Title: The Latest on the Trade War With China

Brian Lehrer: It's the Brian Lehrer show on WNYC. Happy Monday, everyone. Now, don't be ashamed if you're confused about the economy right now and you aren't sure what you'll be able to afford to buy for the rest of this year or what your business will be able to afford to sell. That might now include movie tickets with the latest tariff threat. We'll explain if you haven't heard that one yet. The whole last week has been about as confusing an economic week as there could be, not the least of which because President Trump, who got elected to bring down inflation, remember, was celebrating the idea of buying less stuff for your kids but paying higher prices for it. Here's that clip.

President Trump: They made a trillion dollars with Biden, a trillion dollars, even a trillion one with Biden selling us stuff. Much of it we don't need. Somebody said, "Oh, the shelves are going to be open." Well, maybe the children will have two dolls instead of 30 dolls, and maybe the two dolls will cost a couple of bucks more than they would normally.

Brian Lehrer: The trillion dollars reference was about how much stuff Americans buy from China, but we'll talk about the fewer dolls at higher prices theory of making America great again, a kind of inflation he didn't even try to claim was temporary. It's not just that. That's not the only reason you might be confused. The government stats that came out last week, you probably heard some of this, showed the US Economy was shrinking, that means headed toward a recession, but the opposite of what you'd expect in a shrinking economy, the number of jobs last month went up, and Wall Street last week recovered almost all its April losses.

Remember when Trump imposed all those big tariffs on April 2 and declared it Liberation Day, and most of what happened was that stocks got liberated from their values and sank by more than a trillion dollars? Well, they're back, partly because Trump withdrew his threat to fire the chairman of the Federal Reserve Board and totally politicized interest rates, partly because he might be winning around in his trade war with China, and partly for other reasons.

Wait, there's even more to be confused about. Jeff Bezos has decided not to go through with an idea of Amazon showing you on its pages how much the Trump tariffs are boosting the price of that thing you want to order, but some other retailers are starting to at least announce some of that. Do you want to know? Is it fair to Trump if they didn't show you that for other causes of inflation in the past? We'll take your calls. There's Commerce Secretary Howard Lutnick, who may be confusing you about the meaning of the American dream. Apparently, for him, it's not upward mobility for the masses as we usually think of it. It's you and your kids and your grandkids, all those generations of your family working at the same factory job.

Secretary Howard Lutnick: These are tradecraft. It's time to train people not to do the jobs of the past, but to do the great jobs of the future. This is the new model where you work in these kind of plants for the rest of your life, and your kids work here, and your grandkids work here.

Brian Lehrer: Yes, but those grandkids will have fewer dolls at higher prices, remember? Is your head exploding yet? Then to make it personal, there's Kimberly Adams from Marketplace and the story of how tariffs affected her mother's birthday party. Let's bring her on. Kimberly Adams, as some of you know, is senior Washington correspondent for Marketplace and the co-host of the Marketplace podcast Make Me Smart.

Some of you may remember, she and I were co-hosts of three national call-in specials that we did before the election, comparing Donald Trump and Kamala Harris on three different drivers of inflation, housing, medical bills, and the care economy. Hey, Kimberly, nice to have you with us again. Welcome back to WNYC.

Kimberly Adams: Thanks for having me. I'm glad to be back.

Brian Lehrer: There is so much that is such a jumble of things to be confused about. Let's start with one person's story. The story of your mom as you told it on your podcast, and the party favor she wanted to buy. What happened with your mom and her birthday party plans?

Kimberly Adams: My mom has a big milestone birthday coming up, and she wanted some fans for the party. We went to go look on Amazon and found where we could get like 300 of them, and of course, they're coming from China.

Brian Lehrer: You mean these little, like, handheld fans that are-- you wave them and they're almost like toys?

Kimberly Adams: Not exactly. They're more fans that you might use for like line dancing and things. There's a popular dance going around using a fan that my mom really likes, and so she wanted these fans to teach everybody the line dance for her party.

Brian Lehrer: Neat.

Kimberly Adams: Yes. It could be really fun. She found some fans that she liked, and we ordered them, but I was a little bit worried because I saw that the shipment date was going to be between April 28th or May 2nd, and I was worried about them getting in ahead of when this de minimis exemption and tariffs would kick in. I'd been watching it and watching it, and then sure enough, a couple of days ago, the order just got canceled. The whole thing got refunded, and my mom ended up going back online looking for some different fans to see if she could order them again. She was able to find a replacement, but not quite as nice and about $500 more, altogether.

Brian Lehrer: Whoa. What's that representative of? What's the bigger picture behind your mom's story? By the way, happy birthday for whatever this milestone birthday is. What's the bigger picture behind your mom's story of what the tariffs are beginning to cause?

Kimberly Adams: Well, you mentioned earlier about Amazon deciding not to announce on its website whether or not what tariffs were costing as opposed to Shein and Temu, which are being a bit more directing and talking about the consequences and how the tariffs are showing up in consumer prices. It's not like I got a note saying, "Hey, because of these tariffs, your order was canceled," but it's hard not to make the connection with the timing and the price differential and things like that.

One of the things the Trump administration has pretty openly complained about is this idea that Americans are too used to getting cheap stuff quickly, and that that just may need to change in order to bring some of this business back to the United States or even to punish China, depending on which interpretation of what's behind the trade war that you're using on a given day.

I've been talking to my friends and family about different things that they were trying to buy ahead of tariffs kicking in or this de minimis exemption ending. I think a lot of US consumers are looking carefully at what they're buying and seeing. Especially if you're somebody who regularly shops on a Shein or a temu, you're going to see those prices going up. I know that in my family, as we're preparing for my mom's party, things that you may have assumed you could get pretty quickly, pretty cheaply, it's just no longer the case.

Brian Lehrer: Listeners, help us report this part of the economic story. Have you been running up against shortages yet because of the new tariffs, or sudden cancellations of your orders, or sudden spikes in the price from tariffs that have taken effect, or that the companies anticipate will take effect? 212-433-WNYC. Tell us the story of your mom's birthday or however this is affecting you in your life. 212-433-9692, or if you're a seller, Jeff Bezos and other retailers invited to call in. Help us report that part of the story. How are you having to adjust to tariffs here on May 5th, a month and three days after Liberation Day? 212-433-WNYC? 212-433-9692.

For Kimberly Adams for Marketplace, call or text. For anyone, would you like to see Amazon or any other company show on their price tags exactly how much they're raising prices specifically because of tariffs? Would you like that, or do you want to do that if you're in the business of selling things that are affected? 212-433-9692. Kimberly, let's come back specifically to the Trump price of dolls clip. Let me play this again for people who just joined. Again, he starts by referencing how much stuff Americans are buying from China.

President Trump: They made a trillion dollars with Biden, a trillion dollars, even a trillion one with Biden selling us stuff. Much of it we don't need. Somebody said, "Oh, the shelves are going to be open." Well, maybe the children will have two dolls instead of 30 dolls, and maybe the two dolls will cost a couple of bucks more than they would normally.

Brian Lehrer: Kimberly, can you explain what Trump is getting at there?

Kimberly Adams: Well, this is the idea that the administration, and Trump in particular, has been telling, particularly his supporters, to just be patient and to deal with some of these price increases that we know are going to come and maybe even adjust how we think about ourselves as consumers to adapt to this with the larger goals of having these trade policies do what the Trump administration wants them to do.

We've heard a couple of different things that the Trump administration has said these trade policies are supposed to do, these tariffs. Sometimes they say it's to bring manufacturing back to United States. Sometimes they say it's to balance out the trade deficits between one country and another. Sometimes they say it's to help them negotiate better deals on other issues.

The example of the dolls is really interesting because the Toy Association of the United States actually surveyed its members to see what the impact of these almost 145% tariffs on Chinese imports would do. They're saying that it's putting Christmas at risk, with 81% of their members talking about delaying their orders, small toy companies. Mid-sized toy companies, 87% saying they're delaying orders. Almost 80% of these mid-sized toy companies are canceling orders, and close to half of these companies are saying that they could potentially go out of business within weeks and months. People who are in the markets or buying small toys for children might actually really be seeing these changes in a way that even folks in other sectors might not.

I think what the president is getting at there is many of the things that we have gotten used to buying cheaply are often discretionary items, and so the White House is making the bet, it seems, that people are going to be willing to give up some of these discretionary things. There have been advocates and different groups complaining for ages that our reliance on fast fashion and cheap goods from China are bad for the environment, that there are some human rights abuses in some of these supply chains, and so there may be a receptive audience to this argument.

Brian Lehrer: Yes, he's promoting an economic model. I'm not sure that he cares about slave wages in China or environmental impact, but the economic model he's proposing is about higher wages. I'll be honest, and I think you were just getting at this, I think I've heard this argument for decades from the left. American workers would be better off with a higher wage, higher prices on consumer goods economy than the current cheap stuff imported from China's low-wage economy that's arguably been hollowing out the middle class. Would you say there's right-left overlap on this?

Kimberly Adams: In other political environments? I might. In this particular political moment that we're in in the United States, I think it's very hard for people, even when they agree on the actual fundamental fundamentals of a policy proposal, to acknowledge that there is agreement there.

Brian Lehrer: Let's take a phone call. I think we have another birthday party story, Kimberly. This one from Kris in Roselle, New Jersey. Kris, you weren't going to go to Kimberly's mom's birthday, were you?

Kris: [laughs] No. I have my husband's birthday coming up.

Brian Lehrer: Tell me the story.

Kris: I had ordered something for him, and I didn't realize that the company was Chinese because of the name of it. When I finished the transaction, there was something that came up after I completed and paid and everything that said, "Oh, if there's extra charges on this, we'll charge it to your credit card." I'm like, "What?" I emailed the company. I said, "Look, if you're going to charge me extra charges, I don't want it. I need you to confirm that you canceled the order and refunded my money," which they did.

People need to be aware that some of these companies, which just turned out to be a Chinese company, aren't telling you about the tariff charge. They're just accepting the order and hoping you don't see the little fine print that says they're going to charge your credit card if there's extra charges.

Brian Lehrer: This is a new one to me and maybe to a lot of people. You're saying the price that they're charging is not necessarily the final price. If tariffs affect it before you get it, they may hike the price?

Kris: Yes, because I heard her clothing was supposed to start getting tariff next week, so I said, "Well, let me order it now because his birthday is not until next month." I was shocked when that happened.

Brian Lehrer: A pre-tariff purchase from Kris that maybe a lot of people are making, things like that. Kris, thank you very much for telling your story. Kimberly, had you heard that particular wrinkle before, the price that you are being charged online in some cases may actually come with an asterisk that they can hike it before shipping?

Kimberly Adams: I hadn't heard that specifically, but I'm not surprised just because there's been so much uncertainty around what the actual tariff levels are from different countries. Sometimes there's a pause, sometimes there's a rollback, sometimes there's an exemption. The tariff policy has been just so haphazard, it feels, that I can definitely imagine companies trying to build in that caveat.

Now, it'd be very interesting to know exactly which company that was because if you do look at companies like Shein and Temu, they are saying that whatever price you pay at checkout is going to be the price. But then at the same time, you have companies like Temu saying that they're going to stop shipping products from China to the US altogether while this exemption has ended because of this exemption ending. At the same time, these companies have shipped a ton of stuff to their US warehouses, and some of these platforms they're amplifying, "Hey, this is shipping locally," even if it was a product made in China, so they can get around these new tariffs.

That is a limited supply, right? It's whatever they've shipped to the warehouses, what they've got stockpiled, they're going to run through that stuff. You may not see those prices change right away, but it's coming down the pipeline unless the administration decides to pull back some of these tariffs.

Brian Lehrer: Kris the caller asked if clothing tariffs are going to kick in next week. She had heard that. Do you know?

Kimberly Adams: I'm guessing what she's referring to is this de minimis exemption. A lot of people used this exemption which used to say that if the goods were coming in under $800, you could skip some of the paperwork and avoid some of the tariffs and import taxes. That actually expired over the weekend. The fact that a lot of clothing that used to be shipped in more cheaply is going to be tariff, that's already happening. Depending on what country she's talking about, there could be other tariffs where clothing coming in could be subject to additional tariffs. I think it's already all kicked in, but it's hard to keep track. I don't blame Kris for not knowing.

Brian Lehrer: Interesting, so clothing. How about furniture? Two texts that we have, one says they saw Raymour & Flanigan advertising pre-tariff prices and another text says, "My husband and I are moving in a few weeks and finding furniture has been a nightmare." Does this ring a bell, Kimberly?

Kimberly Adams: Yes. Again, a lot of this stuff was coming in under that de minimis exemption under $800, depending on what kind of furniture you were buying. Those things are now going to be subject to additional tariffs. The vast majority of the packages coming into the United States were taking advantage of what the administration has been calling a loophole, and a big concern that the administration has been highlighting is that they were worried that drugs were coming into the country this way, that it was undermining American companies trying to sell similar goods because they could be sent so cheaply without tariffs from China mainly, but also other countries.

Yes, a lot of that is furniture, especially some of this flat pack furniture that you might have gotten on your Temu, or Shein, or Amazon, or even like a Wayfair or something like that. They were taking advantage of these, which allowed a lot of American consumers to get these products cheaply, and a lot of that is going to be ending.

Brian Lehrer: Here's a little of the right-left overlap on this issue to the extent that it might exist, or if we should call it that. One listener writes very pointedly, "Who knew that it would be an authoritarian, far-right lunatic moron who would finally reduce overconsumption?" That's the most pointed one.

Another one says, "It's frustrating because I tend to agree that we are too used to getting anything we want at extremely low prices, but not because I want to punish China or something. When things are that convenient and that cheap for the consumer, it means that someone or many people must be exploited somewhere in the supply chain. Wherever we get our goods, we should pay more so workers are paid well and treated fairly." Keep going on this.

I think Mark in Brooklyn is going to be in this lane. Mark, you're on WNYC. Thank you for calling in.

Mark: Thank you very much for taking my call. I'd like to ask you and your guest, don't you concern about environmental cost send all this cheap stuff from China? What about birthday party? How about just doing a nice birthday celebration without killing our planet?

Brian Lehrer: Mark, thank you very much. Well, we touched on this before, but there is the environmental impact, which I said I don't think anything in the environmental impact category is a Trump priority right now. That's where part of the right-left overlap is, right?

Kimberly Adams: Yes. To the pointed thing about my mother's birthday party, people are going to make choices. I'm not telling my mother what she can and cannot have for her birthday party. Certainly, we did look for local options, but I think this is what happens to a lot of people. Many Americans say they would like to buy American made products, but the cost difference has been so stark for so long that at the end of the day the vast majority of people will choose the cheaper option, often just because they can't afford a different option, because economic inequality in this country is an issue, because a variety of other reasons.

I think that there has long been a pretty solid economic argument that when given the option, people will choose the cheaper goods over the American-made, higher quality sometimes, but usually higher cost good. Therefore, there need to be incentives to make people purchase that higher-priced thing. This is what you see in a lot of other countries where they will protect their domestic industries. If they know they can't compete on cost, they will make those foreign goods cost more. I certainly hear the point about the environmental impact and I don't disagree.

Brian Lehrer: Kimberly Adams from Marketplace with us. We're going to add a guest in a few minutes and look more closely even at the China aspect of all this, but let me touch a couple of things with you first. On the contradictory economic indicators from last week, see if you can explain these really briefly and make our listeners not only smart, as the name of your podcast goes, but less confused. The economy contracted in the first quarter of the year, but the number of additional jobs kept going up. Isn't a defining feature of a contracting economy usually unemployment?

Kimberly Adams: It often is, but there's not much that's normal about the economy that we're in right now or really the economy that we've been in since the pandemic. Yes, you did see some economic contraction, a lot of that attributed to the tariffs beginning their rollout. The jobs numbers have been interesting. They definitely defied expectations. People were expecting higher job losses. One of the things that has come out of this response report is that people expected a bigger hit from all of these government layoffs, the federal workforce job cuts, but many of the people affected by those job cuts are on paid administrative leave, so they're not showing up in the jobs numbers in the way that a lot of people anticipated.

Also, many employers are just holding steady and had already restricted their hiring to a sustainable level. Many are in a wait-and-see approach. They're not quite ready to stop their plans altogether or to start massive layoffs until they really see how this trade war is going to shake out because there have been so many changes. Nevertheless, when this survey was conducted for these jobs numbers was still pretty early on in this trade war, and so economists are still expecting that we're going to see a hit from it in probably the next jobs report and more economic data as it comes out.

We had retail sales numbers a little bit earlier that showed great number of people out and buying things, but that was often a lot of people stocking up, trying to get ahead of these tariffs as we've heard from callers. Economists are predicting that that means, in future months, people are going to be pulling back on spending because they spent more than they would have planned to trying to get ahead of all this.

Brian Lehrer: In the context of that, why has the stock market been coming back, including nine straight days of gains in the S&P? I think that was for the first time since 2004. You would know that better than me, but why so much optimism by investors of Trump tariff chaos and uncertainty still prevail?

Kimberly Adams: Animal spirits, I guess. It's hard to make sense of the stock market and investors a lot of times. Some of the analyst reports I've read have said that it's a lot of retail investors where because the initial trade announcements were so harsh and there's been some pullback, people are interpreting that as, oh, it's a better opportunity to buy or you should buy the dip as a lot of these meme stock traders like to do. You are seeing a lot of retail investors getting in, thinking that they're purchasing in the moment where there's a deal to be had, especially on some of these big tech stocks that are expected to feel the brunt of these tariffs.

There's a lot of different moving parts, and it's not always easy to explain, but at the end of the day, a lot of the stock market losses that we saw when these tariffs were first announced back in early April have bounced back.

Brian Lehrer: Let me ask you briefly about this idea of Amazon making transparent how much the tariffs would add to the price of specific things they sell. I know Trump said that would be unfair to him because no one proposed showing inflation in that way during the Biden administration or tagged it to any of his policies that might have been inflationary. I don't know if you want to say if that's a fair or apples-to-apples comparison, but then we have this text from a listener who asked, do we know what agreement or threat occurred in the conversation between Trump and Bezos?

Was Bezos doing that, threatening it as leverage because he knew Trump would call him? Do you know who the winner was in the conversation, at least behind the curtain? I guess my version of that question is why does Trump have so much power over Jeff Bezos or Amazon as a company if Bezos is one of the richest people in the world?

Kimberly Adams: Well, obviously, I don't have personal insight into the private conversations between Bezos and the president. This was a story, I believe, originally reported by Punchbowl News, that Amazon was considering highlighting the cost of the tariffs on its products, but then when asked about that in one of the White House press briefings, the administration was saying how that would be unfair. Amazon later issued statements saying that this was only something they were discussing amongst their internal teams for their Amazon Hall division only, which is a section of the site designed to compete with Shein and Temu.

Now then, obviously, the president talked about having a call with Jeff Bezos and that he backed down. That's his version of the narrative. It looks like Amazon was definitely considering this idea, but ultimately decided not to do it for now. We'll see what they end up doing in the long term.

Brian Lehrer: Speaking of Shein and Temu, in a minute, we'll add a guest and look specifically at the trade war with China and how it and China's previous behavior on trade affect us all. Stay tuned. Brian Lehrer on WNYC. We continue with Kimberly Adams, senior Washington correspondent for Marketplace and co-host of the Marketplace podcast Make Me Smart. Also joining us now is Arthur Dong, professor of Strategy and economics at the McDonough School of Business at Georgetown University, with analysis of the US-China economic relationship, specifically, as Beijing is considering whether it should begin to negotiate with President Trump on trade. Hi, Professor Dong. Welcome to WNYC.

Professor Dong: Thank you, Brian, for having me on today.

Brian Lehrer: Can you briefly summarize by way of background, because I think a lot of people don't understand, even if they have a vague sense, why China is seen as such a bad actor on trade with the United States, and maybe globally? It's not just Trump, right, but people in both parties who say China actually does not play fair and we should pressure them to do so. What are the big complaints, and with what impact on Americans' wallets or job opportunities?

Professor Dong: Yes, certainly. This is a very important question because if you step back and examine the structure of China's economy, one can certainly conclude that is a supply-side economy. In other words, systematically over the decades, starting in the late '80s, China's economic policy has been structured in such a way as to emphasize and support and make easy those entities and companies that wanted to implement and also create factors of production, in other words, factories, warehouses, any sort of manufacturing activity. While those firms, whether they were state-owned or privately owned, were provided a great deal of both financial support in terms of low rates of interest, in a sense, gobs of capital, but also policy support in terms of making their lives very easy and in terms of also offering them licenses in which to operate.

If we were to examine China's economy today, one would say that it's an economy where there's excess amount of supply, in other words, those factors of production, and there's just not enough domestic consumption to absorb all of this excess capacity, and therefore much of this excess capacity winds up in foreign markets such as the United States, but also worldwide, creating in the longer term distortions on the economies that are receiving all these goods.

Certainly in agreement with what Kimberly has stated earlier that Americans and the average life of American family-- well, their lives have been improved immensely as a result of the abundance of goods that are available to the typical American consumer at very, very affordable and moderate prices. In terms of our material welfare, that certainly has gone up, and that certainly helps those in the bottom half of the American pyramid where their salaries and their wages have not kept up, and therefore they need to find a way to stretch their paychecks and afford the daily things that they need to satisfy their lives.

There is this challenge that China presents. Many economists, even going back 15 or more years, have been observing that the Chinese model is simply an unsustainable one, and at some point, the world, including United States would have to impose higher trade restrictions by way of tariff.

Brian Lehrer: I think Trump would argue that it's not as simple as saying the quality of life for lower-income Americans has improved because of all the cheap stuff from China because you also did mention all of that has come as middle-class wages have remained depressed for a long, long time. I think the gamble that Trump is trying to make, and tell me if you think this is an earnest gamble or if he's just obsessed with punishing China, is that we can bring back manufacturing jobs to this country that pay better than what they are paying in China, and that's going to more than balance out the fact that that stuff is then going to be somewhat more expensive.

Professor Dong: I would argue that if this trade war goes on, the reshoring of these jobs to America, I just don't see that happening. First of all, given the condition and the availability of labor in United States and the demographics in the United States, I simply don't see hundreds of thousands of young people raising their hand and saying eagerly, "You know what, I want to go to a shoe factory and glue shoes together," or "I want to work in an Apple factory and screw tiny screws into an iPhone." Simply, the availability of that kind of labor as well as the desire for Americans to work in these types of settings I think is a stretch of the imagination.

Brian Lehrer: What about if those jobs, just hypothetically, were to pay about the same amount as, say, Amazon warehouse jobs which are expanding vastly, right?

Professor Dong: Yes. Then, of course, you would be able to attract the economics of labor. People do respond to financial incentive. If they were to pay those kinds of wages, bear in mind, these types of assembly-type jobs are labor-intensive, and if we refer back to the furniture example that you mentioned earlier, certainly there are machines that can do a good portion of the of the assembly, but there's still a tremendous amount of hand labor that's required that no machine can complete.

The ability to find ample numbers of workers that want to do these repetitive tasks and also paying them the kinds of wages they expect, well, all of that is going to be reflected in an increased price of these goods. As you know, we are used to paying $80 for a pair of Nikes, they will now be around $200 a pair.

Brian Lehrer: Here's the president on Meet the Press yesterday on this topic.

President Trump: We've gone cold turkey. That means that we're not losing. We lost a trillion dollars to China. A trillion dollars. That means we're not losing a trillion dollars when we go cold turkey because we're not doing business with them right now. They want to make a deal. They want to make a deal very badly. We'll see how that all turns out, but it's got to be a fair deal.

Brian Lehrer: Kimberly Adams, let me come back to you on this, since you're the Washington correspondent for Marketplace. What does the president mean there by cold turkey?

Kimberly Adams: I'm guessing just rolling out these tariffs so quickly and beyond the level that many people expected. I think we heard people freaking out over the idea of 20% tariffs early on in this administration and instead that some of those tariffs were just much, much higher than many people anticipated, which is why we saw the severe stock market reaction in the beginning of April and not a big ramp up period before they were implemented either. Yes, some of them have been dialed back.

I know that we've been talking a lot about China, but don't forget some of these steel and aluminum tariffs and tariffs on our neighbors, China and Mexico. Yes, there have been exemptions, but a lot of these are already impacting the way that goods are moving throughout the world and supply chains. It's all happened pretty quickly within the first hundred days of his administration for much of this.

Brian Lehrer: Professor Dong, you were talking a minute ago about how factory jobs, if they do come back, would be basically assisting machines who might be making the shoes or whatever the item is. I want to replay a clip that we used in the intro before you came on of Commerce Secretary Howard Lutnick, who may be confusing people about the meaning of the American dream. Apparently, for him, it's not upward mobility as we usually think of it. It's you and your kids and your grandkids, all those generations of your family working at the same factory job in exactly the context I think that you were describing. Listen.

Secretary Howard Lutnick: These are trade craft. It's time to train people not to do the jobs of the past, but to do the great jobs of the future. This is the new model where you work in these kind of plants for the rest of your life, and your kids work here, and your grandkids work here.

Brian Lehrer: Those grandkids will have fewer dolls at higher prices, remember? That's another part of the conversation. Did you hear that clip from CNBC, Howard Lutnick, Professor Dong, and have any reaction to it?

Professor Dong: Yes. Actually, there's a misunderstanding here in terms of the impact on jobs when it comes to manufacturing. Manufacturing today in a modern context involves automation as well as robotics and machines. To cite an example, in the 1970s, General Motors had 350,000 employees employed in making cars. Today, General Motors has basically 120,000 employees, and they're making a lot more cars. The answer to that is that manufacturing as a source of employment simply is not going to be the same as it was in the past, and manufacturing is going the same way as farming.

If we were to look at farming at the turn of the 20th century, close to 50% of the population in America was employed in agriculture. Then came the machine revolution, and today, only less than 2% of the American population is engaged in farming. What's made that possible and the abundance of food possible is the fact that you have a farmer who can sit in a machine that's pretty much on autopilot, plowing down acres and acres and acres of corn and wheat every day from the comfort of an air-conditioned cab.

The same thing's happening in manufacturing. Manufacturing as a source of employment is dying and it's dying all over the world simply because technology is replacing human beings when it comes to the manufacturer product. To refer to Mr. Lutnick's comments that there'll be intergenerational manufacturing in the United States is I think, in my opinion, a falsehood. At the same time, we are a service-based economy. The vast majority of jobs in America, especially high-quality jobs, are all in the service sector.

Brian Lehrer: Here's Gregory in Harlem who runs a small business, and I think has a story about how some of this is affecting him. Gregory, you're on WNYC. Hello.

Gregory: Hi, Brian. How are you today? Listen, I started my small business, and I wanted a piece of equipment. There's a piece to help my apparel. I make bow ties. If you notice, there's sometimes these clasps in the back that work. I fabricated one by hand, and I wanted an American company to do this for me. The startup cost was so exorbitant. I tried for years to have an American company make these little steel clips. There's three pieces and each of them had an [unintelligible 00:38:47]

Nobody would work with me, and I found a small company in Hong Kong. Long story short, now 12 years later, I've been ordering from this company all these pieces. They're beautiful, they're gold-plated, they're gunmetal black, they're chrome. They look awesome, and they upgrade my bow ties, eventually. Thing is, just the beginning of April, I get a notification from the-- and I got them very, very inexpensively by the way, so I could afford it as a small business.

Brian Lehrer: Right.

Gregory: We get a call from customs to go out to JFK to pick up my package, which usually comes by US Mail, to pick up my package, and now my product that I use to put in my bow ties, which I am not going to pass on to my customers now costs almost three times as much.

Brian Lehrer: Wow.

Kimberly Adams: Wow.

Brian Lehrer: What would it have cost you compared to that if you had gone with the US firm that you said was pricing exorbitantly for the clips?

Gregory: I would have started off at the same cost that I'm paying now.

Brian Lehrer: Which is the point.

Gregory: It would have cost me three times as much to even start up my company with an idea that I had that was going to make my product nicer for my customers.

Brian Lehrer: Gregory, thank you so much for your story. Professor Dong, there it is in a nutshell. One could argue that Trump is succeeding with his tariff in evening out the cost of doing business between importing things from China and paying American workers what the law requires they be paid to make things here. I guess people can debate which is better, which is worse, huh?

Professor Dong: Yes. I think your caller makes a very important point in sharing with us, at least from his perspective as an entrepreneur, the additional costs that he's going to have to bear. Ultimately, if he has to source from an American producer, he's going to have to transmit that additional cost to the finished cost of his products. He makes very clear there are two aspects to the things that we buy from China. The obvious are iPhones and articles of clothing that we know are made in China but embedded in a lot of made in USA product are components and piece parts that, in a sense, come from China, but you have no awareness they come from China, even though that product bears a Made in the USA label.

It's this invisible content that is embedded in many products that we enjoy on a daily basis, while a lot of those companies are highly reliant on many of the components and pieces that come from China. The impact both in future prices as well as availability and our ability to buy things at a more reasonable level are certainly going to be impacted by the current trade conflict.

Brian Lehrer: Of course, there's so much more we could say about all of this, other aspects that we haven't even scratched the surface of yet. Obviously, this is such a big thing in the country right now. We'll keep talking about tariffs on the show and different angles on that. Before you go, Kimberly, you have to just tell us what's this about 100% tariff on imported movies that Trump floated in the last day? This isn't about foreign films with subtitles versus Hollywood films, right?

Kimberly Adams: It's unclear exactly how you would go about. The president is saying he wants to put tariffs on foreign-made films, but what does that mean? Does that mean production that happens abroad and the value of that production?

Brian Lehrer: Well, I think so, right? Is that not what it means? I thought like something we may consider a US-made Hollywood film, but they're shooting parts of it in Canada, in Europe, or something like that. Rather than using American facilities, he wants it to be tariff. Is that not it?

Kimberly Adams: That seems to be the broad outlines, but this is something that would be particularly challenging to implement. In the same way that we've seen so many products, cars have parts made all over the world that come into one place. Movies have parts made all over the world that come into one place. I'm still waiting for more details on this, but yes, it does look like this is the next round of tariffs that the president wants to roll out. We'll see how Hollywood responds.

I should say that a lot of production has left the United States. You hear these stories all the time about Hollywood studios sitting empty in favor of either going different places in the United States where the taxes are lower, or there are all these perks for filming, but also several countries all over the world have really done their best to lure production for movies. What about TV shows and all of those things? It definitely could be interesting to see how this one rolls out.

Brian Lehrer: Kimberly Adams, senior Washington correspondent for Marketplace and co-host of the Marketplace podcast Make Me Smart, and Arthur Dong, professor of Strategy and Economics at the School of Business at Georgetown. Thank you both very much for joining us.

Kimberly Adams: You're welcome.

 

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