Marketplace - Biden hits Chinese goods with new tariffs

Episode Date: May 14, 2024

President Joe Biden announced a slate of new tariffs on $18 billion worth of Chinese goods today, including electric vehicles, semiconductors, steel and aluminum. We’ll look at how the tariffs compare to those implemented under the Donald Trump administration and what they mean to business owners. Plus, the latest on salvage efforts in the Port of Baltimore, and a new federal rule encourages more long-distance power lines. The next $50,000 in donations to Marketplace will be matched, thanks to a generous gift from Dr. Joe Rush of Florida. Give now and double your impact.

Big news, one generous Marketplace fan, Dr. Joe Rush from Florida, is offering to match the next $50,000 in donations to Marketplace. And every single gift gets us closer to a critically important May fundraising goal. So please give right now and double your impact thanks to this generous match. Go to Marketplace.org slash donate. Hey Marketplace listeners, you know around here we like to think you're never too young to learn about the economy and financial basics. That's why we're bringing the Million Bazillion Live Tour to schools to teach important lessons

about budgeting, investing, saving, and more. It's all the fun of the podcast, but now live, immersive and interactive. Special thanks to our tour partner Greenlight, the debit card and money app for kids and teens. Learn more about Greenlight at Greenlight.com slash million. That is Greenlight.com slash million. Okay, I guess it's a trade war then. From American public media, this is Marketplace. In Los Angeles, I'm Kyle Rizdal.

It is Tuesday today, the 14th day of May. Good as always to have you along, everybody. There is a certain amount of deja vu all over again to the big economic story of this day, tariffs on China. President Biden this time not only officially backing the Trump-era tariffs on 350 or so billion dollars worth of Chinese imports, but also adding his own on 18 billion dollars worth of Chinese EVs, semiconductors, solar panels, and critical minerals. Now, there is some compare and contrast to be done here, because President Trump used

a whole lot of the same arguments that the Biden administration used today. The China's trade policies are unfair. That the country is boosting its own growth at the expense of others. That these tariffs are necessary to protect American industry and jobs. Yes, the same, but also… not. that these tariffs are necessary to protect American industry and jobs. Yes, the same, but also not. Here's Marketplace's Justin Ho. The goal of tariffs is to root for the home team.

That was true for Trump and now for Biden. Tariffs at a basic level are a disincentive to import. And where do you get stuff if you're not importing? You buy domestically. That's Robert Johnson, an economics professor at the University of Notre Dame. He says President Biden is actually building on what Trump has already done. Meaning that there were about $300 billion worth

of tariffs introduced under the Trump administration. Most of those have been left in place after a four year review of that policy. But then we have the differences. The Trump administration slapped tariffs on a wide range of goods, using a wide range of goods using a wide range of justifications, says Mary Lovely at the Peterson Institute for International

Economics. Sometimes they were justified as a way to reduce the bilateral trade deficit. At other times it was retaliation for China's unfair trade practices. Trump also targeted Canada, Europe, and other American allies. But the Biden administration's tariffs on Chinese imports are much more narrowly tailored, specifically at the industries the administration's been trying to promote with other legislation. The work that was done through the Inflation Reduction Act to support a U.S. electric vehicle, manufacturing, batteries, critical minerals. Biden's tariffs might be more targeted, but they're also a lot higher.

Rachel Brewster, a professor at Duke Law School, says the Trump administration set tariffs in the 10 to 25 percent range. What they were trying to do is say to the Chinese government, we're flexing our muscles, we're hurting you, and so you need to talk to us. But the Biden administration has raised certain tariffs by a lot more. Semiconductors and solar cells will face a tariff of 50 percent. Electric vehicles, 100 percent. Once you've hit 100 percent, you can make the tariff 1,000 percent, 10,000 percent, a million percent.

You know, it's like no goods are getting in. Brewster says a tariff that high is effectively a ban on Chinese EVs. I'm Justin Ho from Marketplace. $18 billion is not in the grand scheme of the bilateral Sino-American economic relationship a whole lot. But a billion here, a billion there, and pretty soon you're talking real money. Marketplace's Samantha Fields has the consumer trickle down angle. One of the first things that happens when tariffs increase is that costs go up for

business owners. Erica York at the Tax Foundation says that's because. They either have to pay the tariff on that input or they have to source it elsewhere. And it's going to likely be higher priced elsewhere. Whether they get it from a manufacturer here in the U.S. or from another country. Then what we see happen down the line is that as businesses grapple with those higher costs, a good chunk of it gets passed on to the consumer. With these new tariffs, Adam Hirsch at the Economic Policy Institute says the impact

for consumers is likely to be minor. These tariffs that have been announced are only going to cover roughly 4 percent of imports from China. Still, Vanna Peterson at the conference board says these tariffs are affecting products that go into making lots of different things. Batteries and computer chips go into just about everything that consumers are purchasing from cars to cell phones. So you could see some upward pressure on prices and the margin. And right now, when the Fed is still trying to bring inflation down. Tens of a percentage point matter. So it's just another thing that's going to put upward pressure on inflation.

In addition to that, as Justin was telling us earlier, that 100% tariff on Chinese-made electric cars could effectively keep them out of the U.S. market. And while that won't necessarily raise prices, Howard Gleckman at the Urban Brookings Tax Policy Center says it will prevent competition that might have brought EV prices down. Howard Gleckman, Urban Brookings Tax Policy Center, says if you want to get consumers to buy electric vehicles, which the president clearly wants to do, one way to do it is to keep the price low. China makes cheap EVs, but Gleckman says the administration's concern is that allowing

them in would hurt U.S. manufacturers, even if it might help U.S. consumers. The president has these dual goals. One goal is to fight climate change, and the other is to encourage American manufacturing. And he says to some degree, those things are in conflict. I'm Samantha Fields for Marketplace. Not to be lost in the economics of all the geopolitics today was a new reading on inflation back here in the form of the producer price index. Up half a percent month on month were prices at the wholesale level, more than everybody

had been guessing and hoping, including one Jerome Powell speaking today at a conference in Amsterdam. We did not expect this to be a smooth road, but these were higher than I think anybody expected. 2.2% for the 12 months just ended for the PPI consumer prices tomorrow. Wall Street today, moderately pleased with things, I'd say. We'll have the details when we do the numbers. It's been seven weeks since that container ship at the Francis Scott Key Bridge in Baltimore.

More than a thousand workers from both private and public sectors, from the Coast Guard, the Navy, the Army Corps of Engineers, divers and crane operators from civilian salvage companies too. They've all been working on the recovery and salvage operations around the clock, no matter the weather, getting to and from work by small boats. Marketplace's Stephanie Hughes took a look at what's going on there. From a distance, the wreckage of the Key Bridge looks like a heap of Tinker toys some kids spilled on the floor. But from a coast guard boat that's doing a loop around the debris, the sheer size of it is overwhelming. Position triggers as follows.

Giant steel trusses are jetting up at precarious angles. And like an iceberg, there's a lot more below the surface, including about a mile of interstate highway. There are at least 11 cranes visible, all on barges with tugboats nearby, moving that wreckage. So they're trying to cut those pieces of bridge down into smaller sizes. Chief Petty Officer Johan Ulloa, part of the Coast Guard's Emergency Response Team, points out flames on one barge where workers are cutting the steel with torches. Nearby, one of the cranes slowly pulls up a weight and then drops it like an anchor.

Chief Ulloa says that's to pulverize parts of the cranes slowly pulls up a weight and then drops it like an anchor. Chief Ulloa says that's to pulverize parts of the bridge. They're actually smashing it with that large weight. So a lot of sophisticated tools being used and then just some grit. Ulloa is talking with Senior Chief John Stefanos, who's also in the Coast Guard. He points out another crane with a giant claw that drops into the water. Like an arcade claw game, yeah. It's gonna reach down in and based on what they're pulling up, also based on sonar scans of the bottom, they'll know which tool, which claw to put on the end,

and kind of roughly where to grab at. All this is being planned at what's usually the Maryland cruise terminal. It's been taken over as the incident command post. Key Bridge Response Information Center, this is Enoch Bang speaking. It's usually the Maryland Cruise Terminal. It's been taken over as the incident command post. Key Bridge Response Information Center. This is Enoch Bang speaking. This means there's signs that say, missing luggage, next to giant diagrams of the Key Bridge. Colonel Esti Pinchasen is commander

of the Baltimore District of the U.S. Army Corps of Engineers, which is clearing the waterway. She says the work changes as they cut and move different parts of the bridge. It's Jenga meets pickup sticks sticks which meets slinky rubber band. Because she says there's stored energy inside those giant bridge pieces. So if you were to imagine holding a spring really tight and then you were you're pulling it apart and then you cut it you're gonna have a reaction that's gonna snap back. You have that on massive steel members.

To manage that snap back takes know-how from structural engineers and crane operators. It looks so graceful. They're just picking stuff up out of the water. There's a lot to it. They can literally feel how the load is reacting. That's where the planning comes in, says another leader of the salvage operation, Captain David O'Connell of the Coast Guard. They go to

the engineers and say, is this going to work? The engineers say yes, we think that's going to work and then they do it and hopefully it all works out. Captain O'Connell says they haven't had anything not work out so far and a big question is how much this is all going to cost, especially since they're on a timeline to clear the permanent shipping channel by the end of May. From our perspective, we're just focused on the work. I mean, obviously it's cost of money and people are working here and they're getting paid and everything's moving forward.

Captain O'Connell says there's no model for dealing with this exact kind of disaster. So the Coast Guard's using what they've learned from previous crises to respond to one he calls unprecedented. In the Port of Baltimore, I'm Stephanie Hughes from Marketplace. Getting off fossil fuels is going to be complicated. Setting aside the challenge of scaling up renewables and green sources and the politics of same, there is the, it turns out, not so simple issue of getting electricity from where it's generated to where it's used used at acceptable costs and at high reliability. One of the things we're going to need to

do to be able to do that is build more long-distance power lines. This week federal regulators put out a new rule that should help. It requires power grid operators to account for more wind and solar sources while they're making infrastructure plans far into the future. Marketplace's Daniel Ackerman has more on that one. Some people line up to see Taylor Swift, but Rob Gramlich, president of the energy consultant Grid Strategies, lines up for meetings of the Federal Energy Regulatory Commission. I was second in line, but my Grid Strategies colleague was first.

Gramlich was there, fanboying, 90 minutes early when FERC approved the new rule, which he says was a long time coming. You would think planning for the future would be what transmission planners do. The reality is there has been very little planning for the future around our industry. He says that's in part because the US power grid grew out of thousands of local ones, each serving a town or company. Connecting those mini-grids made the U.S. power grid grew out of thousands of local ones, each serving a town or company. Connecting those mini-grids made the system more reliable. But we still don't have enough connections, says Harvard's Ari Pesco.

There's a reason that the utility industry has underbuilt transmission. He says some power plant operators oppose more long-distance lines. Because transmission can provide opportunities for their power plant competitors to connect to the system and potentially undercut utilities' historic monopolies. But more electrical connections are just what this economy needs, says Katherine Hausman at the University of Michigan. We need to integrate more wind and solar, and we need to integrate new sources of demand. Think data centers, heat pumps, and electric cars.

Long distance transmission can bring those users cheap power, which might be from a wind farm hundreds of miles away. More transmission allows grid operators to use the least cost power plants. And as a result, says Neil Chatterjee, former chairman of FERC. We'll be able to just get more energy onto the grid at a time that we need it. And the economic impact of that? It's priceless. Because without a functional grid, there's not much of an economy to speak of.

I'm Daniel Ackerman for Marketplace. Hey, here's an idea. I'm Daniel Ackerman for Marketplace. Hey, here's an idea. Use some of the power, the electricity that comes into your home to listen to the Marketplace Morning Report, would you? David Brancaccio and the gang getting out of bed real early in the morning to get you the business and economic news you need every single day. Coming up. We see the smoke, now let's find the fire. Yeah, let's. First, though, let's do the numbers.

Dow Industrial is up 126 points today. Three tenths percent closed at 39,558, did the blue chips. The Nasdaq picked up 122 points, three quarters percent, 16,511. The S&P 500 added 25 points, about-quarters percent, 16,000 to 511. The S&P 500 added 25 points, about a half percent, 52 and 46. There are six U.S. airlines are suing the Department of Transportation over a new rule requiring upfront disclosures of fees for service or checked luggage. The Biden administration calls them hidden junk fees. The airlines say the rule would confuse customers. Hmm. American Airlines elevated 1.7% today.

Delta increased to 10%. United Airlines jumped 1.3%. JetBlue flew up about 5.5%. Today Walmart told employees it's cutting hundreds of corporate jobs and requiring most remote workers to relocate to main corporate hubs. The retailer plans to shut down smaller offices in Dallas, Atlanta, and Toronto. Walmart shares dipped 9 tenths of 1%.

Home Depot posted quarterly earnings that were not great, but not terrible either. Shares reacted accordingly, down a tenth of 1%. Bonds up yield on the 10-year T-note down to 4.44%. Customers would be confused. You're listening to Marketplace. My name is Lee Hawkins. I've been a journalist for over 25 years.

On my new podcast, What Happened in Alabama, I get answers to some of the hardest questions about how things came to be for many black Americans and the truth that must come before any reconciliation can happen. I investigate my family history, my upbringing in Minnesota, and my father's painful nightmares about growing up in Alabama. What happened in Alabama is a new series confronting the cycles of trauma for myself, my family, and for many black Americans. Listen now.

Big news, one generous Marketplace fan, Dr. Joe Rush from Florida, is offering to match the next $50,000 in donations to Marketplace. And every single gift gets us closer to a critically important May fundraising goal. So please give right now and double your impact. Thanks to this generous match, go to marketplace.org slash donate. This is Marketplace. I'm donate. This is Marketplace. I'm Kai Rizdal.

The producer price index that came out this morning is one kind of economic indicator, official government statistics. Private company data is another one. Credit card use, for instance, we get that from Visa and the gang all the time. And there's more anecdotal data too, which can also shed some economic light. 211 call centers fall right into that bucket. United Way operates about half of all of those helplines, and their data reveals some truths about how people are getting by and not getting by as well.

Rachel Wolf wrote about it the other day in The Wall Street Journal. Welcome to the program. Thanks so much for having me. For those who perhaps aren't familiar, what are 211 call centers? 211 call centers are located across the country and they field calls about all manner of different things. Really, they're an emergency helpline. Often people are calling in needing help paying their bills. Some of them also are suicide prevention lines.

So they are a really great window into the state of the American consumer because they field millions of calls every year. Right. So, and that's the gist of this piece. So let's dig into that a little bit. They are kind of a leading indicator. They knew that baby formula was going to be an issue before everybody else knew because people were calling in looking for baby formula, right?

Exactly. They knew families were defaulting on their mortgages before the subprime collapse because people were calling in saying that they were having trouble paying their mortgages. So they are these really savvy economic trend predictors because they just spend all day talking to people about the issues that they're facing. And right now, they're raising the alarm bell that there are way more families living in poverty or something very close to it than the federal poverty line suggests. Right. So let's go deeper there, right?

And there's an acronym that these folks use. It's ALICE, and I've got it written in front of me, but I'm hoping you can explain what it means and why it matters. Yeah. So the United Way has identified millions of families in the United States that are ALICE or Asset Limited Income Constrained Employed. And what that means is they make above the federal poverty line of $31,200, but below the real cost of living in their zip codes, which in Connecticut is over $100,000 for a family of four with two young kids. And so you can see there's a really, really big discrepancy there.

And what these operators are saying is they are really limited in how they can help because they are not eligible for most services. So where does the fault lie? Because we hear all the time about the federal poverty line and how that's the measure. And clearly that's not true. What's the disconnect between the federal poverty line and people actually trying to get by in there every day? You know, it's really interesting.

So the federal poverty line came about under Lyndon B. Johnson's war on poverty. And it basically assumes that families spend a third of their income on food. It does not account for the fact that really families spend most of their income on food. It does not account for the fact that really families spend most of their income on housing. There is just all of this evidence that the federal poverty line does a bad job telling us

who is actually living in poverty. And so there have been some efforts to address that. Alice is one of them. There is a bill proposed by a group of democratic Congress people to adjust the federal poverty line and have it reflect more of the real cost of living, but it hasn't gotten a vote. Not to get too terribly political here, but this is the disconnect in this society, right? The headline numbers in this economy are by and large very good, right?

The labor market is strong. The economy, while growing more slowly now, is still growing. And yet, because price levels are elevated and have been for some time now, people are not feeling it. That's what this data reflects. Exactly. And even though the economy is really strong by many measures, consumers are much more unhappy on the whole than economists would expect them to be. I think that this is one reason why,

that there are way more families than we realize that are not getting by, even though they're not counted in that federal property number. Right. Right. Rachel Wolff at the Wall Street Journal. Rachel, thanks a lot. I appreciate your time and your reporting. Thanks so much for having me. The American healthcare infrastructure is complicated to understate things just a little bit. How we get our care is complicated. HMOs, preferred providers, all that. How we get our care paid for is complicated. Insurance through work or ACA exchanges.

And then medication is complicated too, prescription drugs specifically. There are the drug makers, there are the insurance companies, and eventually the patients. But in between are these things called pharmacy benefit managers, PBMs, which negotiate prices between makers and insurers. Just three of those PBMs represent almost 80% of all insured patients in this economy. They've been around since the 1960s, but in the past few decades they have expanded into every part of the pharmaceutical supply chain save one. They haven't actually been making the drugs. But now the biggest PBM, CVS, has decided it's gonna.

Oregon Public Broadcasting's Lillian Carebake has the story. If you filled a prescription in the past decade, you're probably familiar with at least one pharmacy benefit manager. The big three PBMs are Express Scripts, CVS Caremark, and OptumRx. PBMs take care of the paperwork and negotiation for prescription drug claims. They cut deals with drug makers and they work out how much insurers pay for patient prescriptions. Often, they also operate their own pharmacies. And now regulators are taking a hard look at PBMs.

There clearly is something that is not working in our pharmaceutical marketplace. That's Rahul Rao, a deputy director at the Federal Trade Commission. We see the smoke, now let's find the fire. And the FTC thinks the fire might be PBMs. They invited the public to submit complaints. I think we received over 24,000 comments from doctors and independent pharmacists and patients just talking about the struggles that they feel on a day-to-day basis. One common complaint?

Pharmaceutical mergers creating mega companies. The PBM and pharmacy market is not a normal or healthy functioning market, and it is so consolidated with so few players. For example, you probably know CVS as a brick and mortar pharmacy chain with extremely long receipts. But it also owns the third largest health insurer, Aetna, and the largest PBM, CVS Care Mark. These mergers are everywhere in pharma.

The FTC worries that they hurt healthy competition. Critics say PBMs already benefit from higher drug prices. And now, CVS is making its own drugs, as Cordavis. Which is a wholly owned subsidiary of CVS Health. That's Sri Chakotaro, CVS's chief medical officer. The focus is on biosimilar medications, generics for expensive specialty drugs. By 2030, there is a hundred billion dollar opportunity in biosimilars. It's starting by making Hiramaz, a biosimilar for Humira, which treats autoimmune disorders. Once Humira's U.S. patents expired, CVS swooped in with Hiramaz.

In the three weeks after it hit the market, Chagaturo says that 93% of CVS prescriptions were filled with a new biosimilar. That shows the power of CVS's market saturation. It pushed Hiramaz through every arm of its business. CVS points out that Hiramaz is 81% cheaper. Chagaturo says that's saving their insurers a lot of money. $140 million in gross savings on their drug benefit spent. But is there an inherent conflict of interest in having the same company that negotiates

with the drug manufacturer be the drug manufacturer? Chagatura doesn't think so. Our commitment is to our clients and to the patients and members that they serve to lower drug pricing. Not everyone agrees. It's very intuitive that there is a conflict of interest because you are essentially negotiating with yourself. Niraj Sood is a healthcare economist

at the University of Southern California. He studied what PBM consolidation does to prices and says while it helps cut drug prices short-term. I think in the long run what's going to happen is it's going to erode competition in the biosimilar market. And he says less competition could bring drug costs right back up. I'm Lillian Carey-Bake for Marketplace. This final note on the way out today about which first an observation. It's already May, mid-May in point of fact.

Second, everybody who'd been expecting rate cuts from the Fed in what's left of this year, not so fast. Here's Chair Powell from Amsterdam once again today. My confidence in that is not as high as it was having seen these readings in the, in the first three months of the year. You heard it here first gang. Our digital and on demand team includes Kerry Barber, Jordan Mangy, Dylan Miethinen, Janet Winn, Olga Oxman, Ellen Rolfes, Virginia K. Smith and Tony Wagner.

Francesca Levy is the executive director of digital and on demand. And I'm Kai Rizdo. We will see you tomorrow, everybody. This is APM. My name is Lee Hawkins. This is APM. My name is Lee Hawkins. I've been a journalist for over 25 years. On my new podcast, What Happened in Alabama, I get answers to some of the hardest questions about how things came to be for many black Americans and the truth that must come before any reconciliation can happen. I investigate my family history, my upbringing in Minnesota, and my father's painful nightmares about growing up in Alabama.

What Happened in Alabama is a new series confronting the cycles of trauma for myself, my family, and for many Black Americans. Listen now.