Kara

And then every time an order comes in, they package it up and ship it to a store or a house. There's the photographer who takes pictures of the play sets for the website, the people who maintain the website, the customer service reps, the sales reps, the store clerks who sell the toys at mom and pop stores and big box stores. These are all U.S.

After the break, once you effectively shut off trade, how long does it take to turn the faucet back on? Also, why high tariffs on China is not all bad news for some people. It takes a while for a cargo ship to cross an entire ocean.

Oh, the world's just a big place.

I don't know what knots are, Ryan. This is Ryan Peterson again, who measures speed in knots because he's in the cargo shipment business. His company Flexport helps other companies ship cargo all over the world. And There are so many logistics involved in the import-export business. So many rules, so many agencies actually just to import like a couch.

Name an agency that we wouldn't think of.

In the last three weeks or so, Ryan said ocean carriers have canceled between 25 and 40 percent of their ship sailings from China to the U.S. So there have been all these ships with nowhere to go, nothing to carry.

You could actually see all of these ships on this live tracker online. Tankers, passenger vehicles, tugs. Oh, like tugboats?

All of the cargo vessels that are moving on the ocean and rivers show up as these green arrows indicating the direction that they're headed. If they're idle, they become a green circle on this map.

And off the coast of China?

So some empty ships idling in the middle of the ocean. But a lot of ships actually already went looking for goods somewhere else.

Vietnam may be a big winner in all of this because so many people were avoiding China that Vietnam actually surpassed China in exports for Ryan's company. And it could be good for Vietnam for a while because many large companies, at least, have already been using factories in multiple countries.

When we met up, the big, scary 145% tariff was still in place. Are you, like, stressed? Are you doing okay? How are you feeling?

And when there are high tariffs, there's an incentive to shift even more production to those lower tariffed countries.

You may have heard a Planet Money episode about this recently.

Oh, so that's good for you.

Not like trade for the U.S. necessarily, which is like global trade.

Things will just be moving around. And now, now that the Trump administration has backed off of the 145% tariff and agreed to a 30% tariff for 90 days, well, now Ryan is expecting a ton of demand during those 90 days as businesses rush to ship out goods at the lower tariff rate. After the pause was announced, bookings from China to the U.S.

at Ryan's company was 70% higher than their biggest week of the year so far. And now, Ryan's company says it is too early to tell how many ships can shift back to China and how quickly, because, right, they were already rerouted. And when a ship is sailing to, say, Europe to pick up goods, you can't just turn the ship around and send it back to China.

Now that demand is back, the ship has to continue to Europe, pick up the goods, sail to, let's say, the U.S., drop off the goods, then sail to China, get loaded up, sail back to the U.S., and that can take a month, two months, depending on where in the process the ship might be and where in the ocean. So they are bracing for four bottlenecks.

And Kara, Kara who ordered all those Goldilocks play sets, her ship is luckily still making its way to the port of New York. So she had not yet paid a tariff. And just like that, she no longer has to pay $45,000 extra dollars on her shipment. She'll just have to pay $9,000 extra dollars. And how are you feeling?

Jean and I are at one of the seven terminals at this port where the cargo ships pull in to get unloaded. Like where those giant cranes lift the big steel shipping containers off the ship and like stack them on the dock. That's where we're at, at the Evergreen Marine Terminal.

She doesn't feel confident that the 90-day pause will even stay in place. You don't.

Right around now, Cara would normally be putting in her big $100,000 order and a 30% tariff on that will still add an extra $30,000 whole dollars. But like, who knows? In the months it takes for the factory to make her order and ship it, maybe the tariff will be higher again.

Cara says her business would not be able to handle a surprise higher tariff on her big order.

Yeah, no, I can't.

She's already preparing for a bunch of extra surprise costs that will come from the technically good news of a lower tariff, like a bunch of new demand for ships from people rushing to place those orders in the next 90 days. That could mean that ships get a lot more expensive. This happened to Cara during COVID.

And yeah, ocean freight rates from China to the U.S. are likely to triple in the next month, according to Ryan at the shipping logistics company. So Cara normally pays $10,000 just in the ocean freight. Now she'll pay about $30,000. And With all the extra costs Cara is expecting, she'll have to increase the price of her products 10% to 15%, which is better than before. But U.S.

shoppers are really price sensitive. Think about what 4% inflation felt like just a few months back. This will be like 10% to 15% inflation, basically. It is not insignificant. Cara is actually going to see if she can get her factory in China to share some of the costs of the current 30% tariff and share some of the risk.

The 145% tariff already did its damage. It was like throwing a bunch of little missiles all over the global supply chain. And to try to understand what all the disruptions might be and the costs and the bottlenecks, I think we're going to try to import a Chinese good ourselves. I have a I have a idea. Yeah.

I'm wondering if we could just like put a little planet money something onto your next shipment. Yeah. Just so we can kind of like follow along and process.

Are you expecting one today at this terminal? Not today. And no ships earlier today. There hasn't been any today.

So stay tuned for our very own imported tariff toy of some sort. Today's show was produced by Emma Peasley and edited by Jess Jang. It was engineered by Jimmy Keeley and fact-checked by Willa Rubin. Alex Goldmark is our executive producer. Also, if you want to play around on the live cargo ship map, it is so cool. It is in our show notes. Just select cargo ships.

And you should check out our newsletter on why there are so many vacant manufacturing jobs. I'm Sarah Gonzalez. This is NPR. Thanks for listening.

When there is a ship here, how long is it here?

Four days? I thought it was going to be like hours. So not seeing a boat here actually is like a very stark image. It's a huge deal. That's what I've mentioned. Last year, this port had its second busiest year in its 117-year history. But then last week was one of its slowest. The port was getting 20% fewer ships, 32% fewer shipping containers.

During the Great Recession, there were like 15% fewer containers. And the drop-off now at L.A. has been double that. The port of L.A. normally gets 10 to 12 ships a day. But in the month of May, it's been getting eight ships a day. And fewer ships mean fewer containers mean fewer jobs.

Four of those big 40-foot-long steel shipping containers, four of them equal one job at the port of L.A. And one ship has about 8,000 of those containers. So one fewer ship not carrying goods from China represents 2,000 fewer jobs, fewer dock workers, truck drivers, warehouse workers. So Jean has been trying to get more cargo coming in or out of this port. from anywhere to anywhere.

Like, the port workers just need cargo.

Now, the new temporary tariff on China is... substantially lower. And I did check back in with the port, but Gene says he still has not seen a big rush on cargo. A 30% tariff is still a high, high tariff. And he's not sure companies will want to bring in goods that cost 30% more than they used to.

though the tariff on things like cars and steel and aluminum is higher, about 50%. And, you know, the deal came pretty quickly after talks in Geneva, and it was maybe unexpected or maybe not at all unexpected because the 145% tariff on China and China's retaliatory tariff on the U.S. was already threatening a global recession.

But let's say demand does come back, like in full force. And there are signs that it is coming back. Gene says it can still take a month and a half before this port starts to see some of its ship and container volume return because it's just going to take a while to line everything back up.

the 145% tariff amounted to basically a trade embargo with China. And even though that's now paused, global trade is just not something you can shut off and then turn back on just like that. Hello and welcome to Planet Money. I'm Sarah Gonzalez. And today we are bringing you a portrait of this historic moment for the U.S. of an unfathomably high tariff.

The ones who got lucky and the ones who got really unlucky. And also, if the tariffs are meant to bring manufacturing back to the U.S., what is the right tariff? Is there one? We consider this from the perspective of one small U.S. company.

Trying to run a small business during a trade war is about the roller coaster that you might expect. You try to get ahead of it, to shield your company, but so much of it is out of your control. Take Cara Dyer. She always knew she wanted to create a product, a new thing. She wanted to design something and sell it to people. Cara is a mechanical engineer by training.

For the U.S. military. Kara also used to design cockpit displays for the military, but then she went to business school with the goal of creating and selling her very own product with her own patented technology. And the product she designed...

Her product comes in this little box with a handle.

So there's like a little book immediately. Yeah, you see the little book, and then there's...

And in all the tit-for-tat back and forth, some companies caught really hard. unlucky, like those whose goods arrived at U.S. ports before the pause. If a medium-sized company had a million dollars worth of goods imported, they had to pay an extra million and a half dollars on top of that just in the tariff.

The Goldilocks playset and the Three Little Pigs playset are hands down the two most popular items at Storytime Toys Cars Company. Oh, so you're sold out. No, we're totally sold out of these right now. Which is why back in December, Cara wanted to put in an order for more of these sold out play sets with the factory that she uses in China that manufactures her products.

And regardless of whether you think we should or should not import goods from China or whether we should all do with less from China, less pencils, less dolls. Every time Cara imports one toy from China, it creates and supports more jobs in the U.S. than in China even. Normally, Cara puts in an order for $100,000 worth of play sets and these 3D puzzles she also makes.

But she didn't want to do that in December because she was anticipating that there would be a tariff because President Trump had been saying things like tariff is the most beautiful word. And she was worried what the tariff would be.

So she put in a smaller order than usual, just $30,000 worth of the Goldilocks play sets and the three little pigs, just one small container on a ship. But it takes about a month and a half for the factory in China to make the products for her. And a lot of companies were doing the same thing that Cara was doing, putting in these early orders, anticipating tariffs.

The first ships with the 145% tariffed goods from China had just started pooling into U.S. ports last week when, just a few days later, the U.S. announced that that mind-bendingly high tariff was now gone, paused. The U.S. and China agreed to temporarily bring the tariff way, way, way back down from 145% on most Chinese imports to 30%.

So our order took a little bit longer than I was hoping.

A 145% tariff on $30,000 worth of goods? The tariff that I'd have to pay would be $45,000. Extra on top of the $30,000?

I like that you just do the math like that quickly in your head.

U.S. Customs and Border Protection had issued some guidance on when goods needed to leave China to avoid that tariff.

The cutoff was April 9th. which happened to be the day that Kara's inventory left the factory in China and likely arrived at the Ningbo port in China, too. So maybe getting in under that on the water exemption deadline. Does on the water mean on a ship in the water or can it mean like on the dock at the port? Yeah.

Ryan Peterson runs a global shipping logistics company, so he knows.

And had their ships arrived, like, a day later, their bill would be punched to the gut so much less. And even though this unprecedented tariff only lasted a month, it already inflicted its scars on the economy. Today on the show, what a month of 145% tariffs looked like and felt like for three people in the global economy whose lives were all affected and still will be.

This exact thing was happening to businesses across the U.S. These are the unlucky people in the trade war. And Kara says the cost here is not just the tariff on the imported toy itself. When there's any tariff, it has a ripple effect.

Well, let me ask you this. Could you make all of your toys in the U.S. at a factory in the U.S. ?

The whole trade war started when Trump proposed a 54% tariff on China. And- 54%, not 145%, was meant to be so big, so bad, so prohibitive that companies would stop importing from China and start manufacturing in the U.S. But there aren't that many manufacturing facilities in the U.S. that Cara can turn to. She says there'd be like a six-month wait, maybe more.

And she'd have to order these like huge quantities for them to even put her in their production line. But more importantly, the U.S. doesn't really have enough of the material that Cara needs.

There are a couple factories in the U.S. that make the foam, but Kara says their capacity is completely taken up by the shoe industry. The foam is apparently also used for the insoles of shoes.

And if she imports the foam material from China, she'd still have to pay a tariff on the material, which is almost as much as paying a tariff on the whole finished product.

Technically, Quora could... open her own manufacturing facility and buy and import the fancy printer from probably Germany and the fancy die-cutting machine and laminating machine from probably China, which would also be tariffs. But, like, Kara has a toy business, not a business building manufacturing facility. It's not like she can just... Do all this, like, no big deal.

And for Cara, it is very important to point out that even though she is importing goods, every time she imports one toy from China, she spends way more money on the U.S.

$15 to $30 on U.S. jobs, every toy.

We'll start at the biggest port in the Western Hemisphere. Yes, hi. Nice to meet you. Oh, in a suit at the port on a 93-degree day. This is the uniform. Well, when you run the port, yeah, that's the uniform. Gene Sirocco runs the Port of Los Angeles, an 45% of everything that comes into this port is from China.

Then when her product leaves China, it goes on a container and a ship that is often a U.S.-based company. There's the logistics coordinators that help her clear customs on the U.S. side, the dock workers, the truck drivers that drive the container to Cara's warehouse in Buffalo, the people at the warehouse who unload every single Goldilocks box.

Hi, thanks for having me on.

What's going on? My husband and I are looking for a home to buy, but we were wondering if it's financially smarter for us to buy a starter home within the next year or just save up for five years and buy our dream forever home.

So starter would be under $250,000, maybe a three-bedroom, two-bathroom.

Because we already have two kids, a three-year-old and a one-year-old. Are you all renting right now? We are renting. Okay. So our dream home would be around $400,000. And I guess in five years from now with appreciation value, $480,000. So it might take us more like six years.

Yeah, so I'm not sure, but I am sure that we would be in there. I mean, I'm not sure of anything, but I would hope that we would be in there.

So I'm 21, and my husband is 23. Oh, sweet.

So I want to make the right choice.

We are. So we paid off $32,000 left of our debt last year, and then we're one month shy of saving up our six-month emergency fund.

Okay.

Well, if it's $250,000, hopefully $50,000. Okay. But I saw a lot of nice homes in the $230,000 range, too. Okay. How long would it take you to save up $50,000? So... So my husband, he makes $110,000 gross, so it's $90,000 net. And our yearly bills, just like rent and electricity and gas, are around $30,000.

So that's rent, electric, and gas. Okay, I'm talking all in, groceries, insurance. Really, $38,000.

Okay. Yeah. And is that smarter than waiting these, I'm guessing- That's what I would do.

That is our plan to put as much.

Okay.

Yeah, I've never moved before, so I was worried about, I don't know how much that costs.

Hi, my husband and I just found out recently that my parents are in a bit of debt, and

don't have really any savings and both of them are living on a fixed income due to medical diagnosis that um leave them on disability and social security for their income and just wanted to know the best way to help them out of that we found out just recently that that debt had been enrolled in a debt relief program So it was almost $40,000 that was enrolled last year.

And year to date now, I think of the seven different debts, three of them are settled and payments made. Two of them have reached an agreement and are in progress on making those payments. But unfortunately, the last two are the largest, totaling almost $25,000 less that are in advanced negotiations, and I believe a lawsuit has also been filed for that.

So income with, so they're both on Social Security due to disability, and there's also some long-term disability coming in that totals about $5,500 a month.

So they do still have a mortgage that's about $1,650 a month. They're currently making payments to the debt relief program of about $650 a month. And then everything else, bills and food, comes out to total, including the mortgage and the debt relief program, comes out to about $650.

um right right at the the 5500 it comes pretty close every month okay um have you had a conversation with him which is part of saying hey mom and dad you're broke here's like let's look at the numbers do you see the reality of your situation have you had that conversation yeah so that that's Where the conversation started is, I mean, my parents are scared.

We do have money available that is sitting in a non-retirement investment account that could be used to... essentially tear that off. I don't know the process.

He had very long days, very long nights, a lot of lack of sleep, a ton of drinking while he was there, you know, which we all know just complicates things. But he just functioned through it all. I definitely remember how exhausted he was. And, you know, as a wife, you're like, what can I do to help you? And there's nothing I can do.

He was at work, and I was at home, and one of our kids was sick, and I was just trying to decide to take her to the doctor. It was such a simple thing, and so I called him, and I mean, I just kind of called him for everything.

But he was in the middle of an interview and I didn't know that he took the call.

And so I was super upset, but I just didn't go to the doctor and I was rocking our daughter in her room and he comes in the house and And it's the middle of the day. So I'm like, what? And he came in the bedroom and she was asleep. And I was like, I mean, nothing like this had ever happened before. But he really lost his temper with me.

I kept telling him to leave, get out, and he wouldn't. He kept persisting and persisting. And I was like, if you don't leave, I'm gonna make two phone calls. One is to the cops and the next one's to the divorce lawyer. I'm like, just get out of my house.

His boss ended up coming, and the police came, and the first thing they asked me is, is he armed? And I said, yes. And so it was kind of a big thing. You know, they were very thorough in making sure everything was okay, and just to make sure I was okay.

I've never been afraid of my husband. And that day I was afraid. I mean, I locked myself in the bathroom. And I think he let exhaustion and anger just kind of take over because it certainly wasn't about whether I was going to take our daughter to the doctor. That's not what that was about. And when he came in in the bedroom and he literally was like bowed up and he was mad.

And I've never, ever, that's never happened before.

He would always get me a burner phone whenever he was on any undercover.

And so I would have the phone laying in my bed on my pillow. And when he was done for the night, he would call me. And most of the time it was just like, hey, babe, I'm good. I'll talk to you tomorrow. And I say, OK, love you. Good night. And that was all. That was all I needed.

Normally, our conversation was very short and sweet because it was usually at like four in the morning or something. But that particular night, I was like, are you good, honey?

Because at one point today, I just pulled over on the road and just was praying for you.

I think I just was blissfully unaware of how big the cases were that he was working on. I mean, I was new to everything. I didn't know much. This girl from small town, middle America, had never even left my state for most of my life. So meeting him and Moving to the places we were, the big cities and the border of Mexico and all the places we've been and all the things he's done.

I mean, it's been it's been quite a ride.

I love my role as a wife. I love my role as a mother. If I could just write my life the way I wanted it, my life was how I would have written it. So as far as that goes, you know, I love being the supporting person in the relationship.

I mean, immediately when we got married, he started his undercovers. And I remember telling him one morning, I'm like, maybe you could go back to landscaping. And he's like, what are you talking about? And I said, well, I don't like saying goodbye to you in the morning and not knowing if you're going to come home that night. And he said, honey.

I could be mowing the lawn and get struck by lightning. If it's my day to go, it's my day to go. We're believers. That's what we believe.

Here's what I tell people when they ask me, like, how did you cope with, you know, living with an undercover and how did you deal with it? And I said, well, I did get some training through the movie of Donnie Brasco. That was my training.

He leaves me with the house and the kids and the bills. But not a husband. I want my husband.

He would leave for about two weeks. Days were fine. But around about 9 p.m., I would start. It would just start in my chest. And I would kind of know what he was probably getting ready to start doing that evening. And so I would just rearrange furniture and I'd make my whole house look different. And then I'd go to bed and sleep peacefully. Yeah.

It was a tough time. He did the work of not two people, but three or possibly 10. I don't know anyone else who could sustain that kind of workload and that period of time and still stay focused and clear and know what your goal is and successfully carry it out.

I mean, he would come home with stories. And so he would talk about these guys, especially one in particular, that he literally was best friends through and through with this guy. Other than just the one little detail of he wasn't being completely honest about who he was. But other than that, he was who he is, you know, and he other than his name, he was he was him.