The Daily - You Have Questions About the Economy. We Have Answers.

Episode Date: May 5, 2025

At a time of enormous economic upheaval and uncertainty prompted by President Trump’s trade war, we asked our listeners what they wanted to understand about this financial moment.Ben Casselman, the chief economics correspondent for The New York Times, tries to answer some of those questions.Guest: Ben Casselman, the chief economics correspondent for The New York Times.Background reading: The U.S. economy shrank in the first quarter, in a reading clouded by messy trade data.Video: How Mr. Trump’s shifting tariffs could accelerate a recession.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday. Photo: Angela Weiss/Agence France-Presse via Getty Images Unlock full access to New York Times podcasts and explore everything from politics to pop culture. Subscribe today at nytimes.com/podcasts or on Apple Podcasts and Spotify.

Hi, Michael and everyone at The Daily. Good morning. Hey. Hi, Daily. Hello. From the New York Times, I'm Michael Bobarro. This is The Daily. I had a quick question about Trump's tariff policies.

I have so many questions. I'm struggling to choose priority. At a time of enormous economic upheaval and uncertainty triggered by President Trump's trade war. We asked you, our listeners, what you want to understand about this financial moment. How many American businesses will even survive this? What can actually be done to bring down the cost of goods? No matter how big. The first is whether or not the American dream is feasible in the next coming years.

What can I do to prepare for uncertain catastrophe? Or small. How will this affect Parmesan cheese? I love Parmesan cheese. Today, my colleague, Chief Economics Correspondent Ben Caselman, tries to answer those questions. Please help me understand. Are we going to be okay? The people need answers.

It's Monday, May 5th. Ben, always a pleasure. Michael, thanks for having me. You know, we're going to do something a little bit different here. I hear it's not just us that we'll be hearing today. No, not just us. And I think a little backstory is in order. We came to you, as we do, with some, I suspect, annoying frequency, to ask you how to think

about the economy and when we talked to you last week You said sure there's a ton going on in the economy because of everything that President Trump has done to the economy But that just looking at the raw data. Nothing much has changed since we last spoke with you. Maybe a couple weeks ago but everyone we know is feeling something very acute in their financial lives. And it felt like we needed to listen to that. And we thought, what if we hand our microphone to our listeners and just acknowledge how many people have questions

and anxieties, worries, concerns that they want to get answers to? I love this. And I have to say, I hear all the time recently from friends, from family, from long lost acquaintances who are asking me these kinds of questions. And we're all spending our time asking these questions because like you say, it's not that clear in the data yet, but clearly something is happening and we're all trying to figure it out. Exactly. So we put a call out to our listeners for their questions and they showed up in

force. Hello, my name is Elliot Yeager. I am 22 and I'm living in Boston, Massachusetts. I'm 29 years old and I live in Houston, Texas. I'm 67 and live in White River Junction, Vermont. I am 55 and I live in California. Hundreds and hundreds of questions. From Indianapolis, Indiana. From New Orleans, Louisiana.

From Olympia, Washington. Came our way in the form of voice memos. It's not going to surprise you to hear that a lot of those questions revolve around tariffs. I'm not surprised we're getting these questions, and I will do my best. But frankly, the policies have been changing at such a speed that I don't know if by the time listeners hear this we won't have had another round of changes. So I will do my darnedest but bear with me. Okay.

Caveat accepted. I want to start with a question that I think really encapsulates listeners' curiosities around the tariffs. Hi, New York Times. My name is Sarah. I'm 27 years old, living in Saginaw, Michigan. My husband and I are expecting our first baby in October. My question today pertains to tariffs. Is there anything that new expecting parents can do to prepare? I'm worried about not having supplies for my baby, empty shelves, and the cost of goods greatly increasing, especially those from China."

What do you have to say besides Mazel Tov? I was going to say, first of all, congratulations. You know, we normally think of tariffs as being mostly about higher prices, and they are for sure. But they can also be about the availability of goods. And when we talk about goods from China in particular, right now, President Trump has imposed 145% tariffs on products from China. And you talk to some businesses, I talked to a toy manufacturer recently who said, at

a certain point, 145, 150, he said, a billion percent. It doesn't matter. I cannot pay that. And so there's certain things that just may not come in. Baby goods are a prime example of this. A ton of our strollers and cribs and other baby equipment comes from China. And a lot of that is not gonna come.

Now, look, eventually, right, people will figure out workarounds. It's not like no crib will ever enter this country again. But you know, babies famously come on a timeline. Sarah can't- Sometimes ahead of time. Sarah can't presumably just say, you know, nevermind, we'll get the crib sometime next year.

And so this is a situation where really the idea of trying to get something now before the tariffs make it impossible to get at any price is something I think we're going to see a lot of people starting to think about. I think a reasonable question and it's implied in Sarah's question is, is it okay to kind of panic by now? We all know what happens when lots and lots of people decide to do that collectively at the same time. That's what happened during the pandemic.

It can actually be pretty counterproductive and yet entirely, in this case, understandable. Yeah. I mean, look, we saw in the pandemic how complicated supply chains are, how small disruptions can filter through in unexpected ways. Look, I don't think you need to rush out and buy a year's worth of socks right now necessarily. But it's probably not a bad idea to buy a crib. You know, look, cautious about giving specific advice to a specific person, but yeah, I don't

think it's crazy to say I better place that order for the crib now even though I'm not going to need it for a little bit. How likely are empty shelves? I believe that both Walmart and Target have found a way to warn the White House that that could be a thing. Not totally empty shelves, but not really full shelves either, if the tariffs against China remain in place. Well, we heard President Trump functionally acknowledge that recently when he talked about

you may go to the store at Christmas, at the holidays, and the toys you want to buy may not be there. They may cost a lot more. There may be fewer presents under the tree this year. That is not the normal political messaging. For most goods, we're going to be talking about higher prices rather than just lack of availability. Interesting.

But a huge percentage of our toys come from China. You could easily see a situation where some toys are simply not available or are not available in nearly the numbers that we would expect this fall. All right. Let's turn to a set of questions we got about housing. Hi, this is Anna. Hi, this is Lucy. My name is Mike, I'm 55 years old, live in San Antonio, Texas. And my question is, how or if tariffs will affect US interest rates

and building supply costs? My wife and I are considering constructing a new home on a piece of property that we own. I saved enough money to pay for a down payment on a house. What could happen with interest rates if there's a chance they might go down or if they could even go up in the next couple of years? But with the economy where it is, is that a crazy thing to do right now? Thank you.

A lot of our listeners, and I frankly didn't expect this, asked questions about what the trade war and all that economic disruption means for buying a home. And I think people are intuiting that tariffs could increase inflation, and they know from you Ben and your many appearances on this show, that when inflation gets higher and higher the tool that the government uses to bring it down is that they raise interest rates, which raises the cost of that 30-year mortgage. And therefore, the question really becomes,

do tariffs of the kind that are now in place almost ensure a costlier housing market down the line? Yeah, so let's take a quick step back here about how we got here with housing. It was hard to buy a house before the pandemic, but then housing prices just soared during and immediately after the pandemic, right? Everybody rushing out to get more space, interest rates were super low. Then all of a sudden we get inflation, interest rates soar, so that makes it even harder to

buy a home. And the hope coming into this year was this would finally be the year that things sort of started to settle down a little bit and the housing market could start to get back to some kind of normal. That is just not what we're seeing. So first of all, mortgage rates have not come down. They're still hanging out around 7%. That's pretty high.

It's really high. And there's no sign for exactly the reasons that you're talking about that they're going to come down significantly anytime soon, right? If tariffs drive up inflation, the Fed is going to have a hard time cutting interest rates. That's going to keep mortgage rates higher. Also, tariffs are going to directly hit

the cost of building a home. We're talking about lumber that comes in from Canada. We're talking about appliances that come in from China. We're also talking about maybe less labor supply if we deport a lot of immigrant workers who work in construction. So there are a lot of reasons that the cost of building a home is going to be higher and therefore the supply of homes is going to be lower. And so it could be a really tough time to buy a home is going to be higher and therefore the supply of homes is going to be lower. And so it could be a really tough time to buy a home.

That down payment that Anna saved up may not go as far as she had been counting on. We've been talking about big purchasing decisions. For a lot of people, the tariffs have raised this bigger existential question about whether they're going to have a job and what all of this means for the job market. And I want to play some of those questions. I am 40 years old and I have an MBA and I can't find a job. And I'm not alone.

I'm not really sure what's going on with the job market. I keep hearing the phrase the job market is just really tough right now and I'm not really sure what's going on with the job market. I keep hearing the phrase, the job market is just really tough right now, and I'm sure many people in my same position could relate. Why is it so hard for me to get a job, even though I have all the things I have been told my whole life I need to get a job? With everything going on right now,

what does the job market look like for those of us graduating college within the next year or so? What can you tell us about the job market? And I really want to make sure we acknowledge that final question about folks just coming into the market. So I hear this a lot from people right now. And at first, it might sound a little surprising when I say by some measures, the job market

looks pretty good right now. The unemployment rate is low. We hear about some high profile layoffs, but layoffs in the aggregate are still pretty infrequent. And so if you have a job right now, at least at this moment, it looks like things are kind of okay. What we also know is that it's a hard time to be looking for a job.

And I think that's what these listeners are getting at. Why? So a lot of it has to do with this uncertainty that we're in right now. Companies are trying to figure out what's happening in the economy and where things are going. They're not in such bad shape that they're cutting jobs, but they're also very reluctant to hire. And so it's this sort of stagnant labor market where if you're trying to get that foot in the door or you're trying to get that next step up in your career, it could be really tough because all of these businesses are out there just saying, let's hold off and see where things are.

We'll touch base again in a few months. If the tariffs were to settle into a more permanent seeming dynamic, would that uncertainty start to dissolve and could hiring start to go up? Or is the reality that a settled tariff situation is probably going to lead to higher costs for businesses and therefore that won't be the case? So it depends a little bit on what we're talking about when we talk about tariffs, right? If we talk about 145% tariffs on everybody, that's going to be a very bad situation for a lot of companies. But yeah, the uncertainty is a really big issue here.

On some level, businesses can navigate a difficult environment if they know what it is that they're going to be facing and they can make appropriate decisions. But when you don't know, when one day the tariffs are on, the next they're off, one day they're on China but not on Europe, the next day maybe that flips, and it's not just tariffs, right? It's everything we're hearing around federal job cuts and doge. It's everything, the uncertainty around immigration policy. All of this makes it difficult for companies to make decisions.

And so a lot of companies are on hold. One possibility, right, is we eventually get some certainty and companies start hiring again. But there's another very real possibility, which is that eventually they do start cutting jobs. If we see these tariffs hit, if we see consumers pull back, if we see a real slowdown in the economy, companies won't be on hold

anymore. They'll be cutting jobs and we'll see unemployment rise. Okay. On that note, Ben, we're going to take a break. And when we come back, we're going to answer a bunch of questions we got about what all of this means for the stock market, for people's retirement accounts, their college savings accounts, and their general sense of financial well-being. We'll be right back. Hi to the team at The Daily. Thanks for taking my question. My name is Hannah.

I'm 38 years old from San Diego, California. My name is Hunter Rebel. I'm 31 years old and I live in a small town in Indiana. My name is May. I am 29 and I live in Los Angeles, California. My name is Hannah. I'm 34 and I live in Salt Lake City. As an American in my early 30s, I'm wondering, what should I be doing to protect myself and

build a secure future for my family. Should I be increasing my 401k contribution and buying up as much stock as I can? Is the priority to save money or pay off debt first? I just qualified to apply for a 401k with my company. I've never had a 401k before and I'm wondering is this a good time to open my 401k account because prices are so low. My dad used to work in finance and I feel like he would disown me if he knew we weren't really investing right now because historically over time,

despite any bumps and bruises along the way, the stock market goes up. But I'm just not so sure anymore. What if that trend is over? Ben, first of all, those are great questions. And I think a lot of them are touching on the theme of volatility in the stock market in this moment. Now, whenever we talk about the stock market, I feel like I have to repeat what they say

in all the ads. Trading stocks involves a significant risk of loss. It's not suitable for everyone. Past success is not an indicator of future performance. And we are not, of course, been asking you to give financial advice about the stock market. But how, broadly speaking, do you think about the choice facing some of these listeners about whether to try to potentially profit from the market's swings right now or sitting tight and waiting out these swings in the market's swings right now or sitting tight and waiting out these swings in the market? So yeah, I'm definitely not a financial advisor, and I'm definitely not in a position to tell

anybody specifically what to do. But look, I think you're right, that that is underlying a lot of these questions. And it's interesting to me, right, a lot of those questions sounded like they were coming from people in their 30s, even younger than that. If you're in your 20s, if you're in your 30s, you've mostly experienced a stock market that has been rising. You've had some dips along the way, but it bounces back relatively quickly and we hear buy the dip, right? Stocks fall like, great, they're on sale.

Let's buy them up and profit from it. That's worked out pretty well over the last few years. It doesn't always work that way, right? Stocks historically have gone up over time, but over time is a really important caveat there. The standard financial advice is don't put money into the stock market that you need in the next couple of years,

and put money in that you can afford to risk and don't try to time the market. If you're sitting here saying, like, should I start my 401K? Start your 401K. We heard from folks who are in the unique position of having saved up a good amount of money for their children's higher education in something like a 529 educational savings account and discovered that this is the moment they need it and that because of the trade war, the stock market has gone down. And I want to play you a question from one of those listeners. Hi, Michael. My name is Tracy Church and I live in Louisville, Kentucky. And I'm a single mother. I'm a healthcare worker. I had saved enough for my daughter

to go to a four-year institution. She graduates next week from high school. Next week from high school, you know, I worked my tail off to get money set aside for her. And I took a look at two of the 529s that I had for her and they had decreased dramatically because of Trump and the tariffs and everything. And it's just heartbreaking. and the tariffs and everything, and it's just heartbreaking. And my question about the economy is, how bad is this going to affect our kids' college funds? Thanks for listening. What do you have to say to Tracy?

Well, first of all, oof, it's a tough situation, and I think it's a reminder, you know, we sometimes say the stock market isn't the economy, it mostly affects rich people, you know, most of us have money in retirement savings, in college savings, right? There are real consequences to what happens in the stock market, not only for rich people. I will say, I don't know when Tracy looked at her 529 account, but there was a moment when the market was way, way down. I think it was off 20%. Yeah, it was brutal.

It has come back up since that sum. I make no prediction about where it goes, but it may be worth Tracy's while to take a look and see where things are now, because you don't necessarily have to keep all that money in the stock market, right? You can keep it within that 529 plan and put it into something a little bit safer, which if she needs the money soon could be a safer bet.

But I think that the larger point here is this is painful, these are real consequences and not everybody has the luxury of just saying, oh, if we wait a while, things will get better. We've heard a lot from the president about, oh, short-term pain is gonna yield some sort of long-term gain, but if your kid's going to college today, if your baby is due in a few months, right, you can't necessarily plan your life for the long-term,

and that's a real pain point that a lot of people are going to be experiencing. Right. But despite how worried so many of our listeners are about what tariffs are going to mean for cost, product availability, car purchasing, home purchasing, job market, a fair number of folks asked us what it would be like for the tariffs to accomplish what the president has said that he thinks they could, which is to bring back domestic manufacturing. Now here, I know you, you're about to tell me that mainstream economists of all political

stripes have a lot of doubts that tariffs can bring back domestic manufacturing. But I think what listeners are trying to understand is, what would be the impacts of a renewed U.S. manufacturing base? So I would go further. I don't think it's just that mainstream economists have doubts. I would say virtually all economists are beyond skeptical, to the point of sort of dismissing that the possibility that tariffs, at least as they're being imposed here,

could have that effect. It's not clear that even if you brought back manufacturing production, it would bring back, A, that many jobs, because there's a lot of automation, or B, that the jobs would be all that good. I think the skepticism comes from the idea that these policies could actually achieve those ends.

Because they've actually made the cost of bringing manufacturing back so high. You've said that to us in the past. Business folks are basically telling you the current tariff scheme introduced by Trump is an impediment to bringing manufacturing back. Because you can't turn this around on a dime. It takes time to build a factory. It takes time to reorient supply chains. Right now, even a factory here is probably using goods that are brought in from overseas. That can't change overnight. Rather, they're just going to end up shutting down a lot of manufacturers. Ben, as we come to the end of the conversation, I want to acknowledge that a big thread

running through a lot of the questions we got was an even deeper worry about what might happen. And a lot of people named it the R word. Let me play you some of those questions. Hi, my name's Holly. I'm 19 and I'm from New Jersey. And I keep seeing things online about recession indicators, some serious and some jokes, all relating to the tariffs. And I guess my question is whether all this widespread talk about a recession would affect demand and actually worsen our probability of a recession actually

occurring. Good morning. My name is Cynthia Janzora. Now seeing the way the stock market is seesawing, we are terrified. Is a recession coming? Therefore, keep our money close to the pocket and not spend it whatsoever? We just don't know. Hi, New York Times. My name is Molly. I'm a 25 year old teacher from Chicago. And all

I've been hearing about and reading about from various news agencies is that pretty much every economist thinks that we are headed for a recession. So, one, are we going into a recession? Two, what are the indicators of how bad it is going to be? And three, what can we do to keep it from being as disastrous as the one back in 2008? So, how likely is a recession to be at this moment? And how likely is something potentially even worse than just a recession? So I would say, first of all, even worse than just a recession? So I would say first of all, I don't think a recession is inevitable.

For one thing, these policies could be reversed again, right? We've already seen a lot of back and forth. It's not clear. The deal could be reached with China. The deal could be reached with China. It's not clear where things will end up. It's not clear that these tariffs would inevitably lead to a recession on their own. I think they're clearly going to lead to higher prices.

They're clearly going to lead to slower growth, but that doesn't necessarily translate into a full-blown recession. And most of the economists that I talk to say that if there is a recession, it has the potential to be a comparatively mild one. This isn't 2008 where we have this huge housing bubble that's then gonna collapse. It's not a global pandemic in the same way. So there's some optimism for you. Now let me undermine it. I would say a couple of things. I mean, one, even a mild recession is really painful for a lot of people. If you lose your job, there can be long-term consequences from

that. It also seems like there are some things about this potential recession or even potential slowdown that could be tougher than some in the past. This combination of higher prices and slower growth is a really tough combination to navigate. And it's also not clear that there's going to be a lot of help there. If you think back to 2008 and 2009, or you think back to the pandemic, we had enhanced unemployment benefits, and we had checks that went out to people. Right. It's not clear that a lot of that help is gonna be there this time around. And then there are the bigger risks that are hard to quantify

and hard to be sure about. But, you know, we've seen some real turmoil in the financial markets over the past several weeks, fears of what's happening in the bond market, fears of what's happening with the dollar. But I think there are real questions that are being asked about sort of the long-term stability of the financial system of the US economy,

the US's place in the global economy. And it's hard to predict where that goes, but at a minimum, you've got to be concerned that we could be sowing the seeds of some much deeper long-run problems that could show up in unpredictable and potentially pretty disastrous ways down the road. Okay, you can't use the word disastrous without telling me what you mean. You know, if you look at what the president has done in his first months in office, he's picked fights not just with adversaries, but with allies.

He's called into question fundamental alliances, military and economic. He has at least floated questions about Fed independence, about the sanctity of the treasury market. There are a lot of hard to pin down, but worrying questions that we're seeing our leading investors, their leading leaders of other countries to start to think twice about the role that the US is playing. And I know that this sort of sounds a little bit esoteric.

I know that this sounds a little bit hard to pin down, and it is hard to pin down. I can't sit here and give you a super specific scenario about what this looks like. But the bedrock of the global financial system for decades now has been that the U.S. is the world's strongest and most solid economy, that it pays its debts, that it meets its obligations. And I don't want to say that that is no longer true, but we have certainly seen some cracks in the confidence in that. On the other hand, one of the realities of an unpredictable moment and an unpredictable administration is that we could also be looking at a scenario in which the tariffs get peeled back,

the stock market starts to inch up, gets back to where it was when Trump took office, and confidence in the U.S. financial system remains relatively high and ultimately unblemished. So, I think it is definitely the case that a lot of the economic damage is still sort of fresh enough that a lot of it could be reversed. I mean, indeed, a lot of it hasn't even shown up in the economic data yet. I do think that there are questions about some of the longer run damage that may have already been done, especially when it comes to just business confidence.

If the president comes out next week and says, never mind about the tariffs, I'm not sure that CEOs are all gonna say, well, I guess we're fine then. I think that there are real questions about, well, but could the tariffs be back again a week later? Like, if you can't trust that the rules are the rules, that makes things difficult. And so on the one hand, yes, I don't think a recession is baked in. I don't think that the die is cast. But I also am not sure we can say everything can just return absolutely to normal. I do think that we have already seen real changes that are not just going to disappear.

Well, thank you, Ben. On behalf of all of our listeners, we appreciate it. These were great questions. Thanks for having me. Thanks for having me. On Friday afternoon, U.S. stocks led by the S&P 500 erased the deep losses that they suffered in the days after President Trump ruled out his tariffs on April 2nd. But the increase in stock prices comes despite warnings that the tariffs could spark a recession, and it's unclear what the next few days and weeks of trading will ultimately bring.

We'll be right back. Here's what else you need to know today. Your secretary of state says everyone who's here, citizens and non-citizens, deserve due process. Do you agree, Mr. President? I don't know. I'm not a lawyer. I don't know. I'm not a lawyer. I don't know. Well, the Fifth Amendment sets the stage.

I don't know. It seems, it might say that, but it doesn't. In an interview with NBC broadcast on Sunday, President Trump questioned whether every person on American soil was entitled to due process, something the Fifth Amendment guarantees, and said that he did not know whether it was his job as president to uphold the Constitution. Don't you need to uphold the Constitution of the United States as president? I don't know. I have to respond by saying again, I have brilliant lawyers that work for me.

And they are going to— The exchanges help explain the administration's aggressive approach to deportations and its decision to ignore a Supreme Court ruling to facilitate the return of a migrant living in Maryland who was mistakenly sent to a prison in El Salvador without due process. And, a forthcoming book reports that before President Joe Biden was forced to quit his campaign for re-election, his aides debated having him undergo a cognitive test to prove his fitness for a second term. But those aides ultimately decided against the idea.

The account highlights the degree to which Biden's own aides worried about his age and mental acuity, even as they publicly supported Biden's decision to seek a second term. Today's episode was produced by Diana Wynn, Olivia Natt, Sydney Harper, and Will Reed. It was edited by Mark George, Chris Haxel, and Patricia Willens. Contains original music by Alicia Baitu, Dan Powell, and Rowan Imisto. And was engineered by Alyssa Moxley. Our theme music is by Jim Brunberg and Ben Lansford of Wonderly. That's it for the Daily. I'm Michael Baboro. See you tomorrow.