Marketplace - Who will tariffs hurt the most?

Episode Date: April 4, 2025

Tariff-driven inflation will hit Americans with the lowest incomes the hardest, slashing their disposable income by at least $1,700 a year, the Yale Budget Lab predicts. We’ll explain why. And the labor market could suffer too if demand falls for all those higher-priced products. Plus, New Mexico allocates oil and gas revenue to child care programs, and in booming West Texas, some residents struggle to access running water.  

Another rotten day in the markets and we're still talking tariffs. From American Public Media, this is Marketplace. In Washington, D.C., I'm Kimberly Adams and for Kai Rizdal, it's Friday, April 4th. Thank you for joining us. Well, that was a week. And while the headline econ number of the day is the 228,000 jobs added to the economy in March, that monthly jobs report comes with quite the shadow cast over it because of the sheer wave of tariff news we got this week. So much to discuss, so little time. We have Catherine Rampell at The Washington Post and Sadiq Burearedi at Politico. Hey, you two, how's your week

been? Hi, Kimberly, president. I survived it. So I'd love to hear from the both of you, because with the disclaimer that the stock market is not the economy at all, you cannot ignore the market reaction to these tariffs. We're seeing drops like we haven't seen since the start of the pandemic. So what does that say to you, Catherine? It says that markets did not adequately prepare for the fact that Trump is the tariff man.

He told us he was going to do something along these lines. And for whatever reason, those, I don't know, red flags were ignored. And now we're dealing with the consequences. Although to be fair, I think the tariffs were even worse than even he had televised on the campaign trail, right? He said 10% tariffs globally. Now he's saying 10% minimum tariffs globally with them being a lot higher on some of our biggest trading partners.

So yeah, markets are digesting the news and getting very ill. But I mean, Sadiq, you're on the same White House press distribution list than I am, and they're saying nothing but that it's been wins. Yeah, that does not really work. There's obviously a messaging game here to try to have everybody avert their eyes. We are living through a truly historic moment. In the 75 years we've had the S&P 500 trading in this fashion five days a week, there have been only four times the stock market has dropped this much in two days.

One of them was these four, the others were the 1987 stock market crash and the global financial crisis in 2008 and the COVID crash in 2020. This is a remarkable thing to happen in what is essentially a self-own. To have a moment where you're deliberately doing this and crashing the economy. There was no outside force that was making this happen. This was a deliberate decision to come up with tariffs

that were obviously calculated in a somewhat bizarre way that threw everybody off course. And when you do that, you're deliberately setting a marker for what comes next. And people are naturally reacting to it and reacting to the uncertainty that's coming from economic policy right now. Well, what can we sort of pin down in terms of these tariffs, Catherine, in terms of when these price increases related to them will actually start showing up for regular folks? Assuming that tariffs are actually implemented, and in the past, Trump has found some sort of off-ramp

to at least delay or suspend tariffs, some of the tariffs. Assuming they are implemented, which it looks like they will be within the next week, I think the first things we would probably see in terms of price increases flowing through to consumers, would be perishables. So basically fruits and vegetables. We saw a lot of front loading of durable goods,

things like cars, appliances, furniture, things that companies could stock up on in anticipation of the potential tariffs. So we'll have a little while before companies work through that inventory. And we'll probably see some increase because they're thinking ahead to like the cost of replacing those goods. But for things like, you know, fruit, vegetables, we get a lot of fruit from Latin American countries, berries, things like that. For now, it looks like maybe Mexico has been spared. Again, those tariffs may be coming, but we get a lot of avocados, tomatoes, other produce

from Mexico. If those tariffs ultimately materialize, one should expect that given for those products, first of all, they're very low margin products, the kinds of fruits and vegetables you buy at the grocery store. So it'll be harder for the suppliers to eat those tariffs, but also because they couldn't prepare in advance because the fruit would rot. So I think that would be where I would look first. I want to turn to the jobs numbers, which would normally be at the top of the show. Sadeep, what did you take from this report? It was really quite remarkable to me to see a strong jobs report in a week

like this because it shows a clear line of demarcation. There's been a lot of telegraphing that liberation day is coming, tariffs are on the way, and a lot of businesses and consumers, like the entire economy, kind of shrugged this off and said, like, I'll wait and see what actually happens. The fact that employers were still hiring the last couple of months, despite all of those threats, the fact that actual core consumer spending has continued to stay strong, that's a really good sign about the economy's ability to look through what could have been noise. And if it were just noise, we would have probably continued on

just fine. But this is the marker now and we will see. It probably won't happen immediately. It takes time for businesses to adjust, but they'll start feeling the pain in their supply chains within days. And that will lead to the slow bleed of cuts in certain sectors. And the inflationary dynamic, we've lived through this with egg prices, with bacon, with all sorts of things over the last few years. This will stick in people's minds if you're suddenly paying more for your groceries, even before you think about the cars and the TVs and everything else you're buying from overseas. So Fed Chair Jerome Powell spoke today at a conference for business journalists just a crossover from D.C. and Arlington,

Virginia. And among the things he said was, we face a highly uncertain outlook with elevated risks of both higher unemployment and higher inflation, aka stagflation. This is the two parts of the feds dual mandate but they're kind of not working so nicely together. It puts the Fed in a bind, no Catherine? Exactly. Stagflation besides you know sucking on its own because nobody wants high inflation, nobody wants a recession or slow growth or increases big increases in unemployment. Those things are bad on their own. The even worse feature of stagflation, which is what the Fed is potentially

confronting, is that they don't really have a tool that attacks both of those problems and achieves both halves of their dual mandate at once. If they're dealing with higher inflation, the remedy for that is generally raising interest rates. If they're dealing with higher unemployment and a recession, the remedy for that is the opposite. It's cutting interest rates. So they're in this bind where no matter what they do, they are potentially failing one half of their two biggest duties. And there isn't really a lot of tools, there aren't a lot of tools available other than

the obvious, fiscal policies, trade policies, undoing all of the stuff that Trump has done, but that doesn't seem likely in the immediate future anyway. What? We need Congress to do something? Anyway, Catherine Rampell is at the Washington Post, Sadeep Reddy at Politico. Thank you both so much. Thanks, Kimberly. Wall Street today, we'll have the details when we do the numbers. So, like we were just saying, 228,000 jobs added in March, generally more than economists expected, labor force participation rate up a bit, and the unemployment rate didn't actually move that much, ticked up to 4.2%.

All signs of a fairly resilient labor market. But like we said, that data was collected in mid-March and now it's April with new broad tariffs expected to take effect over the next week. Marketplace's Stephanie Hughes looked at how our changing trade policy could affect employment moving forward. That's saying past performance is no guarantee of future results, it could apply to this jobs report. Things were good in mid-March, but what did it look like in mid-September? Economist Guy Berger is with the Burning Glass Institute.

Tariffs on imports will mean higher prices for, let's say, imported hoodies and headphones and whiskey. And if demand for all that falls, less stuff is going to be going through that chain to the end consumer. Which means we're going to need fewer people to transport, store, and sell that stuff. Lots of it's going to be going through retail's hands. You probably need less salespeople. Manufacturing jobs here could be hit too, particularly in the short term. UBS economist Jonathan Pingle says take automakers, who'll be paying more for imported car parts. If the price goes up a lot because the production costs have gone up a lot, the demand for those

cars is probably going to fall and that probably means less workers to produce those cars. Pingle says if tariffs stay in place, manufacturing could move back to the U.S. But that could take in some cases a year and other years, plural. Also, not every manufacturing job abroad equals a new job for a person here. It could equal a job for a robot. You can imagine 10 people overseas becomes three U.S. workers plus the other seven people's jobs being done by technology paired with the U.S. worker. Jobs in some industries will be less affected. LinkedIn economist Corey Cantanga says, think services that are created and used here. One that's especially needed by an aging population is health care.

We're going to need workers to take care of our elderly, to take care of us. But overall, UBS's Jonathan Pingle says these tariffs are going to hurt economic growth, hurt our national wealth, and ultimately hurt demand for workers. I'm Stephanie Hughes for Market to Invest. Texas is one of the fastest growing states in the country, but the population boom there also means an increase in the demand for water. Take West Odessa, where many residents don't have running water. And this is in a region where the multi-billion dollar oil industry is thriving. But figuring out how to pay for new infrastructure to get water lines where they need to be is

a big problem. Marfa Public Radio's Mitch Borden has the story. As Catarina Tavares drives me around a West Odessa neighborhood, there are bulky water tanks alongside most of the homes and RVs. There's a black tank right here. They've got a green tank back there. RV plays with three tanks. There's a black tank right here. They've got a green tank back there. RV plays with three tanks.

Residents store water in these large containers because otherwise they don't have a reliable source. West Odessa is an unincorporated community that local leaders believe has around 50,000 residents. And in recent years, the West Texas community has been growing fast. Many people came here for cheap land and few regulations. You might see a small ranch in the middle of a residential neighborhood. Workyards filled with oil drilling equipment or mobile homes packed tightly on a single lot. This is West Odessa. I mean, look, you'll have a beautiful home and then you have random mobile homes falling apart.

And as more people have moved here, the community has expanded beyond existing water lines, hence the tanks, which can take a ton of time and money to fill with thousands of gallons of water. Tavares pulls up to her neighbor's house and tells me how they do it. They'll have their flatbed, they'll have different kinds of tanks, they go out wherever it is that they can't either find it. Less expensive. And she told me it takes her about two to three hours per week to haul water.

Tavares is part of a group called the West Odessa Water Warriors, which is trying to get more residents connected to the water utility. Patty Kapoff, who founded the group last year, says it's not been easy. You'd think prolific oil fields, right? We would have money, but we don't.

And, you know, this population just got out of control. A big part of the problem is some parts of West Odessa have access to running water, while large swaths just don't. The local water system is run by the Ector County Utility District, which doesn't have the millions of dollars needed to run water lines to the far corners of West Odessa. The main issue is 99% of the people that are asking for water are outside the district so there is no infrastructure

out there whatsoever. Darryl Pondo was recently elected to the utility district's board of directors. Lots more people would have to pay into the system for this to work, which has sparked some difficult conversations. One citizen told me, he said, Darryl, you mean to tell me that I probably won't be alive by the time you get me water? I said, I might not even be alive. I said, it might not be my kids, it might be my grandkids that are finishing

this up. He says there are some projects in the works that will expand access to clean and running water, but nothing that will fix the problems at the scale that is necessary. In fact, across Texas, communities are worried about running out of water as more people move in. Lawmakers are talking about investing more in water projects, but people out here in West Odessa like Katerina Tavares feel abandoned. It's not an issue for them. It's not a priority for them.

And it's not always about expanding lines to new developments. In some cases, old water wells have dried up, which is what happened to Tavares. This is a basic need. Running water is a basic need that we all have. This should not be a problem right now. It should have been fixed years ago. Years ago. For now, she and her neighbors will keep filling their water containers wherever they can to

keep their faucets running. In West Odessa, Texas, I'm Mitch Borden for Marketplace. Coming up. You get to something that starts to almost look and feel like a universal system. The state that's subsidizing child care. But first, grit your teeth and let's do the numbers. Well, the Dow Jones Industrial Average fell 2,231 points, 5.5%, to close at 38,314. The Nasdaq dropped 962 points, 5.8% to finish at 15,587.

And the S&P 500 lost 322 points, 6% to end at 50.74. For the very rough week it was, the Dow lost 7.9%. The NasdaQ lost 10% entering bear market territory, meaning a drop of 20% or more from its peak, and the S&P lost 9.1%. Bank stocks took a hit today, along with consumers and investors.

Citigroup fell 7.8. Bank of America was down 7 and 6 tenths percent. Bonds rose. The yield on the 10-year T-note fell to 4.00 percent. And you're listening to Marketplace. This is Marketplace. I'm Kimberly Adams. Like we said earlier, this trade war is going to hit everybody's wallet. The Yale Budget Lab estimated fresh produce prices will go up 4 percent, clothing prices up 17 percent. That kind of inflation hits people with the lowest incomes hardest. The Yale Budget Lab figures Trump's tariffs will slash disposable income in the poorest

households by at least $1,700 a year. Marketplace's Kaylee Wells explains. Simply put, the lowest income households spend more money on necessities. Steve Blitz with Global Data T.S. Lombard says the category that'll hit them hardest is apparel. That's really where they're going to feel the most because they buy clothes like everybody else. He says, yes, you can hold on to clothes longer, mend tears, but everybody needs new underwear and shirts sometimes. Shenglu teaches fashion and apparel studies at the University of Delaware. The current reciprocal tariff structure especially leads to a price hike for products targeting the value market.

Meaning the cheapest clothes, which come from Bangladesh, Cambodia, Sri Lanka, countries that face some of the highest tariffs. Liu says that puts low-income buyers in a tough position. They already have more limited choices compared to more affluent consumers. Because if you're already buying your underwear from the most affordable brands, there's nothing cheaper to switch to. You just have to pay the higher price. That's a problem people with lower incomes face at the grocery store too, says Tim Richards, who teaches agribusiness at Arizona State University. The top half of income earners, they spend about 10% of their income on food. But if

you look at the lowest 20% of income earners, they spend 30% of their income on food. Richards says those higher income shoppers can also trade down from, say, the organic vegetables to the cheaper ones. It's one of the real harmful things about tariffs is that the people that are less able to substitute away end up paying the bigger hit. And Richard says that has health impacts because healthier foods tend to be more expensive. And if you can't afford the cheapest vegetables, then you don't buy any. I'm Kayley Wells for Marketplace.

Child care in the United States is a classic example of a failing market. Daycare prices are already about as high as families can bear, and that constraint makes it hard for child care centers to offer enough slots to meet demand, or the quality of care that we know is good for kids. The pandemic really highlighted this problem, and since then, a couple of state governments have been trying to bring things into balance by helping more households afford care, by helping more households afford care, including one state that's offering to foot the daycare bill not just for low-income families, but many in the middle class as well. Marketplace's Savannah Peters brings us this story from New Mexico. At Christina Kent Early Childhood Center in downtown Albuquerque, the kids guide the curriculum. And right now, the two- and three-year-olds in the bunny classroom are guiding it in a Jurassic Park kind of direction. Do you know the names of any of these dinosaurs?

Yeah, I know these dinosaurs. The bunnies are digging into a basket of toy Triceratops and Brachiosauri with their teacher, Danielle Reinertsen, who has a few weeks of dino activities planned. And if they want to move on to something else, yeah, we'll probably move on to something else. Something else like making family portraits or watching real caterpillars transform into painted lady butterflies. Reinertsen and two other teachers lead this class of 18 toddlers. That's a low grown-up to kid ratio. And one reason why this center earns a five star quality rating from the state of New Mexico, but also what makes running

it so expensive. Our margins are fairly narrow, says director Sandra Carpenter. Consistently for a number of years in a row, the center was running in the red. And walking this sort of tightrope, where the center was barely charging enough to cover payroll and keep the lights on. But still, lots of families struggled to make tuition payments. You always have a certain amount of families that you do we send them to collections, do we take it as a loss for the year.

But then in 2021, New Mexico made some big investments that changed that dynamic. It dramatically expanded eligibility for childcare assistance and boosted the reimbursement rate centers receive for accepting childcare vouchers. Now Carpenter says New Mexico pays the entire tuition bill for 60% of families at her center. pays the entire tuition bill for 60% of families at her center. It's allowed child care programs to really focus where we want to focus, which is on the kids. The money for this expansion comes from a couple of state investment funds, fed mostly by oil and gas revenue.

You can make choices about what's important, and New Mexico has really decided to go big on early childhood. Haley Hines studies child care policy at the University of New Mexico. She says a New Mexican family of four making up to $124,000 a year can now send their kids to daycare for free. That's twice the state's median income. You get to something that starts to almost look and feel like a universal system. The goal is also to change the business calculus for child care providers and help them get off that tightrope Sandra Carpenter was describing.

Could we transform the system that way? Could we make it higher quality? Could we incentivize providers to open new rooms because they know they're going to have this reliable, higher revenue source. New Mexico's play, Heinz says, is to inject lots of public money into this broken market to try and make it work better for everybody. Easy, right? Right, I was going to say if every state could have oil money, maybe we could solve the child care crisis.

Jessica Brown is an economist at the University of South Carolina studying child care markets. She says the investment funds that pay for New Mexico's program are unique, but other states should be taking notes. Child care serves this dual purpose in facilitating labor force participation of parents, but also being really important for the child development. If New Mexico can get more kids into high-quality care, Brown says there's research showing those kids will make more money and need less government help down the road. For now, researchers at the University of New Mexico say the

expanded subsidy is helping providers invest in higher teacher salaries, better facilities, and in some cases, expanding. There it is. Across the street from the original Christina Kent Early Childhood Center is a building that will house five new infant, toddler, and pre-K classrooms. Director Sandra Carpenter knows the center

can fill those classrooms now that more families can afford care. Has that set the stage and the foundation for us to be able to say, yes, let's take on a loan? It has. I don't think the school 10 years ago was in a financial position to make that kind of decision. Now that its profit margins are just a little wider, it can take the leap. In Albuquerque, I'm Savannah Peters for Marketplace.

This final note on the way out today, as we've been saying, the effect of these tariffs will hit harder in some areas than in others. For example, in gaming. Polygon is reporting that the tabletop gaming industry is in full panic with the tariff news, since things like specialty dice and wooden and plastic components almost all come from China and could be subject to a 54% tariff. Digital gamers aren't much better off. CNBC has news that Nintendo is delaying pre-orders for the highly anticipated Switch 2 to, quote, assess the potential impact of tariffs and evolving market conditions. Our theme music was composed by BJ Liederman. Marketplace's executive producer is Nancy Fargalli.

Donna Tam is the executive editor, Neal Scarborough is the vice president and general manager. And I'm Kimberly Adams. Have a great weekend. We will be back on Monday. 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.

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