Marketplace - How to dodge tariffs on Chinese goods

Episode Date: February 20, 2026

The Supreme Court struck down many of President Trump’s tariffs today. We’ll discuss how the decision might affect businesses and consumers. Also in this episode: Since Trump announced those tariffs, some importers have figured out ways to avoid them. One way is through “transhipping” — making a pit stop en route to the U.S. and claiming the goods originated there, rather than China. Plus, we’ll talk to a few business owners who are planning for potential tariff changes.Every story has an economic angle. Want some in your inbox? Subscribe to our daily or weekly newsletter.Marketplace is more than a radio show. Check out our original reporting and financial literacy content at marketplace.org — and consider making an investment in our future.

Great certainty has been brought back to the economy of the United States and actually the economy of the world. Has it, though, really? From American public media, this is Marketplace. In Los Angeles, I'm Kyle Risdahl. It is Friday today, the 20th of February. It is always to have you along, everybody. Six to three was the tally in the Supreme Court of the United States today, as you have no doubt heard. striking down President Trump's tariff-palooza of April last.

The International Emergency Economic Powers Act was the statute in question, but it is important to understand here that tariff-free we are not, which is among the things I'm going to talk about with Martha Gimble right now. She's the executive director of the Budget Lab at Yale. Martha, it's good to have you back on the program. Thank you for having me. All right, so let us test my hypothesis or the president's hypothesis, I suppose, has certain. team been restored? I certainly feel less certain about tariffs than I felt this morning. Just to give you an idea of what my team, who looks at this has been up to today, going into

this morning, tariffs were almost 17%. Once the Supreme Court ruled, they went down to 9%. That was at 10 a.m. And then the president gave his press conference today. Yeah, exactly. And then the president gave a press conference where he said that he was imposing 10% tariffs under a different legal authority, but that would be temporary, but then they would replace it with other things that were to come. And then that should take it back up to around 15%. So there's been a lot of strom and dron today, but it looks like we're sort of back where we are, but we're still figuring it out. So let's let's recap briefly, right? Aipa tariffs are gone, but there are, and this is the nomenclature, and I apologize to listeners, but there are Section 232 tariffs, 301 tariffs, now 122 tariffs from various trade adjustment acts of years gone by.

Now what happens? Let's say we stayed 15%. Macro-economically, what do you suppose happens? So, you know, we would expect the impacts to be similar to what we've been talking about since we started with this whole Mishigas, right? That you're going to see upward pressure on prices, you know, that it's going to be about $1,600 for an average household. You're going to see slower economic growth, a slight rise in the unemployment rate. And you're going to raise a lot of risk. And you're going to raise a lot of revenue. So it's in some ways, it's not that different than what we've been talking about before today. Do you suppose, sorry, this goes a little sideways and I wasn't planning on going here, but the Federal Reserve has been saying, by and large, look, we think tariffs are going to be a one and done thing. It's going to pass through the economy and then they're not going to have a

continuing effect. Does this change any of that? You know, the biggest open question with tariffs has never actually been the literal impact of tariffs. It has been how much does the uncertainty surrounding tariffs cause economic activity to slow and prices to go up? So if you're concerned about uncertainty and the effects that it has on the economy, we know what uncertainty does to economic growth. It's not good. then today certainly doesn't make you calmer about the direction the economy's been heading in. Now, on the other hand, the American economy's been able to overcome a lot before. It will certainly be able to overcome a lot again.

I will also say, you know, you didn't ask me about this, but we got the personal income report this morning. And we saw year over year that people's real disposable income was sort of heading towards zero. And so you are seeing a consumer that's under pressure. You're seeing a relatively low saving rate. You know, at some point, these things really do start to bite. So, all right, let me ask you about the next six months, but I'm not going to do that. I'm going to give you 30 seconds to answer this question. There are, give or take, $150 billion worth of these Aipa tariffs out there that now have to be refunded.

Companies, of course, are already in court trying to get these things refunded. It's not like I'm going to get back the two and a half bucks that I see. spent on that, you know, case of soda I bought or whatever, right? That's the, it's not coming back to the consumer, none of this money. Uh, no. And I should say that Secretary Bessent was out there today saying that they don't think that refunds are going out in general. This is something the Supreme Court left kind of open and it's going to be messy and we'll have to see what happens with refunds, how quickly they go out. I should also say, you know, if you are a business who has already raised your prices, passing tariffs onto consumers. Yes, tariffs may have temporarily come off,

but it looks like tariffs are going back on. Right. Why would you adjust your prices? So for the consumer, this is not necessarily good news. It is not at all. Martha, thanks so much. Thank you. There are, of course, a whole lot of layers to this tariff ruling, how it's going to affect the economy, as Martha and I were just talking about, how it's going to affect businesses and consumers. and also how it's going to affect the people who are deep in the nuts and bolts of it. That's why we gave Gretchen Blau a call. She's a customs brokerage manager at Logistics Plus. She's in Erie, Pennsylvania.

So my first thought was, uh-oh, what are we going to do now? And how are we going to implement this? And when will any kind of instructions be coming for how we implement this and the like so that our importers can get their refunds? We're kind of in a holding pattern until we know. how this is going to take place, if it's going to take place, when it's going to take place. I think I need to let it settle a little bit and to see, you know, what's going to be involved, where things are going. I mean, I'm happy. I'm definitely happy for our customers. Don't get me

wrong. Absolutely happy for our customers. I've watched a lot of customers struggle to not only understand to get together the information and to pay the duties. Definitely happy for them. just a little bit cautious about how things are going to go and making any plans until we have the details necessary to do so. Wall Street today, I don't want to say traders didn't really care about the tariff ruling, but they kind of didn't. We'll have the details when we do the numbers. Global trade is a complicated beast indeed, one that the president, as we are all only too well

aware, it takes a special interest in. And on that topic, we learned yesterday the trade deficit barely budged, despite President Trump's now mostly ruled illegal tariffs. You remember, his theory was and is, that higher import taxes would get companies to make things here and get consumers to buy those things that were made here. What the tariffs have done, in point of fact, is mostly weaned American consumers off Chinese goods. Imports from that country are down about 30 percent. Or are they? Marketplace's Kristen Schwab, explained. means trans-shipping. In the most basic sense, trans-shipping is like commercial air travel,

says Pavon Joshi, chief strategy officer at the supply chain platform E2 Open. If we have a direct flight, we'll take that, but if we don't have a direct flight. Or if we want to save some money, we connect through an airport. This practice of trans-shipping, good stopping for a layover before they come to the U.S., is almost as old as global trade itself. But Ibehi-I-Yoha, a professor of business administration at Harvard says there's been an uptick in trans-shipping with tariffs. That creates an incentive to pretend that goods made in China were really made somewhere else. Pretending is very much illegal, but companies get away with it because customs fraud cases are

complex to prove. Ioha says there's also a legal way to use trans-shipping to avoid tariffs. I might import a finished good from a different country, bundle it with something else that I'm producing and then sell them together. A manufacturer might ship components from China and assemble them in Vietnam before importing the product to the U.S. Julie Niederhoff, a professor of supply chain management at Syracuse University, says in that case, the company could claim Vietnam as its country of origin and avoid Chinese tariffs if the product has undergone a, quote, substantial transformation.

Problem is, there's no clear definition on how we define. and categorize that substantial transformation. Trade law would have to define what that means for every product, from bikes to furniture to construction equipment. And experts say, as long as the rules are murky, and as long as we have different import taxes for different countries, trans-shipping is a part of the supply chain. I'm Kristen Schwab for Marketplace.

There's a whole bunch of tariffs that were not struck down this morning, as Martha and I were talking about, including some from the first Trump administration. And there are more a comment if the president is to be taken at his word. So we called April Hemah's earlier. She's the corn and soybean farmer that we know out in Iowa. April, April, April, April, April, April, April, April, April. You know, Kai, this is what I want someday. What's that? I want to just sit back and open a beer.

and just have a chat with you with nothing going on in the world. But that would be so boring. All right. So look, on the theory that you got this news before you opened a beer, what were your first thoughts? Number one, it didn't surprise me. I thought he was overstepping anyway. Number two was, what's this going to do to my grain markets now? And they're not reacting.

It's almost a shrug. So that was my first reaction. You know, now what? Yeah, well, we should point out here that there are a bunch of other tariffs still in effect when the president talked about that this morning. So net net for you is today kind of a wash, right? Yeah, I mean, and I talked to some other, of course, this went through my farming text. Yeah, of course.

You know, we're all like, okay, you know. So I don't think it was a surprise to us and we're used to the tariffs because, you know, I don't even think they ever came off from the phase one agreement with China. So, you know, my big takeaway and I was watching, I had somebody send me an outtake is, you know, he said, well, I paid the farmer bridge payments with these tariffs. Well, that's not true. It was in the one big, beautiful bill act. So all the farmers out there, don't worry, you're going to get paid. Right, right.

It's that $12 billion. But look, let me ask you something about China and phase one, which is obviously from the first term. and now they were going to buy a bunch of ag stuff. That Chinese market now for you all is basically gone, right? Well, it's greatly diminished. There's no stability in our ag markets anymore. The markets, they're not acting like they usually do. And with one social media post, it can go up or down 60 cents.

But the fact of the matter is that China's, you know, population is decreasing. They've really modernized how they feed their lives. livestock. The other big thing is, is we are not competitive with Brazil. They can sell them beans much cheaper than the U.S. can. So, you know, that's what puts us in a tough spot. The president said today, and we played this clip up at the top of the program, he said, you know, great certainty has now been restored to the American economy. And I guess I wonder what you think of that, because you're having to plan that. I just covered my mouth not to giggle.

Okay. Okay. Right? How do you, how do you, how do you? How do you plan when, you know, one of his tweets or social media posts can turn everything upside down? Well, it can. And then, and what I've told people is that could be our profit margin in farming now. And, you know, I just read something with the tariffs gone, oh, the inputs, our inputs will go down. No, they're not. Yeah, that's not what happens. I don't see that coming down.

No. No, that's not the way it's going to happen. And then quite honestly, most of us farmers are going to start planting here in a month or two. And, well, they're already paid for. So 2026 is not looking any better, if not worse, for farmers in agriculture. So, yay. You remember that place? You remember that place we went for lunch when I was out there?

Yep. Yep. Gorder service. There you go. Yeah. Let's see. What time is it where? So if you go by this afternoon for a beer or whatever, what's the vibe going to be?

What are people going to be saying? Oh, boy, that's a good question. Probably not much. It's like, okay, now what? Is what we've been saying all along, you know, from, I mean, I go all the way back to when President Carter put the sanctions on Russia and the wheat embargoes and things like that. And I remember my dad complaining. and, you know, as farmers, we're used to having our commodities be the middle of these trade wars because that's what the other countries want and need, quite frankly.

So it's just really evolving the whole world trade and where, especially soybeans, sit because of the emergence of South America and what they can do. Well, April, we'll talk to you, I guess probably a couple of months. We'll see how things shake out, all right? Now go shovel your driveway or whatever you got to do. right? All right. Talk to you soon.

All right. Coming up. So far, I've gotten nothing. It's been crickets. We've all been there, my friend. First, though, let's do the numbers. Dow Industrials picked up 230 points. Today, about a half percent, 49,625.

The NASDAQ gained 203 points. That's 9 tenths percent, 22,886. The S&P 500 added 47.6%, seventh percent, rather 69 and 9. For the week, the Dow rose about a quarter percent. The NASDAQ added one and a half percent. The S&P 500 picked up one and a tenth of one percent. Amazon expanded 2.6 percent.

Today, Walmart dropped about a percent and a half. Home Depot, up 1 percent. Apple climbed one and a half percent. HVAC service provider comfort systems. Blue past earnings estimates in the last quarter for the year. About a billion dollars worth in profit, the CEO said. Unprecedented Demand. The Comfort Systems USA, ticker symbol, F,

IX heated up 6.5% on the day you're listening to Marketplace. This is Marketplace. I'm Kai Risdon. I bet you thought we forgot, right? Our usual Friday wrap-up of the week gone by. Oh, ye of little faith. There is, in fact, much else to talk about. David Gurra is at Bloomberg, Rachel Seagulls at the Washington Post. Hey, you two. Hey, Kai. Hey, Kai. All right, so on the theory that you two have been listening diligently along to our discussion of tariffs in the preceding at 19 and a half minutes.

Gora, you get to go first. Here's a freebie and a softball. Quick thoughts? Yeah, I mean, I heard Martha Gimble say she feels less certain about tariffs. I think a lot of companies and countries probably feel the same way. They're going to wait to see how all this plays out. And I think that question about refunds is going to loom large here, $170 billion worth of tariffs collected, how businesses are going to get that back.

What's going to happen with these suits? And then, you know, I'm thinking about the role that that's played. in the administration's justification of the policies they've put in place outside of trade over the last year. I mean, the country, as seen by President Trump, is counting on that money coming in. So what does it mean for the United States' fiscal house is just a huge question? So uncertainty about those refunds, then just this kind of not alphabet soup, but numerical soup of tariffs he plans to put in place, the 122s and the 301s, the 232s. I just think we're going to be swimming in this fog for quite a while. We are indeed, and let me apologize to listeners in advance.

Rachel Siegel, same question to you, quick thoughts or, you know, eight-hour old thoughts, whatever it is. No, I agree with everything that was said above. And also, you know, Kai, earlier you touched on the Fed. Like, how do you model this? You know, so much of what Chair Powell says is that they can put in their forecasts and pencil in their estimates for what's coming based on the information in front of them in that moment. And, you know, now if the Supreme Court has the ability to pretty drastically overhaul what the, that information going into those forecasts looks like. I guess I'm just so curious about how the Fed is both going to continue to explain its own expectations for inflation and also just what this continues to do to our ability to model anything and have any sense of what's coming if we're trying to have it with some sort of data-driven information. Right, exactly. So, David, let's get into

the data that came out today. PCE, which is, repeat after me, the Fed's preferred measure of inflation came in today. I was going to jump in and say it. I beat you too, pal. Come on. I know there There's a lag on the line, but you've been around long enough. You've got to know it's coming. Kim me today, 3% the core number. What do we do with that? Inflation's going the wrong way. The labor markets, what do you do?

Yeah, I mean, I think that it leaves the Fed in largely the same position that it's been in, which is kind of flummoxed as the economy continues on the pace that it has been. And as Martha pointed out at the top, you know, real disposable income has really been drifting lower. Saw that in the numbers that we got today as well. Look, we're at this really kind of critical and interesting moment where Jay Powell has two meetings left. There is this era parent nominee to be the next Fed chair. We're sort of waiting for that transition and leadership to see what happens here. But I'm going to keep talking

about the fog that we're in right now. I think that from a policy perspective, we're kind of fumbling through this. And, you know, I think there isn't really still a clear answer of sort of what the Fed's approach is going to be here in the months ahead. Rachel, here comes a curveball, and I apologize for doing this to you on live radio. But you know that game we used to play called What is Jay Powell thinking in five words less? going to say that. It will soon be what is Kevin Warsh thinking in five words or less, so you get to be the first player of that game. Go. Oh, no. I mean, if I were Kevin Warsh, which I am so obviously not, I just feel like it's telling, you know, it's going to be telling what Chair Powell says. You know,

he's going to sort of set the table for how the Fed is thinking about not just this decision, but the information in front of them. And yes, Kevin Warsh is going to be new, but he's going to be stepping into an economy that already exists and, you know, a set of forecast that already exists. And I think that that sets up a kind of test for him about how much he pivots from that. You know, he's going to come in with his own biases and own opinions and information like anybody would, but he's also coming into a table that's in many ways already set for him and with certain expectations about how the Fed's supposed to react to that. And so, you know, I think he's going to have some studying to do based on the two press conferences

that Chair Powell has left. and then he's going to be handed the economy that Chair Powell's, you know, leaving in the sense of the end of his current job. That was way more than five words, Joe. It was like 200 words. Oh, it was. I don't even know what there was. That was like a fully formed paragraph. But, David, let me pick up on something she said in the middle of that 200 words, which is that he's coming in, Warsh is coming in new.

I didn't actually want to get into the Fed today, but he's new, but not new, right? He's got a track record. He's been making speeches, and he's been on the board of governors. Yeah. So here's five words or fewer. This won't be easy. And I think he's somebody who's talked a lot about reforming the Federal Reserve over the course of his career. Yes, at the Fed, but outside of it, I think he's probably gunning to do that when he gets in.

But as you've talked about, as we've talked about, a Fed chair is one member of this larger committee. And I think that what's going to be the steepest learning curve for him going into that job should he be confirmed is learning how to manage that committee. And who knows who he'll be able to pull onto his side to take them where he thinks they, should go. But I think everyone needs a reminder. Despite what the president says, the Fed chair has all of his power, it really is a managerial position, and he needs to get folks on board with him and his ideas. The always grammatically correct, David Gurra, five words or fewer. Rachel Siegel, the last question goes to you. It's about the growth in this economy. Come on, man. I've known you for too long. Gross domestic product came out today. Fourth

quarter of last year, slowed drastically 1.4%. The shutdown took some of that off. But for the year, 2.2% not so bad given the chaos, right, Rachel? You got like a half a minute. Okay, a little under expectations, but not terrible. And I think it's a reflection that all of these things that we're talking about matter, right? They add up, the tariffs add up, the shutdowns add up, consumer spending adds up. And eventually we get a snapshot of what that all looks like. And that helps tell us, you know, how the economy is faring with all the uncertainty that it's

shouldering at the same time. Rachel Siegel at the Washington Post, David Gura at Bloomberg. Thanks you, too. Thank you. Have a nice weekend. of today's Supreme Court decision for now. Wesley Rule, he and his wife Lauren own Knoxville Fine Violins in Knoxville, Tennessee. Everything seems so uncertain. You know, it sounds like good news kind of on the surface possibly because if I can get instruments for lower prices, then I can

offer them at lower prices to my customers, which would be great. However, you know, I don't actually know if my distributors will lower prices. So far, I've gotten nothing. It's been crickets. A lot of my distributors are probably holding their breath as to whether or not they're going to see any kind of reimbursement or if prices are actually going to lower or if they're going to keep the tariffs in place using some other law. I do have some rather large orders being purchased by school districts, so they may want to wait to make those purchases until we can affirm whether or not they can get lower prices. If we get the opportunity and the prices do fall, I I'm hoping they will.

We will eventually definitely stock up on some bases. Double bases have been particularly difficult to get. Their prices have gone up substantially since tariffs have been put into place. We're very short on those. I didn't stock up on bases when I stocked up on instruments. So we will probably have our eye on those. Double bases. Who knew?

Wesley Rule. He and his wife, Lauren. Knoxville Fine Violins is their store. Knoxville, Tennessee. This final note on the way out today in which I hate to rain on today's illegal tariff parade, but since April mentioned it, and Wesley Rule did too, Martha Gimble talked about it. I need to make sure you all don't miss this. Prices, the overall price level, just because some tariffs went away,

they're not going to go down a whole lot. And if they do, it's going to take a long, long time. That is just the way price levels work. They go up. They don't really go down. Our theme music was composed by B.J. Lederman. Marketplace's executive producer is Nancy Fargolly. Joanne Griffith is the chief content officer.

Neil Scarbo is the vice president and general manager. I'm Kyle. I'm Kyle. I'm Rizdahl. Have yourselves a great weekend, everybody. We will see you back here on Monday. All right? This is APM. Want even more Marketplace? Sign up to receive weekly tips from our editorial team to help you make the most of your money. Plus, you'll also be the first to know about exclusive Marketplace merchandise and local events. Text Marketplace to 80568 to sign up.