Chao Deng

Okay, so there are a whole bunch. His administration says that tariffs can raise revenue for the U.S. They can protect American businesses. They can move manufacturing back to the U.S. They can create jobs for American workers. Do you have a sense of what he's envisioning? I mean, he has talked about the U.S. manufacturing glory days.

these American towns that revolved around like, you know, a single factory. So you remember like when one town revolved around steel making or another town revolved around furniture making or textile making. At that point, you know, to have a good manufacturing job that was well paying was really a way to, you know, become a middle class American family.

If you walk around, especially down its main street, you can see its legacy of being a booming textile town back in the day. If you drive around enough, you can actually see some of these dilapidated buildings that used to be cotton mills. And then when the textile industry in the U.S. fell back, residents of this town began to flow out.

There was some farming left, but there really wasn't much going for it.

You know, when I was in the town, I talked to some of the restaurants that were near the factory and they remember when the factory opened and they noticed they had more customers and it just seemed to be a very hopeful moment for the town. And then, you know, months pass, you saw more Korean firms come in.

So you had at least two Korean firms that were supplying washing machine parts to Samsung come in. And they then created hundreds more jobs. So there was a bit of a ripple effect on the local level.

— He didn't have the specificity as he has today, but he was basically threatening tariffs. And if you were Samsung or any other major multinational, you would know that tariffs would have been coming. And then early on, when he, you know, became president, he started talking about industries like steel, aluminum, solar panels, and washing machines. Washing machines.

Trump basically slapped tariffs on this industry after a complaint by Whirlpool, which is an American manufacturer. The complaint was that its competitors overseas were unfairly selling their cheap washing machines to U.S. consumers and that this was threatening U.S. industry and threatening firms like Whirlpool.

So this is where it gets a bit tricky. And we had to turn to a economic study that came out around 2020. And the authors of that study essentially did some math to show that prices of washing machines in the U.S. went up about 12% after Trump imposed his tariffs. And that averages out to about $86 per washer. I mean, that's what economists say tariffs do, ultimately, raise prices. Right.

And the rationale for that is that the firms importing the tariffs might be the ones to bear the burden initially, but they're going to do the math and say, well, we can't really stomach all the cost. We need to pass on some of this cost to the consumer. And, you know, that's how these tariffs ultimately filter through an economy and hit American families.

Yeah.

Are there other Newberries? The Newbery example is just a very rare example where we can say that tariffs did help create jobs. It's, you know, very difficult to find other examples like this. I mean, if you look hard enough, you may be able to find instances where a certain company decided that it didn't want to pay tariffs, and so therefore it made sense to create jobs in America.

But the examples are few and far between. What do you think is the lesson from Newbery? I think the lesson is that the impact of tariffs is very complicated and whether they help or hurt is sort of in the eye of the beholder. You know, as we can see with these washing machine tariffs, there was a different impact for businesses, for the local economy, for the industry, for the nation.

And so, you know, like that's why tariffs, I think, are so controversial. I mean, they just ripple out in all sorts of unpredictable ways.

Overall, economists couldn't take a lot of comfort in this report because all this volatility still needs time to be reflected in the data. So in that sense, this report by no means reflects how businesses are going to react to the tariffs. And that's something that we'll probably see later this summer.

There were hints of tariff pass-through in this report. In a few categories exposed to tariffs, like furniture, car parts, and audio equipment, we did see prices up over the months. At the same time, prices fell for airline fares, which could be a sign that people are holding off on vacations.

Prices also were down for used cars, even though there was a rush of people buying vehicles to try to get ahead of the inflation. But again, economists aren't reading much into it because they're expecting more of that pass-through effect in the coming months. So what does all this mean for the Fed?

This report gives the Fed little reason to change their stance, which has been one of wait and see, essentially, again, because officials are bracing for cost increases and distortions as tariffs take their full effect. A good way to think about it is this report is a bit like observing sunny weather ahead of a widely anticipated storm where the rainfall remains highly uncertain.

A good way to think about it is this report is a bit like observing sunny weather ahead of a widely anticipated storm where the rainfall remains highly uncertain.

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Well, economists say this is really still about the tariff news cycle. Tariffs are in the headlines almost every day and it's really worrying consumers. It's making it very difficult to forecast prices. In this survey, we saw that people expect prices to surge 6.6% over the next year. And that is one of the highest inflation expectations in decades.

In the first half of the survey, which started in late April, people were still very much worried about the tariffs imposed by Trump, including the extremely high duties on China. And then about halfway through the survey, the White House struck a deal with China to lower the duties there. And so that was a pretty big positive surprise. So you would have seen that reflected in the second half.

Es gab auch gemischte gute und schlechte Nachrichten. Später hat Wal-Mart gesagt, dass es die Preise in Bezug auf Tarifen erhöhen würde. Trump hat 50 % der Anforderungen auf die EU bedroht und hat später gesagt, dass er sie auslösen würde. Das hat für einen etwas gemischten Newszyklus geführt. Der Stockmarkt war in Rallye. Das hat die Stimmung von einigen Investoren aufgeräumt.

Aber all in all ist der Sentiment von dem vorigen Monat noch unverändert, weil es so viel Sorgen um Tarifen und die Unwahrheit vorhanden ist. Even just this week, right, we had the news from the International Trade Court invalidating many of Trump's tariffs and then another appeals court decision that put that ruling on hold.

And this news wasn't part of the survey, but this is the kind of headline that is going to continue to worry consumers in the coming months. And so most economists think that consumer sentiment will probably drift Das war US-Economy-Reporter Chow Deng.

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It appears that American households are worried about inflation caused by tariffs. And this was actually a surprise to economists because the survey was taken during a period when the White House rolled back several tariffs, including the extremely high ones on China. The closing of the survey came two days after the China tariffs were decreased.

So it could have been that respondents didn't really get a chance to reflect that change. And so while it's a disappointing report, many economists are holding out to see what the final reading for sentiment in May will look like. Respondents will continue to weigh some of the back and forth tariff announcements. And then also we had Walmart announcing just this week

that it's going to raise prices on its products this month and in early summer. That's another factor that consumers are going to be thinking about and that could push down sentiment in the final read for May.

What we're going to see in the next month or so is businesses scrambling to figure out, well, should they file the paperwork? Should they not? What is the cost around filing the paperwork versus maybe just waiting for another month and seeing if Trump's policy changes again?

We've got a really long list of goods. It could be Mexican TVs, air conditioners, avocados, tomatoes. But for some products, it's going to be more complicated. So for example, if you take a car, You're going to have to look at what components and parts go into that car. Is the majority of that car made out of steel that is originating from North America?

What percentage of the car's value comes from factories where workers earn at least $16 an hour? So the rules can get quite complicated quickly.

Last year, analysts calculated that roughly 45% of goods entering the U.S. from Canada and Mexico entered under USMCA. That is, they entered duty-free because they fulfilled the requirements of the USMCA rules. And then outside of that, you had 40% of goods that were coming in tariff-free simply because businesses didn't need to claim USMCA on those products.

And then the remaining 15% faced tariffs for various reasons, either because the businesses didn't bother to claim for USMCA because they felt the process would be too complicated, or that the tariff rate for those products was extremely low, and so therefore businesses just decided to pay those tariffs.

So when a company tries to apply for USMCA, all they have to do is file the paperwork with authorities and check a box that says their product is compliant. Of course, then the authorities can come back and actually do a check. And if the product isn't compliant, the firm could face fees.

So essentially what we're going to see in the next month or so is businesses scrambling to figure out, well, should they file the paperwork? Should they not? What is the cost around filing the paperwork versus maybe just waiting for another month and seeing if Trump's policy changes again?

It's the U.S. Customs and Border Protection officials that will be implementing Trump's rules. So they're going to have to be really reconfiguring a lot of things, including their electronic databases to properly charge tariffs on products. It's really complicated.

And they could face a lot of legal challenges and headaches from businesses if they don't agree with what's being tariffed and what's not.

Thank you.

Some businesses could have put a break on hiring. At the same time, few tariffs have been passed to customers yet. Many firms are waiting to see what happens next before they make big changes, including to prices and to hiring. Another factor that could weigh on job gains is the sharp decline in immigration stemming from Trump's border policies.

Industries like construction and healthcare rely on foreign labor, so less immigration could leave some job positions unfilled. Lastly, economists will be watching for the impact of the Trump administration's federal government layoffs. These federal cuts have begun to weigh on monthly job gains, and that is expected to continue for the April data.