Marketplace - These sectors are bracing for price hikes

Episode Date: March 20, 2025

More tariffs are set to take effect April 2, and in most cases, American consumers and businesses will pay the tax. We’ll explain why some sectors expect prices to rise as soon as next month while others won’t feel a pinch until later in the year. Also in this episode: Tariffs could inflate the dollar’s strength while sapping demand for American exports, Gen Zers feel “trapped” by microtrends and Alaskan crude oil production is projected to jump in 2026.

For 36 years now, Marketplace has provided free accessible information about this economy with a sense of humor too. Right now, during our March fundraiser, donate $20 or more and pick up a tote bag featuring a classic Marketplace ad from 1989. Get a piece of our past while helping us plan for the future. Check out the tote bag and make your gift right now at marketplace.org slash donate and thanks. Just because you never can have enough tariff news, that's what's on the show today. OK, that's not true. You can have enough tariff news from American public media. This is Marketplace.

In Los Angeles, I'm Tom Rizal. It is Thursday. Today, this one is the 20th of March, good as it always is to have you along, everybody. President Trump's tariffs are affecting a lot of things in this economy, and we have talked about those things a lot the past couple of weeks. But what happens in the American economy most definitely does not stay in the American economy. There are retaliatory tariffs either already in place or coming soon. There are the hits to global growth that are almost certainly coming.

And there are what might be termed unintended, although perhaps unthought about, works as well, consequences. The president says taxing imports, because again, tariffs are taxes on American consumers. The president says that will boost domestic production. American consumers will then buy more Americanmade goods, and American manufacturers will then sell more to consumers overseas, which, fine, until one remembers what tariffs are gonna do to the value of the dollar. Marketplace's Justin Ho gets us going.

Here's the issue. If you want to buy goods from another country and import them, you typically have to buy them in that foreign country's currency. So if we want to buy some cheese from the Netherlands, we need some euros to buy the cheese with because that's what they sell it in. Ed Gresser at the Progressive Policy Institute says if the U.S. government slaps a tariff on that cheese, it becomes more expensive.

Consumers buy less of it. Grocery stores stock less, which means? The demand for euros has gone down relative to the dollar and lower demand for euros pushes down the currency's value relative to others. That would then lead to a stronger dollar. Catherine Dominguez is an economics professor at the University of Michigan. So far this year, the dollar's value has been ticking down. Dominguez says that's in large part because importers have been trying to bring in extra goods ahead of the president's tariffs. So we've actually been buying more imports, therefore needing more foreign currency, therefore

driving up the value of foreign currency relative to the dollar. But once new tariffs start taking a bite out of imports, the dollar's value is likely to strengthen again. And that will make American exports more expensive for foreign buyers. Meaning that now U.S. goods denominated in dollars would be less competitive relative to goods denominated in other currencies. That's when American companies are likely to turn their attention to selling more goods to domestic consumers, maybe even open up new factories and create new jobs. But there's a big trade off to keep in mind, says Oleg Itzhoky, an economics professor

at Harvard. Some jobs would be lost because it would be unprofitable to export because of the stronger value of the dollar. Meanwhile, other countries that follow the US's lead and slap tariffs on American goods will end up turning inwards too. The Canadian factories will turn to serve as the Canadian consumers instead of exporting to the United States, but U.S. will be able to export less goods all around the world because of the stronger dollar.

Itshokey says what we're talking about here is a less efficient global economy. Because we started in equilibrium when it was efficient to produce in Canada for the American market. You lose efficiency as a result. And that's the tax that the consumers are paying in the end of the day. A tax that causes prices to rise and economic growth to stall.

I'm Justin Ha for Marketplace. Wall Street on this Thursday, not a winner. Not bad, but not a winner. We'll have the details when we do the numbers. We got the latest data on existing home sales from the National Association of Realtors today, up 4.2% in February. That's month to month, which sounds pretty good until you hear that January's data was down 4.7% from December. Now, housing data can and does bounce around.

Weather, mortgage rates, just plain noise in the data. And right now, heading into the spring home buying season, the market does look slightly rosier than it did earlier this year. But housing markets can also vary, and vary a lot actually, depending on where you are looking. Marketplace's Mitchell Hartman has that one.

I've been doing a kind of round robin of calls to brokers and realtors across the country recently, and some of what I heard could have been copied and pasted from one place to another. We've had a shortage of inventory, so it's a good market for sellers, a difficult market for buyers. Less inventory, prices going up, buyers competing for properties. We're seeing a frenzy of activity, very limited inventory, and multiple offers. That's Mike Frank at Keller Williams in Chicago.

Debbie Caulfells with Coldwell Banker in Syracuse, and Israel Hill at John L. Scott in Portland, Oregon. Caulfells points out we're not seeing such low inventory everywhere. Real estate's always local. We always say that. Other parts of the country, Florida is an example, you know, condo markets, a lot of listings there for a variety of reasons, insurance and condo fees. Now, we just heard that Portland's a frenzy of housing activity. But Caulfield says in the Syracuse area, listings are slowing, down about 10 percent year to date.

Similar story in Charlotte, North Carolina, says Realtor Steve Scott. It's a little slow even with all the incentives that the builders are putting out. You know, it's slow. Meanwhile, Charlotte's got a wave of new buyers coming in. We have a lot of retirement people moving here from the north and some return from the south because they didn't like Florida. Making it hard for first-time buyers to compete. But head south to Texas.

I'm still seeing affordable houses, you know, 300,000 for my first-time home buyers. Molly Yarborough-Steele at Compass Real Estate in Houston says plenty of new starter homes are going up in the suburbs. She says the fiercest competition is for homes over a million dollars, where she's seeing... A lot of cash offers, which is so amazing to me that this many people have this much

cash. But with financial markets down sharply in recent weeks, some of that ready cash may start to dry up. I'm Mitchell Hartman for Marketplace. It's none of my business really, but were you productive today? Did you get all your work done in the expected amount of time or ideally less time? I ask because worker productivity, rising worker productivity to be clear,

is one of those key metrics that economists watch pretty closely. At its most basic, the formula is widgets produced per hour worked. And the more worker productivity there is, the more widgets that get made in the same amount of time, that's what leads to economic growth and not coincidentally rising wages. Productivity in the United States has been on the upswing, up 2.7% last year, well above

average. And historically, most of the big jumps in living standards, which is a proxy for productivity, have been driven by new technologies, the introduction of the steam engine, widespread electrification, computers too, of course. And a lot of economists are hoping that the boost in productivity we're seeing right now might be the start of another long surge driven by AI. Marketplace is Megan McCarty-Corino. Take a look at that. Two economists made a friendly bet a few years ago about how much productivity will grow this decade. Eric Brynjolfsson and Robert Gordon registered the

wager on the prediction website Long Bets and the stakes are $400. But I think it's more of a reputational bet. That's Brynjolfsson. He's a professor at Stanford where he directs the digital economy lab and he's bullish on productivity. His own research on customer service agents who started using an AI large language model showed their productivity improved as much as 34 percent. And other recent studies on software development, business consulting, writing, and sales showed similar results.

These are the biggest gains I've ever seen. I mean, to see like double digit gains just within a few months is almost unheard of. In the other corner, Robert Gordon, professor at Northwestern and author of The Rise and Fall of American Growth. It's not gonna be a revolution. It's not gonna blow out human nature.

I think that's all greatly overblown. He believes AI will raise productivity, but points to the last 20 years or so of modest gains despite high-tech innovations ranging from smartphones to the app economy. Those things really are minor compared to the difference it made to have trucks instead of horses, to have airplanes instead of trains. For now, Brynjolfsson has pulled to the lead, though it's not clear yet if the bump in productivity we're seeing is evidence of the start of a durable AI boom. Joseph Briggs is a senior economist for Goldman Sachs Global Investment Research. If we look at an economy-wide basis, the impacts still look quite negligible.

Goldman Sachs has forecast that once generative AI has been widely adopted, it could raise productivity in the US by 15% over 10 years. But Briggs thinks it will take a couple of years for AI to show up in productivity data. You need to restructure workflows, you have to have workers comfortable using it. And all of these things take time. Briggs says companies are making big investments in the technology, especially in industries like law. Annie Datish is the chief innovation officer for Silicon Valley law firm Wilson Suncini,

which works with a lot of tech startups. The firm developed an AI tool to help review agreements for cloud services. You'd be negotiating them a lot. It would be high volume, but a standard form, and suddenly automation and AI start to make sense. Wilson-Suncini uses AI, trained on its own best practices, to customize the agreements.

Then a human lawyer reviews and finalizes them. The tech should eventually help the firm serve more clients faster, but it's not quite there yet. Well think about when you hire a new person, right? They're always gonna kind of slow you down at first, but then they get trained up and then they can take over tasks. Right now the AI is still kind of green. And so you're still monitoring it and supervising it like it's that new person, which will theoretically slow you down. It's a pattern you often see when a powerful new technology diffuses through the economy,

says Stanford's Eric Brynjolfsson. At first, it looks like nothing is happening until suddenly productivity takes off in what he calls a J-shaped curve. With the steam engine, with electricity, with the internal combustion engine, when we measured that, it often took literally decades. It took about 30 years for electricity to really have its full payoff. He expects AI to deliver productivity benefits much faster, since it doesn't require specialized hardware or skills to use.

He's got until 2029 to win the bet. Whether a productivity boom from AI will be a win for most workers, that he's not so sure about. I'm Megan McCarty-Corino for Marketplace. There was a time when Alaska produced more crude oil than any other state in the Union. That time, though, was 1988, and in the decades since, oil production in the union. That time, though, was 1988. And in the decades since, oil production in the 49th state has dropped by around 75%. But there is a report out this week from the Energy Information Administration that says Alaskan oil output is going to grow next year, the biggest production increase perhaps in

decades. Daniel Ackerman has more on the rise and fall and maybe the rise again of Alaskan crude. Oil production in Alaska first took off in the 1970s after a series of global energy price shocks. Jeff Kralowitz is with the market intelligence firm Argus Media. He says that growth was helped along by the construction of the Trans-Alaska Pipeline. Which was able to take all of this crude from the northern part of Alaska to the Port of Valdez in the southern part of the state and sell it.

Now though, a lot of those northern oil fields are what they call in the business, mature, says Charles Mason, an economist at the University of Wyoming. So you get a certain amount of production early on and then it tends to taper off. And the only way you arrest that is by having more wells drilled. Mason says that's been happening less lately in Alaska, in part because of conservation measures, but also because the Arctic tundra isn't an easy place to do business, says Ellen R. Wald of the Atlantic Council. If you're going to need to build pipelines, you can only transport those pipelines to

where you need them to be during the winter because you have to use ice roads. Cheaper fracking has helped some other states surpass Alaska's output. But two new oil developments in Alaska are expected to boost production. Not to anywhere near peak levels, says Wald. But I do think that this is meaningful because they put in all of the investment and the infrastructure. Which could make future expansion easier. Jeff Kralowitz of Argus Media says the changes could also be felt elsewhere in the domestic

oil economy. A lot of the new refineries or the refinery modifications in California were designed to run Alaskan crude. Because as California's own production of crude has fallen, refineries there are now more reliant on oil from the Arctic. I'm Daniel Ackerman for Marketplace. Coming up. A trend is at its core a structure for advertising and selling something. If you thought trends move fast, meet micro trends.

But first, let's do the numbers. Now industrial is down 11 points. We'll call that flat 41,953. The Nasdaq off 59 points, about a third of 1%. 17,691. The S&P 500 down 12 points, about two tenths percent, 56.62. Mitchell was talking about housing. Pulte Group, which operates in more than 45 markets around the country,

rose two tenths percent. MI Homes, which builds in the Midwest and South, gained about a half percent. Today is the first day of spring, so some vernal stocks. 1-800 Flowers, take your symbol, FLWS, wilted 0.1 and 0.6% today. Sunoco, traded as SUN, darkened 0.1 and 0 and 1 tenth percent today bonds down yield on the 10-year T-note 4.24 percent you're listening to Marketplace. If you want to be savvy about the economy, the Marketplace newsletter is just what you need. Every Friday, you'll get explainers and analysis that make sense of everything from the moving

markets to grocery prices. No jargon, no hype, just smart takes delivered to your inbox. Sign up today at Marketplace.org slash subscribe. This is Marketplace. I'm Kai Rizdal. All right. Let's talk about inflation here for a second in the academic sense, not the, oh man, egg prices are really high sense. Inflation is a broad-based increase in the price of goods and services throughout the economy over time. And as we told you yesterday, Chair Powell and the gang at the Fed are keeping a close, closer, we should say, eye on price levels, given the Trump tariffs that are already in

place and the ones that are coming on the 2nd of April. But not all tariffs are created equal and not all prices react the same way. Marketplace's Sabri Benishaw has more on that. MFA incorporated is a farmers cooperative based in Columbia, Missouri. It's owned by 40,000 ranchers and farmers. It sells a lot of fertilizer. You know the two biggest wild cards in our business are weather and the government. Chris DeMoss is senior director of plant foods and he says the least predictable one has always been the government. Potash

fertilizer from Canada was gonna get tariffs at the beginning Of this month, but that was pushed back to April 2nd. They're gonna have an impact There's no doubt because 80% of what we use domestically comes from from Canada But whatever that impact is it's gonna be delayed because there were a lot of tons that were already in place for this spring And so, you know We'll probably have a better understanding of what all this means as we get into the summer period and go into the fall. For other products, the delay is going to be much shorter. 20% tariffs on goods from

China are going to start showing up on stickers in April, predicts Omer Sharif. He's head of inflation insights. A lot of sort of furniture and household goods, things like, you know, household appliances, furniture in particular is a big one, cookware, cutlery. 71% of our cookware and cutlery is imported from China, he says. 45% of all footwear is. And the prices for these goods tend to get handed on to consumers. That's what happened with washing machines in 2018. Tariffs went up 20%, prices went up 18%.

Anderson Economic Group analyzed the impact of the multiple layers of tariffs on cars over the next few months. Patrick Anderson is CEO. The typical model produced by these manufacturers in North America would see a tariff cost increase of between four and ten thousand dollars. His advice is buy that car now. Tomatoes from Canada and avocados from Mexico would see jumps pretty quickly in April. Other industries would not see much effect. Tariffs on oil, for example.

Canada would end up eating that because we have so much supply here. Builders are nervous over construction materials. Elijah Oliveros-Rosen is chief economist for emerging markets at S&P Global Ratings. Steel and aluminum is one. And also some goods that are imported from Canada, such as lumber, are very important for housing, so that could have a outsized impact on inflation in the U.S. But for now, all of this is still mostly a waiting game. In New York, I'm Sabri Benishor for Marketplace. Life today moves fast, and it moves even faster if you're a young person trying to keep up

with everything that goes by you on your social media feed. Not just trends, but micro trends. Things like, and I am not making this up, coastal grandmother aesthetic and cottagecore. And while Marketplacecore has somehow not caught on yet, we've called Callie Holterman from the Style Desk at the New York Times who wrote about this the other day. We're going to catch up. Callie, welcome to the program. Good to have you on. Thanks for having me. All right. So trends I get in fashion, right? That's, you know, been a thing forever. Micro

trends, help me out. Yeah. I hate to sort of come with the news of micro trends to you, which of course I'm slow to bring you. That's right. You should have been faster on the microtrans thing. Anyway. But in recent years, especially sort of since COVID, there have been all of these things that seem kind of like fashion trends. Perhaps it's a type of top or a print, like cheetah print, or even a little phrase like

the mob wife aesthetic. But young people I talked to said they kind of rise and fall in a matter of months or even weeks. The really interesting part about it Well many parts about it which were by turn interesting and horrifying is that the the younger kids? Because these are like teenagers ish right who are You know getting absorbed by all this they know what's happening Totally I spent the past few months talking to a lot of teenagers and people in their 20s about sort of what the trend ecosystem feels

like to them right now and over and over they they sort of gave me these kind of sobering monologues about how they know that their attention is very valuable. They understand that things like short-form video platforms like TikTok and fast fashion are kind of working together to speed up the trend cycle. And yet at times they can still feel caught up in it and that can feel like a kind of confusing and trapped place to be in. Yeah, I bet. It is also and they know this too and being more environmentally aware,

I suppose, than older generations, by and large, they feel bad about it. They know it's all about consumption, right? It's about buying things quickly and then turning around and buying more things. Absolutely, yeah. A trend is, at its core, a structure for advertising and selling something.

It also can be a kind of more fun mode for self-expression, but I think the consumption aspect of trends is really heavy on the minds of a lot of young people right now. And you hear the word consumption, and it's kind of opposite over consumption all the time when you get onto a platform like TikTok or Instagram. Right. And while acknowledging that social media, you know, has done a lot of good for a whole lot of people, this is reason 3972 that social media can be bad, man. Yeah, I heard from a lot of young people who sort of said that the proliferation of micro trends

every year or a couple of years, the way that might've been the case when like I was in middle school, there can be several a week and it ratchets up the feeling of insecurity or inadequacy or if you don't have and can't afford often that item. Right.

So on the whole can't afford thing, I mean, you know, fast fashion is cheap and a lot of these things are not incredibly expensive, but they add up and, you know, it's not nothing. Totally. I spoke to one young woman who talked about, I think in middle school, really like begging her parents saying she just started at a new school she really wanted to fit in and she mentioned the fact that she went to school and saw Every girl at school had scrunchies and then she went home and scrolled through tik-tok and saw You know another 20 videos of girls with scrunchies and it I think ratcheted up that feeling for her of oh I'm not going to fit in without this

But as our conversation went on she was one of several young people who expressed to me I can feel that this is happening and I am really trying to take a step back from it. And so many of these young people who, again, know what is going on, are, I think, trying to take steps backwards from the trend cycle, although sometimes they are finding that difficult to do. Well, so where do you land on this, right? Is this going to keep going and will it get faster and faster or is it eventually gonna die out because teenagers just go, I can't do this anymore?

It's funny, I've posed this question to so many experts and I heard a lot of really conflicting things. On one hand, there are people who think that TikTok is in jeopardy right now. On the other hand, one person I talked to who writes a daily trend newsletter said, you know, I do think Gen Z is growing up and they're wising up to trends,

but coming up right behind them is Gen Alpha. And she thinks that members of Gen Alpha will be even more clued into trends than the generations that came before. I had such hope there and then you got to Gen Alpha. Sorry about that. That's all right. All right, Kelly Holtzman at the New York Times, the style desk. Alpha. Sorry about that. That's all right. It's all right.

Kelly Holtzman at the New York Times, the style desk. Kelly, thanks a lot. I appreciate your time. Yeah, thanks for having me. This final note on the way out today, which I mean, okay. Klarna, which is a buy now, pay later service, has announced a new partnership with DoorDash. So you can pay for your food when it gets delivered, you can split it into four easy

payments, no interest by the way, or you can put it off to a date that aligns with your payday. It is perhaps worth a note here that Klarna is set to go public on the New York Stock Exchange. Ticker symbol is going to be K-L-A-R should you be interested. Or in need of a buy now pay later for your food. John Buckley, John Gordon, Noya Carda, The Parker, Amanda Peacher and Stephanie Sieck are the Marketplace Editing staff.

Amir Bibawe is the Managing Editor. I'm Kyle Rizdal. We will see you tomorrow everybody. This is APM. For 36 years now Marketplace has provided free accessible information about this economy with a sense of humor too. Right now during our March fundraiser donate $20 or more and pick up a tote bag featuring a classic marketplace ad from 1989. Get a piece of our past while helping us plan for the future. Check out the tote bag and make your gift right now at marketplace.org slash donate

and thanks.