential purchases of companies that are much more focused on AI.

And if M&A starts to pick up, F. Sharipour says there's a lot of research showing that CEOs tend to get a little jealous when competitors start buying other companies. The executive sees that their competitor has just bought another big company and now the CEO is a CEO of a much larger company, then that person might think, well, I want to be the CEO of a much larger company. As a result, F. Sharipour says a series of deals in a particular industry can cause M&A activity to snowball as long as companies feel confident about the broader economy. I'm Justin Ho from Marketplace. This final note on the way out today, which I'll set up by noting that a week and a half ago we devoted the entire show to the political independence of the Federal Reserve should

the election turn out the way the election turned out. One key slice of that is could President Trump fire or otherwise force Chair Jay Powell out? Powell was asked about that today. Hi, Victoria Guido with Politico. Some of the president's elect's advisors have suggested that you should resign. If he asked you to leave, would you go? No. Can you follow up on, do you think that legally you're not required to leave? No.

We are, however, going to leave. John Buckley, John Gordon, Noir Card, Diantha Parker, Amanda Peacher, and Stephanie Sieck are the marketplace editing staff. Amir Bibawe is the managing editor. I'm Kai Rizdal. We will see you tomorrow, everybody. This is 8PM. What do they say? More money, more problems, and way more questions from your kids, right? But not to worry.

Million Bazillion, a podcast from Marketplace, has you covered. I'm Bridget Bodner, and with my co-host, Ryan Perez, we take you and your young ones on grand adventures and comedic sing-alongs to answer all the questions your little ones have about money. Join us as we explain how banks work, why name brands are more expensive, and what happened to Black Friday sales. Listen to Million Bazillion wherever you get your podcasts.